Southampton, Bermuda – Brad Anderson, vice-chairman/CEO of Best Buy, discussed his concerns about the Blu-ray/HD DVD format battle, overwhelming consumer demand for HDTV and other industry issues at the CEA CEO Summit, here, this morning.
In a one-on-one interview with CEA president/CEO Gary Shapiro, Anderson commented that the format battle between the competing HD disc formats is a “challenge” that reminds him of the competition between DVD formats and the introduction of DVD Audio. “It makes it impossible to get behind one format and introduces so many problems. In DVD consumers found their way through it. With DVD Audio, the format battle [with Super Audio CD] dramatically slowed down the effectiveness.”
He said that whichever HD format wins it must be successful or else it will be a “disaster for the industry. We must get an affordable [HD disc] software format. It is vital for the movie industry too, to sell their library of titles again.” As to which format will win, Anderson said plainly, “I don’t know.”
Shapiro asked if there is a format battle in HDTV between LCD, DLP and plasma. Anderson commented, “That’s a contest of advantages for customers, not a format war. There is no inconvenience for the customer.” In this case the Best Buy CEO did volunteer a winner in the competition. “I think LCD will become dominant. That’s the conventional wisdom and I agree with conventional wisdom.”
He noted that the industry’s rollout of HDTV, both in sales and in consumer understanding of the technology “has been great so far. The consumer appetite in flat panel, has been great. We expect explosive growth in the next few years. With the form factor, flat panel will appear in more places in the home in years to come.”
Shapiro asked if there is any concern on Best Buy’s part on the 2009 analog cutoff date. Anderson said, “Our biggest concern is that it may induce too much activity, not that we are complaining. The theory is that there will be explosive sales in 2008 in North America.” And he doesn’t think that many Best Buy customers will take the U.S. government funding of $40 coupons to continue to use their old analog sets. “Only those people that are technology averse will. It is important to have a path — a graceful path — to get everyone there. Politically it had to be done. But few of our customers will take advantage of the coupon program.”
In-store pick up of items bought on the Web, especially in the case of Circuit City’s program,
has been seen by many as a key growth area for retailers. Anderson agreed and tipped his cap to his competitor and former employee, Circuit City president Phil Schoonover. “That’s one of the things we admire about Circuit and its program. They are ahead of us there. We know that 60 percent of our customers visit the Web before they come to our stores. In-store pickup is a smart thing to do. We have the capacity to do it and have to catch up. It is a vital growth area.”
When asked if Best Buy’s Web and store strategies are different or the same, Anderson said, “They mirror each other. There is a natural integration of use of the Web and the stores. Use of the Web site to purchase” is one area, but the Web also “drastically can increase the functionality of our staff” in the near future to provide “training, just-in-time information and to illustrate product features and advantages that you can’t do verbally.”
Anderson said that the next few years will be “much more complex” for the industry and that this year’s International CES was “the most interesting show I’ve ever been to” because of the trend toward interactivity of devices.
“So many of the products we will sell in the near future depends on a connection to something else. The Geek Squad and home installation are more important because it gives us the ability” to provide consumers with solutions. “But it makes our business more complex. We have to build skill sets into the stores and become more sophisticated.”
About the Geek Squad’s test in Office Depot, Shapiro asked if the operation will now appear in more competing retail chains. Anderson quipped, “Well, the test just started and [Circuit City’s] Phil [Schoonover] hasn’t called yet. He’s doing his own. As the industry becomes more complex we will align with partners to acquire skills to make life easier for our customers. If the Geek Squad can help Office Depot, the Geek Squad should not be restrained” from being used by other retailers “just because it is part of Best Buy.”
When asked if there have been any surprises in the industry so far this year Anderson noted, “Not really. Xbox has sold very well and flat panel has gone great.”
(For more on Brad Anderson’s comments at theCEACEO Summit, see the July 3 print edition of TWICE.)