Wednesday Jul 09, 2014

Renew Blue, Ignite the Possible

Best Buy, who I wrote off a few years ago, has more than bounced back.  They are aggressively combating "showrooming" and winning. With sales up and their stock rising, they're well on the road to recovery.  RIS News recently reported on Best Buy's transformation, quoting CEO Hubert Joly:

"The next chapter of our transformation is what we call Renew Blue Ignite the Possible.  Our aspiration is to create end-to-end customer experiences that allow our customers to smoothly and fully experience the possibilities of technology.  In retail we've evolved our store organization to better support the nation of retail which is the execution of our category and functional strategies the development and implementation of effective market level strategies that take into account local specificities and lifting our performance in terms of employee engagement, sales, customer satisfaction and profitability."

Well said.  I think there are three keys to Best Buy's turnaround, and other retailers should take notice.  First, Best Buy is focusing on the customer experience, offering store-within-a-store concepts by partnering with suppliers like Sony and Samsung.  This experience continues to extend into homes with Geek Squad, which I believe is a big differentiator in the complicated electronics market.  Second, Best Buy offers a low price guarantee for both local stores and major online retailers.  No longer are they routinely beat on price.  Also, it doesn't hurt that Amazon now charges tax in many states, removing one of Amazon's advantages.

The third and most important key is using stores for fulfillment.  Consumers don't like waiting.  Best Buy allows order online, pickup from store and the ability to ship from a nearby store thus shortening delivery time.  As depicted in the graph below, in many cases Best Buy now beats Amazon in delivery time.

You can clearly see the ship-from-store change occurring around October 2013.  As Sharon McCollam, Best Buy’s CFO, put it:

"The amount of inventory that has actually been unlocked represents about two-thirds of our inventory.  We have already seen margin benefits and we expect that to continue to grow as we progress through the year and the merchants and the demand planners learn more about how to use ship-from-store as a pricing leverage tool. The big opportunity is from the merchant organization, whereas they are now pulling and pushing levers in order to move that inventory through the system faster. You should expect to be seeing more positives."

Turning stores into an offensive weapon against online retailers is clearly making a difference.

Wednesday Nov 14, 2012

Showrooming: What's the big deal?

There's been lots of chatter recently on how retailers will combat showrooming this holiday season.  Best Buy and Target, for example, plan to price-match certain online sites.  But from my perspective, the whole showrooming concept is overblown.  Yes, mobile phones make is easier to comparison-shop, but consumers have been doing that all along.  Retailers have to work hard to merchandise their stores with the right products at the right price with the right promotions.  Its Retail 101.

Yeah ok, many websites don't have to charge tax so they have an advantage, but they also have to cover shipping costs. Brick-and-mortar stores have the opportunity to provide expertise, fit, and instant gratification all of which are pretty big advantages.

I see lots of studies that claim a large percentage of shoppers are showrooming.  Now I don't do much shopping, but when I do I rarely see anyone scanning UPC codes in the aisles.  If you dig into those studies, the question is usually something like, "have you used your mobile phone to price compare while shopping in the last year."  Well yeah, I did it once -- out of the 20 shopping trips.  And by the way, the in-store price was close enough to just buy the item.  Based on casual observation and informal surveys of friends, showrooming is not the modus-operandi for today's busy shoppers.

I never see people showrooming in grocery stores, and most people don't bother for fashion.  For big purchases like appliances and furniture, I bet most people do their research online before entering the store.  The cases where I've done it was to see if a promotion was in fact a good deal.  Or even to make sure the in-store price is the same as the online price for the same brand.

So, if you think you're a victim of showrooming, I suggest you look at the bigger picture.  Are you providing an engaging store experience?  Are you allowing customers to shop the way they want to shop, using various touchpoints?  Are you monitoring the competition to ensure prices are competitive?  Are your promotions attracting the right customers?

Hubert Jolly, CEO of Best Buy, recently commented that showrooming might just get more people into his stores. "Once customers are in our stores, they're ours to lose."

Monday Feb 06, 2012

Reinventing Retail

Just like physicists are fond of saying matter is neither created nor destroyed it simply changes form, so goes retailing.  The industry has morphed from small independent stores, to chains, to big-box, to online, to mobile.  Consumers' tastes, habits, and preferences change over time, thus retailers must always stay in-tune.  Unfortunately, many don't.

The most recent whipping-boy of the industry seems to be Brian Dunn, the CEO of Best Buy, who's company was attacked in a recent Forbes article.  (A follow-up to that article, which includes an indirect rebuttal from Brian Dunn, is here.)  While not calling out Best Buy by name, Marc Andreessen also predicted Best Buy's forthcoming demise.  I just finished watching the show Best Buy: The Big Box Fights Back on CNBC, and was struck by the pessimistic future painted there as well.  But in my experience, Best Buy is one of the most innovative retailers in the industry.  Unfortunately, I think their problems are more a reflection of the products they sell rather than a lack of willingness to change.

So are all retailers in trouble?  Ron Johnson, who is credited with Apple Stores' success, recently said retail isn't broken, store are.  Now he needs to prove it as CEO of department store chain JCPenney.  His recently announced transformation plan includes "fair and square" pricing, but Apple was able to avoid discounting because of a lack of viable competition.  JCP doesn't have such an advantage, so it remains to be seen if that strategy will work.

Barnes & Noble did a nice job moving into digital books, unlike competitor Borders, but B&N is still in a fight for its life.  Now they are considering spinning the Nook business off.  While that might unlock additional value in the Nook business, any decoupling from B&N makes their stores less relevant, a step in the wrong direction.

And while physical stores are doing more to be connected to consumers online, there's a rumor that Amazon might just open its first physical store in Seattle, ironically in a former Borders location.

I hate to use this overused phrased, but I will... retail is at an inflection point.  Chains need to lighten the burdensome cost of physical stores, find a way to offer more value to in-store shoppers, or preferably do both.  It starts by building Your Experience Platform to support a strategy for empowering employees to delight your customers.  That includes making better product, placement, pricing, and promotion decisions on the backend, and delivering a unique shopping experience across all selling channels.

We're running fast toward the future of shopping, but only those willing to change will finish the race.

Tuesday Jan 03, 2012

Best Buy in a Downward Spiral?

Larry Downes seems to have struck a nerve with his popular Forbes article Why Best Buy is going out of Business...Gradually.  As of this writing, he's already had over 550,000 views for the five-page, somewhat long-winded diatribe that was posted yesterday.  Larry basically lays out his reasoning for Best Buy's demise based on poor customer service while refuting the excuse that cheaper online retailers like Amazon have an unfair advantage.  He cites the recent cancellation of orders by Best Buy just before Christmas as the ultimate failure to serve customers.

As a former Circuit City employee, I can feel Best Buy's pain.  Electronics is a tough market. The products become obsolete quickly, installation and configuration can be customer service nightmares, and the Web has made competition more fierce than ever.

I haven't shopped at Best Buy in quite a while, so I don't have any good or bad recent experiences to relay.  But I did have three good customer experiences recently, so I thought I'd share:

1. We decided to do some remodeling in the kitchen so I ordered a faucet, cooktop, and range hood from  They were available to be delivered from the local store in two weeks, but since we'd be on vacation I put a specific date in the comments.  Within an hour of submitting the order, my local Lowes called to verify exactly when I wanted the items delivered.  Everything arrived as planned.

2. I ordered a MicroSD card from Amazon, but the wrong type of card was delivered.  My order was accidentally switched with another Austin resident who got my product.  I called Amazon and they immediately shipped my original product via 2-day delivery with no questions asked.  I understand mistakes happen and just want them rectified quickly.

3. Lastly, I bought an expensive blender from Costco which went on sale the next week.  I called and they happily refunded the difference.  By the way, I chose to buy the blender from Costco not because they were cheapest but because they have an excellent return policy.

All three situations had a few things in common.  First, the employees I spoke with had good attitudes.  I felt they enjoyed their jobs, and it made the conversation that much better.  Second, all three retailers had the necessary systems to enable my purchase and handle post-purchase issues.  Third, the people I talked to were empowered to make me happy.  There was no runaround at all.

In this blog I focus lots on the technology that powers retailers, but in the end its the human touch that makes it work.  Perhaps Best Buy needs to get back to its customer service roots.


News and ideas about the retail industry with a focus on customers, innovation, trends and emerging technologies.

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