Has Best Buy solved the Amazon riddle?
Do you remember showrooming? Just a few short years ago, there was widespread discussion within retail circles about stores being in peril as consumers shopped in physical locations to gain information while ultimately going online to purchase. Best Buy was among those retailers most often cited as being at risk, but something(s) changed along the way as evidenced by the company’s rebound and articles about how it has solved the challenge of competing with Amazon head-on.
The change began with Best Buy’s hiring of Hubert Joly as CEO in 2012. Mr. Joly started off by getting the company’s finances in order through a series of cost-cutting measures. This set the stage for a turnaround under the company’s “Renew Blue” strategy. The initiative included an increased emphasis on service in stores and with its Geek Squad technical services unit; a push of store-within-a-store concepts featuring Samsung, Sony and other major consumer electronics brands; price matching; and a commitment to building its digital business.
As a Wall Street Journal article points out, Best Buy has come a long way. Its share price has rebounded from January 2013 when it was at about 25 percent the current value. In the company’s most recent quarter, same-store sales in the U.S. were up 1.8 percent on top of a 0.8 percent increase for the same period in 2015.
“From an overall merchandising perspective, we saw year-over-year sales growth in home theatre, mobile, and emerging categories like wearables and connected home,” Mr. Joly told analysts on Best Buy’s third quarter earnings call (via Seeking Alpha). “This was offset by continued softness in gaming. We also continued to drive considerable year-over-year improvement in our net promoter score, which increased approximately 400 basis points over Q3 last year.”
Best Buy’s online sales increased 24 percent for the third straight quarter. “This growth was driven by increased traffic and the cumulative benefit of our investments over the past few years in the digital customer experience and enhanced dot-com capabilities,” he said. “We continue to refine our search, research, and checkout capabilities with a focus on streamlining the customer experience across all channels.”
- Best Buy’s CEO Hubert Joly on Q3 2017 Results (Earnings Call Transcript) – Seeking Alpha
- How to Fight Amazon.com, Best Buy-Style – The Wall Street Journal
- Best Buy CEO Hubert Joly smiling over retailer’s holiday prospects – Minneapolis Star Tribune
- Best Buy is on a roll – RetailWire
- Is Best Buy’s ‘Renew Blue’ igniting a turnaround? – RetailWire
- Best Buy CEO says chain open for showrooming – RetailWire
DISCUSSION QUESTIONS: What do you think Best Buy is doing right and what does it still need to work on? Does the chain serve as an example for other retailers dealing with competition from Amazon.com?