Best Buy’s Experiments
By George Anderson
Best Buy isn’t afraid to try new things. The consumer electronics chain has set its sights on becoming more customer-centric and it has been willing to test a number of new store concepts knowing, at worse, there may be learning that it can apply in its big box stores.
Stephen Baker, director of industry analysis at NPD Techworld, said, “Not everything is applicable or transferable, but you try to roll out as much as you can into the big stores.”
The consumer electronics consumer has changed significantly in the past 10 years and, with stores such as Studio d, Eq-life and Escape, Mr. Baker said Best Buy is able to focus on specific segments to gain insights into those who may or may not be currently shopping in its full line stores.
Studio d, for example, focuses on providing education and personal service in helping consumers determine the right product for them. The store, located in Naperville, Ill., runs classes and provides individual instruction for digital cameras. The goal, said Mr. Baker, is to create “an experiential environment around preserving memories.”
Another of Best Buy’s testing laboratories, Escape, is targeted to young male video gamers. Eq-life has products that are intended to appeal to aging baby boomers.
Moderator’s Comment: What can Best Buy learn from separate concept stores that it cannot learn from tinkering with tests in its existing big box locations?
Is the chain succeeding in achieving its stated goal of becoming a customer centric organization? –
George Anderson – Moderator
Best Buy’s experiments and variations often can’t be tested in its traditional locations because (1) the sought-after market conflicts with the traditional audience or (2) the traditional locations aren’t managed very well so any additional complications won’t improve the situation. Who hasn’t entered a Best Buy when they’re playing the music so loudly that normal speech cannot be understood? Won’t this turn off the Boomer segment or the female segment?
Testing outside the BBY box provides flexibility in learning to be sure. Not the least of which is the ability to make wholesale changes and try new things without disrupting an existing store location.
But the real opportunity is to learn what consumers may be seeking that they will NOT accept within a BBY format. In other words, if the mold has to be broken to expand it, let’s be the first to do it. This open air approach to site strategy is reminiscent of another retailing giant who proves consistently that it is willing to test almost anything. Funny how they both seem to do pretty well in the market, eh?
Best Buy can target the focus consumer segments better through concept stores by strategically locating the stores. The effectiveness of the experiment depends on Best Buy’s ability to steer the focus traffic in their concept stores. For that reason, the concept store format is better suited than alteration of the big box format. It is harder to predict if this experiment is worth the investment.
I think one could look at the interactive experience that Lowe’s and Home Depot have created for their customers. To embrace and expand the comfort levels of the products they sell, Best Buy is creating that same comfort level — to buy bigger and better electronics, as well as helping their customers move into other areas of electronics that they may not have tried to tackle because of a lack of understanding or a lack of experience. By creating separate learning centers for the entire company, BB is able to really focus and perfect an offering that, once complete, can be much more successful going forward.
Best Buy’s experiments show that they recognize the value of pre-purchase service to important segments. But their existing impulse-purchase driven culture regards such service as an expense with an uncertain return which may force less competitive prices. So don’t expect any improvement soon.
The BBY management team needs to spend a full day in an Apple Computer flagship retail store, where they will see enviable customer traffic seeking not only products, but a variety of services, many of which are available only for a fee, such as one-on-one consultation and solution demonstration before a new purchase (available in Apple’s “Procare” service bundle). Such pay-for-service concepts may be the only way to provide truly customer-centric service levels without upward pressure on product prices.
Best Buy has developed a very successful business model by listening to the consumer and, more importantly, finding a way to stay ahead of the consumer. With each new format they try they’re able to pick up ideas they can use in their mainline stores. The current customer-centric approach they’re taking is a direct result of their ability to define who their shopper is. What makes this all the more special is they’ve done this in a category that is under extreme pricing pressure. This should serve as an example to other retailers who believe they can’t deviate from the norm due to pricing pressure. The grocery industry is one that can learn a lot by watching how Best Buy as defined and gone after their market.
First, with all due respect, the consumer groups to choose from are “off.” You should think in terms of the other Generations, like you did with Baby Boomers, but leave off the aging word…for this Generation is the wealthiest.
So let’s consider X-Generation, Y-Generation, and the new Millennium Generation. Each of these groups have distinct characteristics and buying habits that can better be addressed. Hence, the consumer-centric direction and, most important, quality is improved.
With concept stores being tested, the Generations view them very differently than the Big Box outlets… where hiking shoes are needed; sales associates / employees playing ‘hide and seek’ isn’t fun; consumer information centers don’t exist; and the personnel lack knowledge of the product, competitive values, and “how to.” JUST TRY TO GET AN X-GENERATION PERSON TO BE PATIENT IN GETTING WAITED ON.
The concept stores within a Big Box would be located in the back, and have minimal exposure, unless the consumer knows where to find them. Just ask Toy ‘R Us about its Birthday room area, and how it failed.
You don’t get the Big Box store personnel to embrace the new area, and people walk in to a Big Box knowing what it offers, i.e. a different mindset for the shopper and the sales associates…
The smaller concept stores emphasize a consumer-centric approach and may have a diverse sales group, who knows how to relate to the different generations. Specialty comes into play, whether in higher tech items; a show space to show what a completely connected and functional unit can look like and do; and the store can sell add ons with more time spent with the shopper.
This Big Box vs. concept store of smaller size and better consumer-centric value is just like Harris Teeter’s large supermarket, and its H. Teeter Express; focused on meals and superior quality perishables. The personnel are educated and the chefs walk and talk with the shoppers. Time well spent to generate higher sales in stronger GPM.
Just what Best Buy wants in a concept outlet. Hmmmmmmmmm
While I applaud Best Buy’s efforts at reaching out to women, in some ways I believe that they are missing the point. Eq Life is a great concept, don’t get me wrong. However, when will tech retailers begin to acknowledge that not all women are clueless about technology and need to be gently introduced to the latest gadgets? I am reminded of this any time I go into Best Buy with my uber tech savvy female business partner. She loves to learn but usually knows what she wants. Invariably, it takes about fifteen minutes for the guy waiting on her to get out of “instructional” mode and to realize that she knows what she’s talking about. About 50% of the time, she ends up knowing so much more about new technology that she ends up getting referred to someone else in the department or just letting the guy off the hook and saying she’ll just poke around on her own. I just realized that this is why I accompany her as infrequently as possible…the process is so predictably excruciating, time-consuming, and annoying! Using new concepts to gain insights is laudable however, if the approach from the get-go is “what do women want?” without considering “what do women KNOW?” the implementation will be always fall short.
As the market bifurcates into a set of retailers that provide personalized service and customized products on the one hand and a set of retailers that standardize procedures and offer low prices on the other hand, trying to find a way to appeal to specific market segments within a big box store will be a challenge. Analyzing purchases to determine the most valuable customers is a first start. Then Best Buy has to determine whether these valuable consumers are one segment or more than one segment, what they want in terms of service, and what they want in terms of products. Then they need to figure out how to provide the service. There is likely to be a great deal of experimentation to test which tactics are most effective with which groups before rolling out specific changes. Meantime, once Best Buy figures out what elements they want to change, researching other non-big-box retailers to determine best in class approaches will be an important step when designing new strategies for Best Buy. If the research and experimentation stages are handled carefully, Best Buy stands an excellent chance of pulling ahead of its competitors.
Best Buy will be able to learn much about their customers, their needs and how to meet them with each type of concept store that they try. Unfortunately, these are very expensive and require many dedicated resources with a less than average return. The key is to properly gather information, analyze it and use it to impact strategic decisions which headquarters is formulating. Whether this is really being done is open to debate. Instead BB may be doing the same thing which most retailers do and measure sales, ROI, product turnover, etc. The key here is for BB to try and interview as many folks as possible who don’t purchase something, after they are leaving a store, determine what is missing from their product mix that they are leaving out, and how far customers are willing to travel to come to a different kind of store (as well as how they found out about the store). This information requires unique advertising, to a segmented target market, to differentiate BB from the other competitors in the space, and that can be very expensive. However, any efforts to differentiate themselves through increased target market segmentation can only increase BB’s appeal in the long run.