Best Buy Hunts Opportunity in Economic Slump

After reporting better-than-expected results for the first quarter, Best Buy’s president and soon-to-be CEO Brian Dunn outlined the electronics retailer’s strategy to capitalize on what it regards as the opportunities in the current market, taking into account a more cautious consumer and the demise of specialist competitors such as Circuit City as well as the expansion of electronics operations by online retailers like Amazon.com, Costco and other warehouse clubs and discounters including Wal-Mart.

Dunn said Best Buy would press four initiatives:

• Grow Local Market Share. Best Buy will aggressively pursue former customers of departed competitors Circuit City and Tweeter. Dunn said Best Buy had increased market share by 1.2% already but that continued gains would not be easy given competition from the Internet and non-specialist retailers. Best Buy will use information gathered from its 30 million Reward Zone loyalty program members to develop insights into its customers and apply them to provide a superior shopping experience, he said. Application will occur at store level where Best Buy will encourage entrepreneurship among managers and sales floor employees. Over the past two years, he said, the company had reduced its worker turnover rate from 70 percent annually to 44 percent, preserving experience and knowledge that increases the chance employee interaction translates into customer satisfaction.

• Connected Digital Solutions. Best Buy’s term for an effort to put itself on the cutting edge of mobile technology, connected digital solutions will build on investments in the Best Busy Mobile operations to offer consumers the latest innovations available. It will provide both product and service support to help consumers with what Dunn related as their goal, to become fully connected to each other and information at home, on the go and on the road.

• Best Buy International. As it accomplishes its expansion in Mexico, the company will reduce new store growth in its international operation – which also covers Canada, Europe and China — as it shifts emphasis from unit expansion to improving customer experience. It will take lessons learned in one country and apply them worldwide to drive sales at existing stores and gain market share. Dunn said improvement in Best Buy Mobile in the United States had been substantially based on ideas taken from its United Kingdom-based joint venture partner Carphone Warehouse, and he added that the expertise of the Best Buy U.S. merchandising team would be applied more consistently across the global operation.

• Driving an Efficient and Effective Enterprise. The company is planning to cut the rate of its SG&A growth and slash capital expenditures in half as is slows store growth in the United States as well as internationally. Spending priorities will shift to technology that will improve the company’s efficiency, ability to capture additional sales and win over new customers as the economy around the world recovers from the current slump.