It was two years ago amid the fallout from the global financial crisis that Best Buy CEO Brian Dunn took the reins of Earth’s largest CE retailer.
His first order of business, akin to catching falling knives, was managing the aggressive growth plans that had been put into place both here and abroad before the world economy buckled.
But faced with unprecedented competition online that was fomented by the very technology his company sells, Dunn also launched a laundry list of initiatives to leverage the retailer’s formidable multichannel capabilities and ensure its leadership in a connected world.
Throughout the challenges the one-time sales associate has maintained a shirt-sleeve management style borne of his days on the store floor, which has endeared him to his 180,000 far-flung employees. The affection was evident during a recent store visit when Blue Shirts vied for a chance to be photographed with their chief executive.
Dunn’s no-nonsense manner extends to his unassuming corner office, where he shared with TWICE his vision for Best Buy in the brave new world of price transparency, online efficacy and an always connected consumer. — Alan Wolf
How is Best Buy addressing market share gains by online-only retailers?
For me it isn’t a question of Internet vs. brickand- mortar — it’s Internet and brick-and-mortar. I do not believe that physical alone is going to be enough, nor do I believe that digital alone will suffice. It is how those things come together, and that’s how people are living today.
influences 60 percent of the time we ring the register in the store. The customer’s been to
and done some research, taken a look at what’s available, and increasingly we see that being important.
I’ll give you an example of something we’re selling right now: “Batman Arkham City” launched last month, and Best Buy has exclusive content. We have a Robin fight game and we have a couple of exclusive maps, so if customers pre-ordered the gaming disc from us, they got the code for a download for that additional content. Increasingly we’re going to see physical and digital interacting.
I hear the statement all the time that “Boy, the Internet is going to devour the entire physical world.” I simply don’t believe that. I believe people want to see the television screens they’re going to be enjoying in their homes. I believe people like to see the different phones side by side and decide which smartphone is the best phone for them. They like to see the form factor of the computers.
There are times and places where a digital transaction lickety-split will solve the day. There are also times when only a physical interaction with the product is going to be able to answer the questions or create the set of solutions that you’re going to want.
What’s the ideal channel mix for Best Buy?
I don’t have a hard number in my head. I certainly have targets for online, on-phone, in the store — for all the various channels we have. But I really think it’s for the customer to determine what they want, where they want it, and how they get it.
Our job is to be where the customer needs us to be, and the best way to do that is to be where they are. And that’s what we’re doing. That’s why you see us doing work with Facebook, that’s why you see our presence on Twitter, that’s why you see our network of stores you know so well, and that’s why dot-com’s so important. We even have a media network now, Best Buy On, where we present information and advertising.
How do you contend with smartphone price comparison apps?
Increasingly you will find us priced competitively with pure-play retailers on the SKUs we carry in our stores. Our initial position has always been that we are always there on any physical prices, and increasingly we are expanding that so that we are more actively engaged with online and sharpening our pricing there, and you will continue to see us drive better and sharper pricing in all the channels we play in.
We’ve done a couple of things. We launched Marketplace this year, which allows us to bring different providers in through
and has allowed us to get even sharper on pricing, [while] our extended SKU assortment and our supplier direct fulfillment has allowed us to broaden the range of offerings.
How will you continue to get footprints in the stores now that traditional traffic drivers like physical music and movie media are fading?
We have over a billion customer visits a year between online and in our stores, and one of the challenges we face is with the deterioration of sales of physical music, the shiny discs. What do we do in place?
What you’ve seen us do in the center of our store is roll out things like Best Buy Mobile, like our digital imaging boats, like our gaming solution now. Increasingly, Best Buy is becoming a sort of digital playground, and I think that we find that to be very, very compelling for our future because while some of the technologies that have been central to this industry for a long time — physical media as an example — are fading, digital’s exploding. And we’re just getting started with what we’re going to be able to do with digital media and digital technologies.
So we are very much making our store an experiential place where people can explore, touch, feel and play with the products.
How does the new connected store format support that?
It sounds so trite, it’s so obvious, but consumers are really gravitating toward “How do I test drive these connected technologies?”
One of the demonstration areas we have set up in our connected stores is the Samsung AllShare model, where you can distribute from the phone to the tablet to the television screen. You can’t go into one of those stores and not find a customer who’s playing with that and is really impressed with how you distribute that content.
It’s that sort of thing that we need to bring to life to show our customers the thrill of what’s available today at their fingertips. And you will see us move aggressively toward deploying what we’ve learned in our stores starting next year.
What will the chain look like in ten years? Will there be fewer and smaller stores?
It’s very hard for me to tell you with precision what we’ll look like ten years from now. We will still have a big number of physical stores. I don’t know if it will be 1,100, or 2,000 with our freestanding Best Buy Mobile stores, or 1,200 because nodes have shifted. What I can tell you for certain is that we will have what it is we need; big footprint, small footprint, medium footprint and digital, digital, digital.
We’ll do what we always do — we’ll be where the customers need us to be, and we will be the leading multichannel retailer in the world, period. We will bring the latest and greatest solutions to our customers. We’ll bring great value and great price. We’ll bring great information, great knowledge. We’ll bring a great and differentiated experience.
Ten years from now I don’t think there’ll be an area of our lives that this digital connected technology’s not touching. We’ll have in-home solutions for everything from energy management to healthcare to transportation and on and on and on and on. All these industries are going to be dramatically impacted by this, and we’re going to have a big role to play.
TV has traditionally been the backbone of CE retail. How are you restructuring your business to compensate for slowing sales and severe price and margin compression?
TV is a critically important part of the portfolio of products and services we sell. TV remains a multibillion-dollar business for us. Television has just had over the last seven or eight years the largest adoption of new technology certainly in the history of TV since it’s been a “mature” business.
So we’re in a very predictable trough on the backside of that huge adoption that is exacerbated by the worst economic events since the Great Depression. Yes, television to some degree has slowed down. However, it remains as I’ve said a multibillion-dollar business, and our higher-end, or more fully featured, television business is doing very, very well. On our last quarterly call we talked about positive comps that were certainly over 25 percent. That business is growing and growing rapidly, and has been for some time now.
As those price points start to contract and those technologies start to compress, they start to fit into the mainstream space, and it is a very good indicator for what television sales look like a year and two years from now.
Listen, there is nothing more central to connected living, to the American home than the television. I’ve described it as the modern-day hearth. It’s what families gather around, and share experiences. Sundays in my house — and I’m blessed that my kids and my wife are all big football fans — are a multimedia experience, all centered around that biggest of screens watching football, something we all happen to love. And that’s not going away.
Nor is the fact that it’s a visceral technology — you must see it to appreciate it, and no two pictures are exactly the same.
So, yes, the rate of sales has slowed down over the last several years. I don’t see that as permanent, I see it as temporal, and at Best Buy we’ve always built this business for the long haul. We’ve never overreacted to temporal disturbances, and we have no intention of doing that. TV remains an important part of what we do, and we’re quite thrilled to be part of the television business.
What are your key strategic priorities?
We are enormously focused on our online business, enormously focused on services, as you would expect, and we are fanatically interested in the work we’re doing in China, and we’re very, very pleased with the team there.
In hindsight was Best Buy overly aggressive overseas?
Let me be really, really clear about this: What happened in 2008, when the recession started over that Lehman weekend, changed the world. So decisions made before 2008 were completely appropriate for the time. And post-2008, in this new world we’re working in, there are different sets of choices which you’ve seen me execute against.
It’s not that I’m second-guessing any of the choices that were made prior to that. It’s that I believe the world fundamentally shifted that weekend, and businesses that don’t take that moment to really roll up their sleeves and look at their model end-to-end in all their businesses will have a tough time ahead.
There’s two ways to look at it: You can say, well, it’s a temporal event and things are gonna get better, so let’s plan our business for when things get better, and we’ll get that real nice tailwind. I believe when you have seismic events like that you need to look at your model end-to-end and make sure you are invested in the places where you have the highest probability of being successful. And what I have done is focused the portfolio.
Will things eventually get better?
I am an optimist. I believe in the human spirit and that mankind will prevail, in spite of itself sometimes. I absolutely believe that our country will find a way — it always has, and I’m a firm believer that it will. This is a long march through a very, very challenging time as we find the steps we need to take to strengthen our economy and the world’s economy.
So, yes, of course it will get better, but this isn’t a time for wait and hope. This is a time for people to dig in, roll up their sleeves and get very, very connected to their customers.