Best Buy is on a roll

Discussion
Aug 26, 2015
George Anderson

There’s nothing like outperforming expectations to make investors happy. That’s the story at Best Buy, which saw its share price jump as much as 17 percent after the company posted a 0.8 percent gain in total sales for the second quarter, buoyed by strong U.S. sales, compared to analysts’ predictions of a two percent drop.

Best Buy CEO Hubert Joly, speaking with analysts on the retailer’s second quarter earnings call, pointed to three competitive advantages the company has used to drive four straight quarters of same-store sale growth (2.7 percent in the most recent period) in the U.S.

The first competitive edge is Best Buy’s ability to serve its customers in stores, online and in their homes. The company, which operates stores within 15 minutes of 70 percent of the U.S. population, has enhanced its digital shopping experience with its online site and mobile shopping app.

According to Mr. Joly, Best Buy’s focus on offering "advice, service and convenience at competitive prices" has enabled it to achieve market share gains in key categories, including appliances and mobile phones.

BestBuy

Source: corporate.bestbuy.com

Mr. Joly said Best Buy’s second competitive advantage lies in its positioning within the marketplace, which attracts early adopters.

The third competitive advantage is the company’s relationship with its vendors, including a number that now operate store-within-a-store concepts inside of Best Buy locations.

"Not only do we showcase the best of what our vendors offer, we’re also benefiting from the material investments that several of the world’s leading technology companies are making in our stores," said Mr. Joly (via SeekingAlpha). "With these partnerships, we’re able to bring to life interactive technology experiences that again make the Best Buy operating model more relevant for customers."

What do you think are the biggest reasons for Best Buy’s improved performance? What will it need to do to continue to build on the gains it has made?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Oh, there’s one thing that wasn’t mentioned that is REALLY important. Sales associates now have the time and inclination to actually be helpful."
"I’m happy for Best Buy. But this seems to question a lot of conventional wisdom in retail. I guess we better brush up our pundit skills here on RetailWire!"

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15 Comments on "Best Buy is on a roll"


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Paula Rosenblum
Guest
5 years 5 months ago

Oh, there’s one thing that wasn’t mentioned that is REALLY important. Sales associates now have the time and inclination to actually be helpful.

I was really surprised earlier this year when I went to a store to buy a Bluetooth speaker. In case you haven’t looked, there are literally hundreds on the market now. By all sorts of vendors from Logitech to Klipsch to Beats, to really high-end. I actually could not begin to sort through which was the best for my needs.

To my amazement (given past experiences) an associate asked me a few pertinent questions, and then led me to a specific speaker (a Logitech as it turned out). It wasn’t the most expensive, but it wasn’t the cheapest either.

When I got home I checked out reviews and, sure enough, it was the most highly rated indoor/outdoor Bluetooth speaker available.

Human-to-human interaction is the key, I think. And it just needs to keep on keeping on, while keeping prices “in the ballpark.”

Another great turnaround story in the making.

Tom Redd
Guest
5 years 5 months ago

Best Buy has refined their assortments and cutback on carrying a little of everything. I also think that their store service has improved quite a bit. This is what brings people back and lifts store performance numbers.

Overall, Best Buy has quit thinking they are number one and are now fighting harder to be the CE leader. Also, the website has really, really improved.

Key though is the assortment tune up improves store margins and capital expenditures.

Max Goldberg
Guest
5 years 5 months ago

It’s simple, Best Buy will match Amazon’s prices. Why should consumers wait when they can get it now for the same price?

Best Buy has also worked hard to train their salespeople to be knowledgeable and available.

Their website is still a mess. Its search capabilities deliver too many irrelevant results.

Still, there’s that price match.

Ben Ball
Guest
5 years 5 months ago

Two things strike me about this report. First is that the markets are reduced to rewarding a retailer with 0.8 percent overall sales growth with a 17 percent bump (that should not be construed as my thinking markets are always rational in the short term). Granted, this was a “beat” of expectations — but it also suggests the expectations for retail growth are quite low.

Second, the real good news is that the “outperform” was driven by 2.7 percent same-store growth. This implies a “miss” in all other channels. Isn’t this the inverse of the current paradigm? Isn’t the growth in successful retailers supposed to be coming from online and other non-traditional channels?

I’m happy for Best Buy. But this seems to question a lot of conventional wisdom in retail. I guess we better brush up our pundit skills here on RetailWire!

Mark Heckman
Guest
5 years 5 months ago

Best Buy is a great example of leadership reacting to a changing market. When their music and DVD business tanked along with the stagnation of the flat screen TV market, a notable percentage of their business was under siege.

While there is some resurgence in the TV category with curved screens and LED technology, for the most part Best Buy has rebuilt their business by amping up their online business and most importantly creating a shopper-assisted environment in-store that emulates the online experience.

There are lessons to be learned here, as many retailers are experiencing radical changes in the expectations of their shoppers due in large part to the Millennial influence and increasing comfort with buying online.

George Anderson
Guest
5 years 5 months ago

Editor’s Note: Best Buy separates same-store numbers for online out separately. They were up 17 percent for the period.

Liz Crawford
Guest
5 years 5 months ago

Do you remember a couple of Christmases ago, Best Buy embraced the dreaded ‘showrooming’ trend? They were radical for doing that… and I applauded them. Their CEO at the time claimed that those showroomers were his to lose. How right he was.

I believe this move has played a big role in the comeback. Best Buy knows its role in the new economy: providing an interactive experience with the product, backed by human high-touch help. Bravo Best Buy. You are a role model for embracing changing technology for other retailers, and even for brands.

Robert Heiblim
Guest
Robert Heiblim
5 years 5 months ago
Mr. Joly and leadership at Best Buy have moved decisively. The organization has been flattened while also enabling more authority and responsibility down. The best example is Mr. Joly placing price matching as the “table stake.” Beyond ads and online listing, associates at the store can match price without any other approval. This is very empowering and has driven morale which of course also improves service. The stores have gotten facelifts through innovative partnering with brand marketers who also benefit. Fresh stores with unique displays appeal to shoppers and give them new reasons to visit. Product trends are benefitting Best Buy. We are early in adoption of things like 4K TV and Best Buy shopper demographics are favorable. The translation is that they are getting more than their fair share here. Along with new areas like fitness bands, smartwatches, action cameras, etc. that are early in the adoption curve, this supports Best Buy over mass retailers who may later gain share, but for now make Best Buy and interesting retail playground. A serious commitment to… Read more »
Gajendra Ratnavel
Guest
5 years 5 months ago

Best Buy is for sure doing things right. I think the overall economy has a part to play in this also.

Lee Kent
Guest
5 years 5 months ago

In the electronics business there is a much stronger need to have knowledgeable help. Best Buy’s store-within-a-store partnerships along with more knowledgeable staff have made the difference to me.

Often times, electronics must be connected with other devices and it is imperative to know if they will work together, what else might I need to make this work, and which one best meets my needs.

Best Buy’s in-store experience has it in spades as far as I’m concerned, and that’s my 2 cents.

Arie Shpanya
Guest
5 years 5 months ago

I think Best Buy’s physical stores and price matching policy are its biggest assets. When combined, Best Buy has the ability to steal market share from Amazon. Why wait for an item when you can pick it up at your local store for the same price with no potential shipping charges? It’s a win for consumers and keeps Best Buy competitive.

Sure, price matching can be a slippery slope, but instant gratification reigns supreme in retail.

Lee Peterson
Guest
5 years 5 months ago

The best thing Best Buy ever did was snap up Geek Squad. They couldn’t have seen the writing on the wall that long ago, but having an implementation service is a huge advantage.

The other thing is their focus on the “Blue Shirts” (store associates). They “get” that without them, you can just buy online and not miss a thing. And although they have a long way to go with with associates, at least they understand that they ARE the front line and should be the priority.

Having said all that fluffy stuff, they’re still about 500 stores heavy IMO, unless most of them become showroom only, ship to home with a Geek.

Matt Talbot
Guest
5 years 5 months ago

I think there are two significant factors that have contributed to Best Buy’s resurgence. One of those factors is how they have a strong omnichannel presence. Whether online or in-store, they have competitive pricing, good selection and product knowledge that is readily available.

Another commenter mentioned the way they have embraced showrooming, also known as ROPO (research offline, purchase online). This is critical. Some products, like a pair of headphones or an office chair, are hard purchases to make simply based on pictures and videos online. It’s easier when the customer can see and feel that product in person. This is where Best Buy can win a customer away from Amazon or another online retailer by using their floor staff to build customer relationships through in-depth product familiarity and support. Couple that with competitive pricing and that’s what builds customer loyalty and ultimately more sales for Best Buy.

Seeta Hariharan
Guest
5 years 5 months ago
The three competitive advantages cited by CEO Hubert Joly ring true as the biggest reasons for Best Buy’s improved performance. The personalized, seamless click and mortar experiences they provide are gaining momentum over pure online competitors. Their store-within-a-store concept allows customers to experience appliances, electronics, and new technology first hand, building deeper relationships with their customers and partners alike. And, their focus on offering advice, service and convenience leads to the delivery of frictionless customer experiences. Best Buy is proving that they understand the importance of owning as much of their customers’ journey as possible by rounding out a highly personalized customer experience across otherwise siloed channels in digital and physical spaces. They have been smart to understand the significance of partnerships to provide consumers with more value than what Best Buy could provide alone. For example, their relationship with Apple to meet demand for Apple Watch is a successful proof point in how they have redefined shopping to drive demand and provide added value for consumers. Staying focused on these objectives and using customer… Read more »
Charles Whiteman
Guest
5 years 5 months ago

Best Buy is focused on the enemy!

They’re working hard to identify and leverage their advantages which include:

  1. “Self-funding” billboards (i.e., each of their 1,000+ well-placed retail storefronts);
  2. Store environments that are fun places for CE enthusiasts to visit and buy on impulse;
  3. A pricing strategy intended to short-circuit Amazon’s value proposition;
  4. And (I’m guessing) their vendors who (guessing again) would like to avoid the scenario where they lose any way to get their products into the market, except through Amazon — a just-in-time online-only operator.

Maintaining this focus and figuring out new ways to combat Amazon’s assortment/price value proposition is the key to keeping this ball rolling.

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Braintrust
"Oh, there’s one thing that wasn’t mentioned that is REALLY important. Sales associates now have the time and inclination to actually be helpful."
"I’m happy for Best Buy. But this seems to question a lot of conventional wisdom in retail. I guess we better brush up our pundit skills here on RetailWire!"

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