Best Buy Reignites Its Innovation Engine Under Renew Blue Strategy

Author:
Publish date:
Best Buy has reinvigorated its sales floor — and its top and bottom lines — by parceling out real estate to vendor partners.

Best Buy has never been short on innovation and reinvention.

Back in its formative years it rose from the wreckage of a tornado to help define the big-box format, and decades later, as a global powerhouse, it led the way with cellular specialty shops (Best Buy Mobile), an in-house tech support service (Geek Squad), and a channel-changing end-around (Magnolia Home Theater) that brought ultra-premium products to the mass market.

Heck, the company even ran a customer insights unit (CIU) headed by a former CIA intelligence officer.

Not all of the efforts were successful: witness the disastrous acquistion of the Musicland retail business; its costly forays into Europe, China and Mexico; and customer centricity, its noble experiment in segmented merchandising and store design.

But by the second decade of the 21st century, even Best Buy’s best initiatives hadn’t prepared it for the massive structural changes impacting the CE industry and retail as we knew it, and pundits began preparing the company’s obituary.

Enter Hubert Joly, the dashing Frenchman who drew up and executed an ambitious turnaround plan, Renew Blue, while fending off an attempted boardroom coup by Best Buy’s old guard. Among his first moves: dramatically cutting costs, by thinning management’s ranks, renegotiating leases and supplier contracts, streamlining the supply chain, and jettisoning the offshore gambits.

At the same time, he poured resources into competitive pricing, store-level training, and an overhaul of its industry-trailing e-commerce operations (improved navigation, ship-from-store capabilities, and local out-of-box inventory) to prove that this was no brick-and-mortar dinosaur.

But perhaps the most visible, and crucial, change came with the development of the chain’s branded in-store shops, which began under previous administrations with dedicated Apple and Amazon sections, but were taken to new heights by Joly. Faced with millions of square feet of unproductive real estate, he began parceling out space to vendor partners, who saw the value in showcasing their wares within the last remaining national CE specialty platform.

The first step began a scant two years ago with the launch of Samsung mobile boutiques chainwide. By 2014, Best Buy, along with Samsung and Sony, were ushering in UHD TV with the rollout of branded 4K Experience shops across the country, and the concept would later extend to appliances (Samsung Open Houses); computers (Microsoft IT departments and Google Chrome stations); 3-D printing (Intel zones); hi-res audio (Sony demo areas); mobile carriers (AT&T and Verizon Wireless Experience Stores); and expanded Apple sections.

The additions have helped make the sales floors fresh and exciting, and the stores a destination once again, bringing greater foot traffic, comp sales and vendor support. And manufacturers, at least so far, appear pleased with their investments.

“We understand the importance of the product experience in stores and will continue to work with our retail partners to showcase next-generation technologies through effective merchandising solutions,” said Samsung Electronics America president Tim Baxter.

Similarly, Sony Electronics president/COO Mike Fasulo projected a “significant” increase in his company’s business at Best Buy, as well as a halo effect on Sony purchases in other venues.

Added Joly, “I am very excited about these how these partnerships with our key vendors have evolved. It’s more than just about the physical layout in the stores. These are very close partnerships.”

Looking ahead, Best Buy is pushing the store-in-store envelope with an inventive twist on its own strategy: Next month the company plans to open ten licensed pilot shops within Macy’s department stores, bringing phones, tablets, smart watches and accessories to a new class of trade. The saga continues …

Featured

Related Articles