NEW YORK –
Best Buy has had one of the worst months it has ever experienced — reporting a $1.7 billion fiscal fourth-quarter loss, the announcement of $800 million in cost cutting for the next three years, the closing of 50 big-box stores, and, finally, the unexpected resignation of CEO Brian Dunn and subsequent investigation into possible personal misconduct.
While Wall Street analysts and the media began to pick apart Best Buy’s cost-cutting strategy before the Dunn resignation, it became a feeding frenzy afterwards, with seemingly anyone who had ever bought anything at Best Buy weighing in as to its current strategy, its future and what type of CEO it should turn to during this time of crisis.
Best Buy is considering internal candidates for the job — interim CEO Mike Mikan along with Mike Vitelli executive VP and president of its U.S. operations, among others. Pundits have suggested that the pool of candidates should only be centered on those with online retailing experience.
TWICE contacted several industry executives who have worked with, sold to or competed against Best Buy for years and asked this simple question: If you were named CEO of Best Buy, what would you do to turn its fortunes around?
Here are their views:
Franklin Karp, COO, Audio Video Systems:
I would look at the sales staff. A non-commissioned floor without any incentives has already proven to be unsuccessful. It is no wonder people visit their stores, snap photos of UPC codes and shop online. They know they will not be engaged or asked for the sale. What motivation does the current staff have to do anything but watch for theft and punch the clock? You will reap what you sow — a lousy, unexciting retail experience leads to diminished sales.
Elly Valas, member services director, Nationwide Marketing Group:
I would determine a direction and a vision. [Chairman and founder] Dick Schulze clearly knew what kind of store he wanted. His formula won’t work now. At this point, Best Buy is kind of like Kmart — not the low price leader (Walmart) nor the fashion place (Target).
Best Buy cannot compete well with Amazon on price or with the low overhead that leads to the low prices online. I’d reduce store count and size.
There is a real opportunity for service leadership in the CE space, but blue shirts can’t provide it. Home networking, smart-home connection, etc., are not really do-it-yourself projects. Who’s going to connect my smart refrigerator to the grid once I get my new smart meter?
[Best Buy’s] next leader must be innovative, intuitive and visionary. [The new CEO] must understand technology and retailing and be able to create and execute a first-rate customer experience to differentiate Best Buy in the marketplace. Also, the new CEO must have the courage and the board support to put re-building the company ahead of share holder value, stock price and growth.
Retooling will require thought, new ideas, risk-taking and vision, someone who can start from the ground up — with nothing but the great Best Buy logo and a keen sense of reinvention. The next CEO must be willing to look back at the company’s history but not be beholden to it.
Gary Shapiro, president/ CEO, Consumer Electronics Association:
I’d refocus staff on service and issue a new consumer pledge. I’d differentiate, offer installation [and carry] new installation products ... like health care and security monitoring, solar and wind power.
Daniel Pidgeon, chairman, Starpower:
They need a plan to get customers excited to visit the stores. If no one wants to go there — or even worse, actively avoid the store — there is no hope. I always hear bits and pieces of certain strategies that never get fully implemented [at Best Buy]. Get some smart people in a room, define the strategy and don’t deviate from the plan until you have excited the consumer.
They need a real estate plan. [Current stores are] not “fun.” It’s like visiting a pharmacy. They have no competitive advantage from Walmart from a display perspective. What they need is a slimmed-down store format that is open, bright and engaging. Throw the old plans out and get serious about a real store experience.
I don’t care if the sales tax issue gets passed — they will not beat Amazon at their game. They need an Internet strategy that engages the client and motivates them to use the store for something other than fulfillment. Clever merchandising of the site, by raising questions about their use of the selected products, positions them as someone that truly cares. They can get the user to engage on a higher level and drive traffic to the stores by making “preselections” for a site visit where they “set an appointment” with a rep — who actually knows what they are doing — at “a store near you.”
The company needs to go private. It will cost the equity holder … but it can be structured with an upside to shareholders so they retain some equity position. There are plenty of private equity firms with sufficient capital and desire to make this happen. Best Buy’s moves cannot continue to be scrutinized by Wall Street, and their CEO has to get off the front page of The Wall Street Journal.
Bob Weissburg, global executive VP, Gibson Guitar:
I would improve the training of the sales staff. This has to be the biggest complaint of consumers. Revamp the entire blue shirt organization. Develop specialist in store, pay them a living wage, train them to be knowledgeable about technology, truthfully answer questions, guide customers to the right products, and, yes, even demonstrate the gear for them.
Go to the store. Listen to the customer but not with news cameras so the stock holders can see I’m working. Listen to the employees who actually care about what the company is doing. The capable front-line people probably know what’s wrong but don’t feel anyone in corporate is interested in their opinion. Create a store personnel committee to solicit their input.
I thought back when Best Buy was really growing and turning the industry on its ear. What was going on in the stores? Excitement! Consumers couldn’t wait to see the latest cool consumer electronics. Today the store is boring — walls of TVs just like Walmart, the home audio department is a shrinking passive display, the speaker demos rarely work or no one in the store is capable of demonstrating most of the gear. Get new products in, make a big deal about what’s going on in the store, have in-store demo days, get people excited about products and technology. There is more new technology today than ever before but you wouldn’t know it.
Everyone is talking about how physical stores are a liability, turn it into an asset. It can give you a huge advantage over Amazon. Challenge the merchandising team to get out of the box and not just worry about covering their [rear-ends]. Where is the passion about products?
] to this day the pricing is wrong, the merchandising is wrong and no one is minding the store.
Use the Internet to get people in store and use the store for people to shop online. I really think if they get highly focused on the web, they can win and use the stores as a competitive advantage. If you consider the revenue capability of the website, why aren’t they putting huge resources behind it? Take the costs you are cutting and reinvest it in dot-com.
Peter Weedfald, president, Gen One Ventures:
Best Buy’s greatest defense against a multitude of sharp and smart competitors through vast declines in CE manufacturer profitability and through hyper-changing consumer, digital and social dynamics is a calculated asset offense.
Best Buy has a multitude of empirical strengths and assets: 1,400 store locations, largest retail emporium for CE products, multimodal employee selling talents (stores, dot-com, direct, etc), Geek Squad support for in home/ business service … a best-of-breed Rewards Card program and in-store blue shirt sales support, refulgent merchandising and marketing teams, a highly competitive and targeted publishing infrastructure, and fungible, unyielding executive team focus.