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Best Buy Case (History (Dick Schulze - 1966, Tried discounting - worked…
Best Buy Case
History
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- Tried discounting - worked super well
- There was cut throat competition
- Added braoder range, expanded store size to super store proportions
- Part super store, part show room, employing commissioned sales ppl to give advice
- Warehouse personnel to lead items in ppl's cars
- 1987 Highland SS (Ind no 2) moved in to its territory and started super discounting
- Best buy - red sales ppl, inc show space by dec storage, did salaries in favor of commissions - and carry and go concept introduced - by 1996 became market leader
- 1996 - Expanded product line - more freq purchase and higher margin items (DVD, music etc)
- Circuit city tried copying by 2001 but by then it was trying diff strategy
- 2001 - Adding service - Geek Squad
- Widening PRod line (Magnolia home theatre, pacific home kitchens)
- Reward program to drive higher sales
- Looking international for growth
- In 2001 - Acquired 88-outlet future shop - similar service model to Circuit City
- 2006 - Acquired majority share in Jiangsu Electronics (china's 4th largest electronics retailer) - had a diff model than best buy (company personnel and merchandise of choice)
- Also started own model stores in China
- Joint venture with Carphone Warehouse to create best buy Mobile
- Acquired 50% stake of CPW (2008) - big UK and European presence
- In 2009 Circuit city filed for chap 11 bankruptcy
- Competitors like Walmart offering deep discounts on a narrow line
- Small phone shops threat for latest gadgets
- Amazon growing share online - since free from 5.4% sales tax in many states
- 2009 - Reorganizing staff for 1000 layoffs (salaried) and dec in pay of 8000 sales associates - cause of high international operating costs
- 2009 - Brian Dunn new CEO - cut capital spending by 1/2
- Began testing new product categories + standalone mobile stores - inc in sales + operating profit
- 2011 - anncounced closure of Best Buy stores in China and focus on 5 star model - planned to close big box outlets in UK as well
- Boughht CPW's share of best buy mobile
- Intend to write off most of goodwill of best buy Europe
- Launched own Market place for 3rd party sellers
- Amazon's price check app hit - but still inc in sales of 1%.
- 2012 - CEO resigned and Chairman forced to step down amidst accusations of acting improperly with female employee
- Schulze offered to buy off the company in 2012 Aug 6 - given till mid dec for the 10 bil - eventually didn't
- CEO from restaurant industry (Hubert Joly) - first external CEO - started new hiring and re-structuring
- Trying to improve the "say-do" ratio
- At this time - MArket leader in NA and gaining / maintaning shares in most categories
- 2012 - 150 / 725 mil cost cutting achieved + net promoter score up by 2 %age points
- Renew Blue - practical steps - pg 161 mid para
- To open Samsung stores in all 1400 US stores + 600 windows stores with stores
- Sold half of stake in Best Buy Europe
- Room to improve online site (compared to Amazon's)
- Shoppers visited 5 stores on avg in 2007 - 3 in 2013 when they visited the mall
- Price cuts of $765 mil done instead of planned 725
- 2014 - extended online fulfillment to all its stores
- First half 2014 - adding stores for Samsung, Magnolia, Sony ... plus installment payment plans for all carriers
- End of 2014 - to sell its China operations
- Half of future shops closed in Canada - half turned into Best Buy
- Feb 2016 - made announcement that closing Marketplace next day (ie. only 1% of domestic revenue - though loosing many SKUs from third parties)
Joly's insight and work
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- Failure to capture online sales
- Low customer satsifcation scores
- Poor customer price perception
- ^ Despite competitive prices in core categories - higher margins of accessories
- Error of continuing to open stores in 2007- 09 recession
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Competitive advs he saw
multi channel product and delivery - home, in store or online
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Start
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Multi channel strategy in NA - cause of this and prev - inc operating costs - but growth still elusive
Other stuff
Had Apple, Samsung and Sony stores in house
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Problems
-ve comparable sales - Cause of poor price perception, shift to e-commerce - customers no happy
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- Sol - Boost customer experience in an integrated way- online and insore
- Sol - Differentiate - innovate - drive value
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