Best Buy Looking to Cut Costs
By George Anderson
Best Buy is looking to cut expenses to the tune of $300 million by the end of this fiscal year marking what a Minneapolis Star Tribune article refers to as “a fundamental shift” in the way the company conducts its business.
The consumer electronics chain has seen costs rise over the past two years as it has shifted to its “customer centricity” formats that tailor locations to meet targeted demographics on a store-by-store basis. Currently, Best Buy has converted 292 of its 741 stores in the U.S. to its various customer centric formats including “Jill” (emphasis on serving so-called soccer moms), “Buzz” (young techies and gamers) and “Barry” (affluent professional males),
Joseph Beaulieu, a retail analyst with Morningstar, said, “It’s going to be interesting to see how they cut back costs without impairing the customer centricity efforts.”
Expectations are that the company will first look for savings by not filling jobs where there is turnover and by adjusting scheduling in the stores to reduce staffing during non-peak hours.
“Best Buy has a lot of low-hanging fruit it could cut without customers really noticing,” said Daryl Boehringer, an analyst with FTN Midwest Research.
“A lot of what came out of customer centricity was good,” he added. “It helped employees learn how to up-sell, but one part that wasn’t good is that it created a lot of bureaucracy and middle management that clouded the bottom line.”
Others, such as Morningstar’s Beaulieu, appear concerned that Best Buy may not be seeing the forest for the trees with its plans to cut costs. “Their stores are well-staffed. But that’s part of the whole strategy, to intercept people and help them find what they want. It’s a strategy that’s made good money for them so far.”
Moderator’s Comment: What is your reaction to Best Buy’s cost cutting program in light of it being in the relatively
early stages of shifting into its customer centricity strategy? –
George Anderson – Moderator