MINNEAPOLIS – Despite a major investment of real estate and vendor equity into its Ultra HD TV presentations, Best Buy believes the category is still not ready for primetime, or at least Q4.
“We’re excited about the future of this technology even though we believe that the impact to our business this year will be limited,” president/CEO Hubert Joly told analysts during a second-quarter earnings call last month.
“We have a backdrop of a consumer environment that’s a bit fragile,” he explained. “What’s going to drive the penetration is the price decline. Now prices have started to go down … but for the vast majority of the public, they may want to wait until next year and the following year.”
“[So] while we’re excited by the new technology and the customer response, I think … the actual impact will still be relatively limited before we ramp up into next year.”
The pronouncement was ironic, given Best Buy’s expansive 4K fall initiative in partnership with LG, Samsung, Sony, the Consumer Electronics Association (CEA) and other vendors. The 13-week consumer program, dubbed “Believing Begins Here,” includes Best Buy-driven TV ads, digital marketing, buyers’ guides and educational videos, and in-store demonstrations at 50 Best Buy locations in 11 major markets each Saturday through Nov. 1.
The demos themselves take place within the chain’s recently remodeled home-theater departments, which number some 500 Samsung A/V shops and about 350 Sony Experience sections.
“We rolled out over 800 Samsung and Sony hometheater stores-within-a-store during the quarter,” Joly said, representing the first major merchandising transformation within the chain’s home-theater departments in nearly a decade. “We believe that transformation further solidifies our position as the destination for customers to discover and interact with industry-leading home-theater technology, particularly Ultra High-Definition TVs, and we’re encouraged by the early consumer response to our expanded assortments.”
Added chief financial officer Sharon McCollam: “I don’t know anyone out there that is better positioned than Best Buy with our new Samsung and Sony hometheater stores-within-the-store. I don’t know how you could be better positioned to go after this new opportunity. … We would put it up against anything in the industry right now and we’re very product of that.”
The category is also being supported online with “significantly richer visual and editorial content,” Joly said.
Pricing concerns aside, Joly remains a big booster of the display technology, which he said readily outshines 3D due to a customer benefit that is “immediately tangible and meaningful in the form of improved image quality.”
Customers can see “a material difference” even without the benefit of native 4K content thanks to superior upscaling, he said. “And when they go to our stores,” where Ultra HD content is available from Samsung and Sony storage devices, “we can show them the difference between high-definition and Ultra High-Definition TV.”
Joly jested that consumers may not realize they need an Ultra HD TV when they walk into a Best Buy store, but after 10 minutes of watching a demo with a “hyper-trained” Blue Shirt sales associate, “You will know that you need it. The only question you will have is when and which one it will be.”