September 03, 2013

Best Buy

Several months ago, Best Buy published their 2nd quarter results (click here to review them).

A few tidbits:
  • Domestic sales are down 9% vs. last year (largely because of one fewer week of sales in the reporting period).
  • E-Commerce is +16% vs. last year.
  • Comp Store sales were -1.3%, on top of a -5.2% last year (hint - that's not good).
  • Gross Profit was down from 24.9% to 23.1%.
  • Consumer Electronics = -8% comp.
  • Entertainment = -17% comp.
  • Computing and Mobile Phones = +4%.
Those last three bullet points are interesting, don't you think? That's the essence of the Merchandise Forensics work you do - Best Buy is telling you that their business is going through a fundamental transformation.

A couple of questions for you, the loyal reader.
  1. You have a huge box, and many of your merchandise categories are dying. Tell me what you do?
  2. Even if you match prices with all of your competitors, describe why the customer should get in the car and purchase from Best Buy when comparable merchandise can be purchased almost anywhere, at the same price, without sales tax, with faster shipping? Discuss.
  3. Management notes that they are working on improving the Net Promoter Score, a key metric in their opinion. Where would you prioritize customer satisfaction vs. merchandising strategies? Discuss.
Mind you, I'm not criticizing Best Buy in this post. I'm asking you to think like this was your business. What would you do, and how would you demonstrate that your ideas are better than what they are currently doing? I'm asking you to think. Discuss.


  1. This comment has been removed by the author.

  2. Seems to me that fundamentally Best Buy has a real estate problem. It stems from a merchandise problem, but because of the brick and mortar business, they're stuck. In the direct world, it's as if they're locked into a monthly 120 page catalog, but their growing and most profitable lines can easily be shown on 24 pages.

    The devil is in the details (and this would be a huge devil), but it seems that Best Buy has one critical asset that Amazon does not...consumer accessible real estate in high-traffic areas. If I were them, I'd be figuring out a way to reconfigure the stores/business to ride on Amazon's wave through a partnership.

    The sales tax advantage issue Amazon currently enjoys is probably going to go away in five years, but the high cost of door-to-door delivery of refrigerators or home entertainment centers will not.


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