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Best Buy Prepares For Hard-Fought Holiday Selling Season


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
VP Mike Vitelli is
more than a little
upbeat about his
company’s holiday

“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
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

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.”