Best Buy Upbeat On Holiday Prospects

By Steve Smith On Oct 12 2009 - 6:00am




Best Buy should have a happy holiday season, with the national chain growing same-store sales, emphasizing connectivity products and services, and “being there on price,” according to Brian Dunn, CEO.

The company, a five-time winner of TWICE's Excellence In Retailing Award for Best National Retailer (see story, p. 16), reiterated remarks from a recent investor call when it said it continues to gain share and sees hopeful signs for the holiday selling season.

“This will be my 25th Christmas season with Best Buy,” Dunn related during a Holiday Media Day event at its lower Manhattan loft last month, then cracked, “and as always, it is our most important season ever.”

In products when Best Buy says “connectivity,” Dunn said it means flat-screen TVs, smartphones, netbooks and notebook PCs, and digital imaging products. “Those categories are doing well,” he noted, and will continue to show growth for Best Buy this holiday season.

Dunn also has high hopes for the e-book category, where Sony's e-reader and Best Buy's own iRex joint venture represent the first wireless alternatives to Amazon.com's Kindle, giving customers “a real choice.”

Dunn is also anticipating “a good” holiday season for gaming thanks to recent price moves by manufacturers, which have made the products affordable for a new tier of consumers. He also forecasted a “Blu-ray Christmas,” helped in part by Sony's $100 price drop on its PS3 console. “For $100 over the cost of Sony's Blu-ray player you get a terrific Blu-ray solution,” he said.

In terms of service Best Buy will rely on the capabilities of the Geek Squad and its Best Buy Mobile stores to make sure consumers can understand and enjoy their products.

When asked about the complexity of today's CE products, Dunn said, “Complexity is our friend. It helps us provide more technology to our customers and more service” so they will enjoy their purchases. Referring to Best Buy Mobile, the mantra for the company is that they want consumers to “walk out working” with their smartphones.

Concerning industry talk of deeper price cuts in CE this season, Dunn insisted that Best Buy will “be there on price,” and later added, “Our products are tagged at the lowest price point, and we won't be beat. That's what we always do.”

When questioned about adequate inventories for the holidays, Dunn said Best Buy is “strong” in many areas where the chain “placed bets where we need to be” in a strong position.

In response to questions from the media, Dunn said the company has increased its market share by providing a “positive customer experience” rather than through discounting. Indeed, he cited a recent Best Buy-funded survey by TeleNomic Research showing that price is only the third-most important factor to CE shoppers, following product quality, and knowledgeable and readily available sales staff.

He added that Best Buy has managed to be competitive on price without impacting profitability by taking costs out of the back end and working closely with vendors to develop new supply chain efficiencies.

When asked about Circuit City's departure, Dunn noted, “Many asked us if 'it put a lot of customers in play.' It did, and we gained more share than anyone. But Circuit City's departure doesn't mean we have fewer competitors. There is no shortage of competition. We compete against Disney World, restaurants ... really any business that goes after discretionary income.”

To further ensure its share of discretionary dollars, Best Buy has stepped up its social-media efforts by launching new applications for the Web and mobile phones — the latter developed by Google. The online apps will appear on Best Buy's recently relaunched Facebook page, which is followed by some 1 million visitors, or “fans,” and now features Best Buy's full catalog of products and services.

New features will include a “Hint Hacker” that allows visitors to select a desired holiday gift and send an email alert to a potential gift-giver. The recipient can then opt in to receive product-related advertising, prompted by cookies, whenever surfing online.

Other applications include a Facebook Secret Santa; a “Holiday Morning Simulator” cartoon Christmas card featuring photos selected by the sender; and a 25-song catalog of holiday tunes, sung by a chorus of Best Buy Blue Shirts, that have been altered to address gift-purchasing questions and can be attached to emails.

Speaking at the media event, Best Buy chief marketing officer Barry Judge said the new applications are the fruit of the company's recently launched Best Buy Remix API (application programming interface) initiative, which allows outside developers to tap into the retailer's massive catalog of data, pricing and images.

He said the revamped Facebook site has the potential to attract up to 3 million to 4 million followers.

Best Buy has also partnered with Google to develop traffic-driving applications for mobile handsets. The first, slated to be released next month, will provide customers with directions to the nearest Best Buy in response to a product query, and will even guide them to the correct location within the store.

Shawn Score, president of Best Buy Mobile — the wireless initiative launched three years ago with Carphone Warehouse — said the retailer is also launching a dedicated Best Buy Mobile Web site in October. The site will initially provide product information and reviews, but will add sales and activation functionality after the holiday season.

The new initiatives come in addition to traditional marketing efforts. Despite a smaller holiday advertising budget, Judge said the company will air six or seven TV commercials this coming season that position the chain as “a place for great gift ideas.” The spots, which will feature Best Buy's “Twelpforce” — the 2,500 staffers who answer technology questions via Twitter — will also highlight gaming, home-theater and computer bundles, and iRex and Sony e-readers.

The spots will be supplemented by vendor commercials, newspaper inserts and email marketing, Judge said.

Dunn noted that Best Buy is also working on multiple pilot tests, including:

• a redesign for the center of its stores that will be a “monument” to its connected services abilities;

• new, more comprehensive digital download offerings, developed through its Napster acquisition and its Fuse new-media venture fund, and;

• alternative product categories, like electric cars, that “test the elasticity of the brand.”

Dunn reiterated what he said during the financial conference call last month: “This is a great time to be a consumer. There are values” on fully featured products “that have never been seen before.” — Additional reporting by Alan Wolf

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