Best Buy Revamps Store Operations

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Best Buy has restructured its store operations in an effort to cut costs and put more supervisory personnel on the sales floor.

The reorganization, which is effective immediately, will result in a headcount reduction and pay cuts.

Best Buy spokesperson Susan Busch said the move was the next step in a company-wide restructuring that began with the voluntary separation of 500 corporate workers in February and the loss of 250 headquarters jobs in March.

“The world around us has changed,” Busch said. “The global financial environment is unlike anything we have ever seen. We believe we have done a good job of meeting our customers needs so far, but have to continue to evolve and change today to continue to do so tomorrow.”

To that end, Best Buy’s new store operating model “places greater emphasis on customer-facing employees and provides more focus and clarity to the leadership roles in the store,” she said. The changes support the company’s enhanced focus on store-level initiatives and local marketing to meet the needs of customers and communities, as expounded by incoming CEO Brian Dunn during an earnings conference call last month. Dunn also stressed the need for continued cost reductions amid the economic downturn.

This could mean the demotion of as many as 8,000 senior sales associates and the dismissal of upwards of 1,000 assistant store managers, according to a research note from Sanford Bernstein analyst Colin McGranahan, which was cited in the Wall Street Journal last week.

Busch said the numbers were high and wouldn’t provide specifics of the reorganization, which was announced to workers on April 11, but acknowledged that it affects every store employee. The company tried to limit the number of job cuts, she said, and downsized employees will be given the opportunity to apply for other positions at the stores.

Best Buy also plans to open 45 U.S. stores this year, including eight this quarter, which will create thousands of new jobs, Busch said.

Reports by the Journal, the Minneapolis Star Tribune and other outlets drew comparisons between the reorganization and Circuit City’s controversial decision to dismiss 3,400 seasoned sales associates in 2007 and replace them with lower-paid hires. Terminated workers were similarly given the opportunity to reapply for the lower-paying positions, and the resulting disruption and diminished moral is believed to have hastened Circuit City’s demise.

Best Buy adamantly dismissed the comparisons. “For the record, we are not going down the same path as Circuit City,” Busch said. “We’ve been talking about our actions to make the store experience better for our customers for some time now.”

McGranahan of Sanford Bernstein agreed. In his research note, he acknowledged that while the aim was the same for both CE chains — to reduce wages — the comparison ends there. Best Buy’s approach is less severe than Circuit City’s, he noted, and the company’s performance-oriented culture and its employees’ fondness for CEO-elect Dunn, a former store clerk himself, would limit the risk of disruptions.


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