Can OZ CE Retailers Learn From Best Buy
For the likes of The Good Guys, Harvey Norman and JB Hi Fi their future could well lie in what Best Buy has had to do and is now doing to compete up against Amazon.
After being beaten up and smashed by Amazon for several years the big US consumer electronics retailer in now aiming to grow revenues by 9.1 percent from last year to $43 billion.
They are also looking to achieve an operating income of $1.9 billion-$2 billion, up from $1.7 billion in 2016; and an additional $600 million in annualized cost savings.
It’s been five years since Best Bu held an investor meeting. And while much has changed since the last one, there will still be sceptics in the audience who did believe they had a future up against Amazon.
At its last one, in November 2012 in New York, then-new chief executive Hubert Joly laid out his transformation plan “Renew Blue” to reverse sales declines and improve profitability through cost cuts and growing online sales.
Best Buy did just that, now they are looking to move to their next level of growth.
“Five years ago, the times were different. We had negative comps. Our margins were going down. There were questions about whether we were going to survive up against Amazon,” Joly said.
Earlier this year, Joly concluded the transformation was complete.
“We’ve had four years of positive comps. Our margins have expanded. We have been, in the last five years, in the top 10 percent of the S&P 500 from a total shareholder return standpoint. Customer satisfaction is up. We’re gaining share,” he said.
“We’ve become relevant again,” Joly said, smiling. “And I couldn’t be prouder of what our associates have accomplished.”
For Australian CE retailers who are looking for ways to compete up against Amazon there could be some strategies worth considering.
They also plan to leverage their Geek Squad and outsourced IT expertise, and are counting on the chain’s curated assortment of instore products to tap into connected-home technologies.
Among the initiatives now being rolled out is an expansion of its Assured Living elder-care pilot, which addresses the fast-growing senior’s population.
The program allows adult children to monitor their aging parents remotely, and is currently being extended due to early success in East and West Coast test sites.
Also on tap: Total Tech Support, a new offering from Geek Squad that provides installation and set-up; unlimited phone, online and in-store support; and reduced-fee repair and in-home services for either $199 annually or $20/month. Best Buy is testing both approaches.
The comprehensive program, designed to shore up Geek Squad’s flagging comps, is currently offered in 200 stores in 10 U.S. cities and throughout Canada.
As part of their initiatives program, the retailer dispatches staff to customers’ homes to perform free tech consults. The program was launched last year in three cities, and has since been beefed up with 300 advisors and expanded to all major U.S. markets as of earlier this month, Joly said.
The third leg of the services triad is directly tied into smart home. By the end of October, Best Buy’s five-month-old home automation and security program called Vivint will be extended to 450 stores, and the chain is throwing another 1,500 Vivint and Best Buy staffers into the breach to man enhanced smart-home sections in all its approximately 1,000 big-box locations. A beneficiary of this program is Australian security Company Swann Communications.
The efforts are designed to shift sales from single units and one-two’s attachments to whole-home solutions, while creating subscription-based recurring revenue streams.
While rolling out extended service operations the Best Buy is not turning its back on hardware claim executives.
The company identified major appliances — where it has a 12 percent market share — and mobile phones — where it commands half that — as significant opportunities, as are ongoing in-store and online enhancements.
The latter, reported Shari Ballard, multichannel retail president, include same-day shipping, which will be offered in time for the US holiday selling season in 40 markets as the company builds and expands distribution centres.