Best Buy Mobile Stores Growing At 4G-Like Speeds

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— It’s only been four years since Best Buy hooked up with Britain’s Carphone Warehouse to crack the U.S. wireless market and opened its first Best Buy Mobile store in Manhattan.

Since then the CE chain has rolled out more than 100 of the freestanding wireless shops, placed Mobile departments in each of its big-box stores, and more than doubled its handset market share to between 4 percent and 5 percent.

But to hear Best Buy Mobile president Shawn Score tell it, the company has only scratched the surface.

Indeed, given present opportunities in real estate, technology and the competitive environment, Best Buy appears well positioned to meet its goal of a 15 percent piece of the domestic wireless market.

On the real estate front, the company and its European partner plan to ultimately operate upward of 1,000 Mobile stores across the country, and have already targeted 200 shopping malls for the rollout before expanding to strip malls. Enclosed malls provide the perfect medium for the 1,200-square-foot shops, Score told TWICE earlier this month on the eve of his group’s 100th store opening, and provide a new customer base, i.e. women and teens, who don’t typically shop large-format Best Buy locations.

The shops offer more than 90 handsets from nine carriers; netbooks, notebooks and e-readers; more than 130 accessories; mobile broadband modems and routers; and pre- and post-paid phone and wireless broadband plans, including 3G and 4G service under the new Best Buy Connect private-label brand.

Plans are also afoot for the flagship stores, where bigbox Mobile departments are being expanded to accommodate the growing assortment. The expansion is part of Best Buy’s center-of-the-store redesign, where connectivity and content solutions for TVs, computers and phones will blur traditional departmental lines. As with the first two screens, Score said Best Buy is also exploring opportunities to leverage the chain’s Napster and CinemaNow digital delivery services for mobile devices by preloading them with software and possibly creating a download store on the company’s beta-phase website.

The growth runway is equally long on the product front, where smartphones, accessories and slate computers represent huge growth opportunities, he said.

Smartphone adoption is at a tipping point in the U.S. “and is really ramping up,” Score observed, pointing to a recent Best Buy-commissioned survey by Gfk Roper showing that 45 percent of shoppers want multimedia capabilities on their mobile devices; nearly 30 percent want to replace their landline phones; and more than a quarter want their devices to access social-networking sites and be Wi-Fi-enabled.

What’s more, Carphone Warehouse projects that smartphones will represent about 83 percent of all cellphones by 2013, and notes that:

• the average revenue generated by a smartphone activation is 3 percent higher than that of non-smartphones;

• Geek Squad’s service attachment rate for smartphones of 44 percent is about 26 percent higher than that of non-smartphones, and;

• the attachment rate for smartphone accessories of 36 percent is 157 percent higher than that of less sophisticated handsets.

Score is particularly enthusiastic about accessories, which tend to lag device launches. “There’s a huge customer need for cases, chargers, power supplies and screen protectors,” he said.

He also anticipates that “We will see a lot of slate PCs this holiday season,” perhaps including the private-label Rocketfish prototype that Best Buy chief technology officer and Geek Squad founder Robert Stephens teased over Twitter this summer.

Other opportunities abound in prepaid premium handsets — including Android devices and BlackBerries — which have “well exceeded expectations,” he said, as well as pre-paid mobile broadband, which has shown “significant growth.”

Internally, Score is making up for lost time in leveraging Best Buy’s 25 million Reward Zone loyalty-program customers (“We’re woefully undelivering to them,” he acknowledged), but is making hay by keeping in touch with subscribers over the course of their two-year-long phone contracts. The effort, unofficially dubbed “Happy 24,” includes reminder notices about upgrade eligibility, which only four in 10 customers would otherwise receive, the Roper survey showed.

All told, he said, sales of mobile accessories and airtime make for a “very attractive” basket, putting Score in the catbird seat as demand for TVs and other traditional core CE categories has cooled.


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