Best Buy is pulling out all the stops to ensure that the company and its customers come out ahead this holiday season.
But the challenge is clearly daunting. Like all retailers, the No. 1 CE chain is facing cutthroat competition and a recession-weary consumer, while the company’s own projections call for flat to slightly negative full-year growth in samestore sales and its cash-cow categories of TVs and computers.
Nevertheless, Best Buy Americas president and corporate executive VP Mike Vitelli is more than a little upbeat about his company’s holiday prospects.
“Yes, there definitely will be a Christmas this year,” he chuckled. “TV is relatively flat, but about 34 million sets will still be sold in the U.S. this year, and that’s a lot of business.”
The game plan, he said, like Best Buy’s overarching product strategy, is to build around those maturing businesses with fast-track categories like tablets, smartphones, e-readers and gaming, where the company’s share is low and its growth opportunities are vast.
“We want to go where the market is moving and be a leader,” Vitelli said.
Operationally, the retailer is prepared for the holiday crunch with ample inventory and manpower. Working closely with vendors, Best Buy’s merchants project out sales by the week and down to the SKU level in a finely-honed justin- time exercise to avoid supply chain excess. Even still, the company carries about sixty days of supply at any one time — in stores, in warehouses, in transit, and on display — so that theoretically all of its inventory needs for November and December were somewhere within the system by the end of October.
In addition, manufacturers and/or their distributor partners now provide direct fulfillment for Best Buy’s growing assortment of online-only SKUs, which allows the company to share in the advantages of virtual inventory.
“You have to be in stock and have what consumers need to make sure that your conversion with them in the moment of truth is as high as possible, whether it’s in-store, online or on the phone,” Vitelli noted. “Logistical supply-chain performance excellence is more important than ever because you’re not going to get multiple shots at people.”
Assuring the biggest basket also requires an experienced sales force, which is why Best Buy opted to cut its seasonal hires by nearly half (to 15,000) and up the hours of its better-trained Blue Shirts. The move was seen by some as evidence of lowered expectations for holiday sales, but Vitelli is adamant that it’s all about the customer experience, and giving employees the extra hours and income that they’ve asked for.
“It’s precisely what we said: You want to make sure that your best people are there in front of the customer to help them through that purchase decision.”
Total labor hours are flat over last year, but include twice as many online Geek Squad IT staffers and an additional 3,000 employees to work the phones and distribution centers.
The re-allocation of labor is part of Best Buy’s focus on providing a “hassle-free” holiday experience through liberal pricematch and returns policies, unrestricted free shipping and added support for all purchases.
To convey this to current and potential customers, chief marketing officer Barry Judge has devised an elaborate mix of online, print and TV messaging that touts the seasonal initiatives and Best Buy’s broad assortment of hot new products. Much of the increase in this year’s holiday budget will go toward digital inserts — interactive versions of traditional newspaper circulars that feature richer, embedded content and tag cookies that can direct targeted ads to viewers.
“People are living multichannel lives and that’s the way we need to engage them,” Judge said.
So far the only foreseeable wrench in Best Buy’s best laid holiday plans is digital imaging, after first the tsunami in Japan and now the record flooding in Thailand is hobbling component factories and constraining supplies of finished goods. “Digital imaging has really had a very difficult year,” Vitelli acknowledged. “I’m not sure what the total impact of that will be, but there were some shortages in the first half and it looks like there will be some in the second half as well.”
As for Black Friday, the former Sony exec predicted the promotional period will start earlier, end later and will be highly competitive — just as it has for the past seven Thanksgivings he’s been at Best Buy.
“The consumer is very discerning, and it will be as competitive as it’s always been,” Vitelli observed. “That said, what we’re trying to get out is a broader message than there are a few days of crazy prices. We’re trying to make the holiday season more hassle free for customers.”