Monday, October 27, 2014

Some Thoughts On How Best Buy Can Get Back On Track #Bestbuy

Best Buy has been struggling the past few years, as a lot of electronic goods retailers. Among the reasons of its issues are:
  • Tougher competitions with online competitors like Amazon having aggressive pricing
  • "Showrooming", which is linked to the online competition: people go in store to touch the products, get information, than buy it online to competitors
  • Less disruptive innovation (tablets, Led TVs, blu ray, digital cameras...) than the last 2 decades. Also, and linked to it, we are not anylonguer in an equipment market, but in a renewing one, which implies less volumes.
  • Digitalization of cultural contents, which are decreasing the sales of DVDs, CDs, and soon video games.
Best Buy is in the same situation than other retailers, like Fnac in France, which had to adapt to the competition, and a lower demand. Obviously, Best Buy still have strong arguments to face competition:
  • A strong brand, which people knows and trust
  • A large retail network, which allows Best Buy to have proximity with its customers.
  • A know how in terms of logistics, and a size that allows it to master its operational costs.
I believe that Best Buy however need to move forward and make adjustment to its strategy in order to  find back growth:
  • Find new product categories linked with its brand image: That is what the Fnac has done in France, selling kitchen applicances. It will allow them to master the decline in DVDs and CDs sales.
  • Invest in instore experience: There are two ways they should do so: Educate its sales person. We are living in the information age, where most customers know more about products than most sales persons. Hence, in order to create value to the store visits sales person needs to provide great advice and information about products. Also, Best Buys stores should emphasize more on product demonstrations, to enhance shopper experience and trigger sales.
  • Lowering instore stocks to get more cashflow. Internet retailers are thriving on cashflows as they have cheaper infrastructures. Hence, instore inventory should be lower in order to get back some cash and hence profitability.
  • Embrace multi channel potential. And this by 2 ideas. First: get some lockers to develop click & collect activities. It will create some traffic from online shoppers, and hence potential instore sales. Secondly, master "showrooming". People want to buy it online after having visited the store? Fine, but on Marketing materials must hence be developped to make sure we track these customers.