Best Buy Going Mobile in a Small Way

Of course, the biggest problem with the cellular phone shopping experience in the U.S. is that consumers are at the mercy of their carriers. Unlike almost every other product category, you are shopping for a carrier and a contract first, with the actual product ending up as something of an afterthought. Apple began to turn this business model upside down by driving sales of a great product first, and making the rest of the transaction secondary (if not cheap). But most carrier-driven stores (AT&T, Verizon and so on) seem to be more interested in selling contracts than selling phones, because that's where the money is.

At least the Best Buy model provides an alternative, where the consumer can focus on the phone's features and benefits first, provided that he/she isn't already locked into a pre-existing contract. And Best Buy simplifies the pricing strategy by taking mail-in rebates out of the equation. Opening free-standing stores is a huge opportunity for Best Buy to take this fast-growing segment of its business outside of the "big box" framework and to a much more cost-effective, convenient location strategy.

Richard Seesel, Principal, Retailing In Focus LLC

Buying a cell phone is like buying a mattress -- it's hard to make a head-to-head comparison.

Consumers want to know why they can't get the phone they want (say an iPhone) from the provider they want (say Verizon).

The cellular companies have also made it hard for many people to understand what phone and/or plan is really best for them.

If Best Buy can leverage the consumer education issue, they may be on to something.

Ryan Mathews, Founder, ceo, Black Monk Consulting

Ha! Shopping for mobile ranks lower than the dentist! No kidding. Best Buy takes a giant step in the right direction by acknowledging the truth and setting forth a plan to fix it. If their sales associates treat various shopper segments with the same empathy and respect as they do in their big stores, they'll do fine. Personally, I gave up my cell phone and now use only a work issued Blackberry due to a carrier store's inability to provide consultative or even halfway helpful customer service.

Anne Howe, Founder, Anne Howe Associates

There's been a major shift in the consumer's mindset when it comes to buying mobile devices. It used to be that brand defined features and directly influenced sales. Now it's about the carriers such as, AT&T, Verizon, and Sprint. Once consumers are locked into a plan, they head back to the store that offers that plan and select among the devices...except (to a certain extent) for the iPhone (AT&T) and the Droid (Verizon).

So where does that leave Best Buy's small stores? How do they grab customers who are like lemmings heading back to the sign for AT&T, Verizon or whoever represents their service? Many of these consumers can easily make their decisions directly with the service online. They don't need to go to the store.

The retail environment has the opportunity to engage the consumer with the devices and their differentiating features. But oftentimes that experience is lacking, because the retailers don't offer it. All you see is all you see. What happened to touch, feel, engage, and understand?

It boils down to the fact that the competitive landscape has changed tremendously. Best Buy's approach does not seem to recognize the overall changes in the universe but is focused on its retail location challenges. That might not be enough to improve share and generate profitable revenue.

Joan Treistman, President, The Treistman Group LLC

So they're going to go head-to-head with all the Sprint/AT&T/CellularOne stores for "incremental connections?" Sounds like looking for anything rather than the right thing but they have obviously mined their data to know who this customer is--whether she will open up her wallet--with kids in tow--at the Best Buy Lite store seems like a high risk gamble rather than a sure thing.

Bob Phibbs, President/CEO, The Retail Doctor & Associates

Somehow I don't think cramming a mom and a couple of kids in a smaller space sounds like a good idea. The problem with buying a cell phone which usually is NOT addressed is that consumers are leery that they are getting ripped off--that there are hidden fees in the plans available. And this is usually true. The better approach would be a spacious area, with knowledgeable and trustworthy associates and simple self-explanatory plans. Seriously?

Michael L. Howatt, Retail and Shopper Insights Consultant, Ascension Growth & Innovation Strategies

Ok, here is the problem. Most cell phone stores offer only the dummies (and that's not the employees) to play with on the shelf. When it comes to cell phones, it's really hard to determine what you want until you actually play with the device and navigate through the screens, etc. Rogers Plus stores in Canada usually have 2 or 3 flagship phones that are actually operational and can be used to make calls or surf the net. Bell stores also employ this method and I think that's what is needed in this category.

I made the mistake of getting the Blackberry flip phone thinking that I wanted a flip phone with Blackberry features. What the associate failed to tell me is that they jammed a Commodore 64 processor into the phone and if I want to send an email, listen to music and surf the net, I basically have to block out 2 hours out of my day. Had there been a working model, I would have seen that right away and went for the Curve or Bold model instead.

Smaller stores are a better idea. Less product knowledge to learn and more possibility of actually interacting with the devices.

Doron Levy, President, TheMortgageMachine.ca

BB is a winner here, I think.

First, they expand the reach of their brand into a venue other than the big box, where the typical customer is primarily male. Secondly, if they are able to extend the knowledge and service available in the big box into the smaller stores, it will be a big plus over the typical experience in the carrier stores.

The comments above about customers automatically returning to their carriers is absolutely true. I'd love an iPhone, but I absolutely refuse to deal with AT&T. However, it's useful to remember that there used to be only one phone service in this country (Ma Bell) until it was broken up. My sense is that, technology issues aside, that could happen again with exclusivity of carrier. Should that happen, Best Buy finds itself in a very, very good place.

Bill Emerson, President, Emerson Advisors

Best Buy comes at the the 'consumer' side of the business better than the major providers--it's more ingrained in their DNA.

By offering the consumer a suite of products in the cell phone space, Best Buy will be listening closely to what the each individual customer is seeking, and then provide both the handset variety, and plan that can fit their needs.

These new boxes should be very successful, as Best Buy will be taking on real estate at a time that it is less expensive than a couple of years ago. And, they have a U.S. population base that is planning on making use of new devices and service.

Based on the January, 2010 Consumer Intentions & Actions (CIA) Survey from BIGresearch, 12.1% of the population is planning on buying a new cell phone in the next 90 Days. Fully 43% of the population is considering changing providers in the next 6 months, and nearly 1/4th (23.6%) say that they are definitely planning on switching.

Why are they planning on leaving a Provider?

According to the CIA survey of 8,500+ Adults, the leading reasons are PRICING/VALUE, PLAN OPTIONS, COVERAGE, RELIABILITY, and FREE MINUTES. Of the people who switched in the past 90 days (8%), the top 5 reasons for actually leaving were PRICING/VALUE, COVERAGE, PLAN OPTIONS, CUSTOMER SERVICE, SERVICE.

Those switchers have an interest in music, video, text plans, internet connectivity, and handset variety. All of this technology has been on the scene for some time (just look to Europe and Asia). In the U.S., parsing out these applications, at a marketable price, has been controlled by the providers. Best Buy is likely to set a new bar--and, the consumer will be the winner.

Roger Saunders, Managing Director, PROSPER BUSINESS DEVELOPMENT / BIGinsight

You know, this is a hugely popular concept back home in India where we have many such small Mobile retailers (MobileStore, for instance) catering to a very niche consumer electronics market segment. Given that 45% of the Indian population (yes, that is a HUGE number) uses cell phones, we are way ahead of the curve when it comes to this, really! We don't, of course, have "contracts" with carriers there like we do here, which makes matters (read: buying decision) a lot less complicated.

This is a step in the right direction for Best Buy and should continue to be a very profitable business model for them.

'rgupta'

I think they'll do quite well, and this will could be at the expense of the local and regional wireless retailers. Making and maximizing the wireless transaction today is much more difficult than it was years ago, and I believe the deep pockets and experience of Best Buy will enable them to deliver a better shopping experience.

It doesn't mean that the local and regional retailer has to roll over either. What it does mean is they need to up their experience and not treat customers like a commodity. She wants an engaging premium experience from an extremely knowledgeable salesperson. The person who delivers it the best will win.

Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Best Buy's approach to selling mobile phones treats the phones like their customer centric plans attempted to treat shoppers. Several Best Buy associates have told me they stock only popular models which sold well from the product's launch.

These associates lament dropped models they liked due to a slow sales start. Also most phones, if not all, are not functional. As stated above this makes the retail experience pretty useless.

I am with Sprint whose corporate stores offer virtually all current phones and most if not all are functional.

My experiences have only been with BB big box stores. In some I have found associates very knowledgeable, in others they were extremely misinformed.

Based on my experiences Best Buy has a lot of basics to firm up before beginning on their 1,000 store quest.

'RetailEditor'

I read a few weeks back that Best Buy and RadioShack were going to become one. I spoke to friends at RadioShack who responded they had heard the same thing; but that was only one of the stories floating out there in cyberspace and they put no credibility to it. RadioShack got some good publicity in this same Discussion about how improved and effective their marketing has become.

Looking at the RadioShack model and retail footprint makes it appear to be a good fit for Best Buy and what they are proposing to accomplish. Most of the same and needed infrastructure and staffing is already in place, isn't it?

It will be interesting to sit on the sideline and see how this all unfolds.

Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I agree with Mr. Rosenbaum that the timing of this announcement is interesting given the announcement in March that BB was looking to buy RadioShack. Could it be that this free standing store announcement is simply a way to influence the price that they might have to pay to buy RadioShack?

Steve Montgomery, President, b2b Solutions, LLC