The last post “5 Retail Strengths You MUST Have” looked at the strategic strengths for every retailer to attract and retain loyal customers. Convenience, Selection, Price, Experience and Service are the levers retailers have to differentiate their brand and become long lasting.
Best Buy’s center pole is in its name: Price. It comes to the market proclaiming that it will be the BEST Buy. For customers, that equates to price. It revolutionized consumer electronics retailing in the 1990’s with non-commissioned sales people and a serve yourself model that gave customers the option to have less service for a lower price. It’s secondary attributes were Selection (desiring to be THE destination for high technology products for Americans) and Experience (a tremendous amount of money goes into a Best Buy location build out to create an exciting and dynamic atmosphere where shoppers can play with new products in a try-before-you-buy environment.)
With the recent miss on quarterly earnings and the subsequent Wall Street back lash to its stock price, here is what Best Buy is saying about its strengths:
From the Minneapolis Star Tribune: “Best Buy executives said they were disappointed in the results, but that they weren’t going to cut prices willy-nilly just to bring shoppers into the store.”
From the Wall Street Journal: “Best Buy…may have misfired this holiday season by deciding not to compete more aggressively against its new direct competitors such as Wal-Mart and Amazon in favor of preserving profits.”
So Price is no longer the center pole?
In the past few years, Best Buy has foregone its Experience strength (a high priced item for which customers were not willing to concede loyalty in return) for a Service strength (through the build out of Geek Squad.) Yet, as Best Buy has transitioned to the Service model, it has not clearly demonstrated that its Service is for the benefit of its customers as much as for the benefit of its own profits. Best Buy customers do not equate Best Buy as having a Service strength. For appalling proof, read the customer feedback at the Wall Street Journal. Which leaves it floundering with only one redeeming strength: Selection.
Best Buy faces its stiffest competition ever in Selection with Amazon, WalMart, Target, Costco, Netflix and Apple all offering the products that customers had traditionally looked to Best Buy to provide. Best Buy’s private label lines have not made a dent in America’s psyche as destination brands (the way Kenmore or Craftsman has at Sears.) Do you even know the name of Best Buy’s private label* line? Their same-as-the-next-guy’s selection no longer makes their stores an exciting place to see new technology.
They’ve lost their way. Can they get it back? Yes. It will take a management team who says NO to interesting initiatives that don’t support core strengths, a reexamination of how customers want to buy CE today (and letting go of what made it successful in the 90’s) and more courage and innovation than they’ve shown in the past 10 years.
*The private lines are Insignia, RocketFish, Dynex, Init and Geek Squad. More confusion in brand management? Only time will tell.