The Best Buy brand has been able to thrive for the past ten years or so now, because we have executed our retail model better than the other specialty retailers (Circuit City and Comp USA etc) and thus have taken share in the decelerating growth land based environment while benefiting from faster growth in the direct channel with our BestBuy.com brand. As this direct channel shift is accelerating and we have less land based share to take, for us to continue our strong growth arc it is time for us to invest more significantly in our direct channel efforts.
I believe our best course in this effort is to pursue a dual brand strategy. The BestBuy.com brand should of course, be invested in as the Brand is very vibrant, has over 50 million existing customer relationships and 1,000 stores. These assets are quite differentiating as well as have the potential for much growth. However, I believe there is also an opportunity for Best Buy to either build or buy an alternative brand(s) that targets a different segment(s) with a different value proposition than what the Best Buy brand offers. There are many potential segments that could be served effectively in this way including small business, price conscious, very tech savvy, much less tech savvy to name just a few. I like this approach because a powerful .com value .proposition can scale much faster than a land based value proposition and this activity will encourage us to not make Best Buy be “all things to all people.” And as strong a brand as Best Buy is, there are many consumers that just don’t like Best Buy or worse are indifferent to it.
There are obviously different points of view on this. I am interested in hearing feedback and on mine and differing thoughts.
I think that’s dead on, especially the part about appealing to different segments from the very non-tech-savvy to the ultra tech-savvy. I know often times I will research a product on the manufacturer website, then read reviews on Amazon, and then go to a Best Buy store to purchase the item. I personally do not receive enough information from the Best Buy site, and yet my father was complaining the other day that he doesn’t care about extra information, he wants to click “buy now” and be done with it.
I suppose that’s the wonderful power of the internet, to allow different customers a different experience with a minimal amount of work on the business’s end. A simple store for someone like my father, and multiple more robust stores for someone like me that may be purchasing equipment for my business during the day and purchasing a new stereo receiver later that evening.
So I must agree. Associating an existing or new brand with these different segments could be very beneficial to the Best Buy brand as a whole and keep consumer’s minds focused on the fact that Best Buy offers something that most other retailers don’t (and won’t).
However, I’ll end with this – no tech-savvy consumer is EVER going to pay $40 for a 6 ft Geek Squad-branded USB A/B printer cable. Just sayin’
i like the idea of price conscious, given your audience shift over the last five years. timing is right, too. the expertise and implicit backing of bby would give such a brand an edge over competing offerings.
the opposite ends of the tech savvy scale both feel as though they need more of a hands-on experience.
I think you’ve hit on a great idea for extending your reach with an online niche brand. The example that comes to mind is what Amazon is doing with endless.com. It’s a great extension of their platform to reach a specific market, and to compete with the rapid growth in that segment by Zappos.
But regarding your statement, “many consumers just don’t like Best Buy or worse are indifferent to it,” that’s not always correct.
Take me for example. I won’t shop at Best Buy since a nightmare experience a few years ago. Without getting into details, it ended with me beating your company in small claims court and you lost a customer for life. Indifference would not be worse.
My point is that if you launch an online niche brand leveraging the resources and platform of bestbuy.com, and millions of savvy shoppers like myself keep googling new brands before clicking checkout, that association will be easy to find. Good, bad or indifferent – some linkage to Best Buy’s reputation will always be part of the equation.
Regarding indifference, I was thinking about being insignificant and thus it would be difficult to get that person’s attention. If you don’t like us for some reason, I was thinking if we heard you on why you didn’t like and we then fixed that reason, you may then decide to try us again. You may be right that we could screw up so badly that you may never try us again.
On the branding point, it is possible that another Brand could be have attributes and a culture completely outside of Best Buy. It is not easy to your point but I do think possible if constructed with that aim.
As previously mentioned in Twitter, I’m not a huge fan of the idea in general. I think you’d get better bang for your buck focusing on improving your multichannel capabilities and exploring new channels (i.e. making a kick-ass mobile site).
Here’s my concern about creating another brand online: who’s going to run it? The existing staff? Will inventory analysts now be supporting retail, dot-com, and Brand X? In the early days of the integration between dot-com and retail, you had a very difficult time getting retail folks to work on dot-com, as it was only a small fraction of their business. They would get better return on their time spent on the retail store. The online experience (out-of-stocks, incorrect pricing) suffered as a result.
Now will you be asking those same people to support another brand, which will start out very small (and likely, never be as big as bby.com)?
That being said, I think there -are- a few opportunities for new BBY brands or channels:
MAGNOLIA:
I don’t think you do that brand justice by being mixed into the overall dot-com assortment. Having it’s own online presence (complete with checkout & delivery) would give the brand the platform it deserves.
APPLIANCES:
I don’t think that BBY.com has ever done appliances that well, as they just don’t fit into the current templates. A site dedicated to appliances (large and small) would allow you to build the experience to that category’s unique needs.
GEEKS (PC components, High-end gadgetry):
The geeks of the world (unite!) have always shunned BBY for anything but media purchasing. Plus, nobody does PC component sales particularly well. Even the best of the bunch look like a catalog that’s been scanned and put online (I’m looking at you, TigerDirect.com). A well branded, well staffed (read: knowledgeable) entry into this market could do well.
BBY OUTLET:
Create a site just for dumping overstocks, returns, refurbs, etc. Get the outlet off of BBY.com where it detracts from the overall brand. Let the cheapos go somewhere else! Tailor the platform and experience around frequent item and pricing updates that leverage social networks for getting the word out (RSS feeds, email notifications, forum tie-ins, myspace/facebook widgits, etc). I love what WOOT! does in this space.
Final note: My gut tells me that anything you try to build will be expensive, time/resource/focus consuming, and will never be big enough to make an impact to the overall balance sheet. Do what you do best.
Barry, as a forgiving person I never say never. But my incident with your company was not trivial and it would take a lot.
I took my computer in for minor repairs. BB returned it dead and claimed it wasn’t covered. I wouldn’t accept that, took it for a second opinion and found out it wasn’t just misdiagnosed – it was vandalized. The power switch was disconnected from the mainboard, a key was glued down on the keyboard, and my hard drive appeared to be replaced with a defective one. The latter point was diagnosed because a sticker from the Best Buy service center was left on the defective drive. I later confirmed with the computer manufacturer that my laptop left the factory with a different model hard drive.
Having a lot of personal data go missing is a stomach-wrenching experience. And made so much worse when the company handling your equipment denies responsibility. The only solution BB offered was to send the computer back to the same service center for another look, and I wasn’t comfortable with that. I pursued mediation through the BBB and AG’s office and Best Buy declined to participate both times. I documented extensively and BB wasn’t interested. For what it’s worth, the judge wasn’t very interested in my documentation. He seemed to have his mind made up after getting the store rep to admit that their policy is to verify that a computer is working when checked in, and mine was returned dead.
So what would it take for me to shop at Best Buy again? Find my f$#%ing hard drive! .. ok, knowing that’s unlikely after 2+ years let’s start with this: admit fault, apologize, tell me who had access to my computer and what disciplinary action was taken, show me proof that such incidents are now handled more proactively, produce a decline in your number of BBB complaints. Start with those things and we’ll see.
For what it’s worth, I consider myself more reasoned and less frothing-at-the-mouth than other Best Buy haters who’ve had a service incident. From telling my story and hearing others in return I know that there are many more out there. I made the comment about a negative brand image impacting a niche endeavor because I know how negative that part of the reputation is. But you’re still a hometown company, I know that a lot of great people work for Best Buy, and I sincerely hope you improve.
I definitely appreciate different customers having different needs, but I wonder if the fundamental online researching/shopping needs are that uniquely different for people, or if the real difference is in the products they want to purchase. Seems as though BBY could make the existing site more customizable thereby satisfying the differing needs rather than creating a whole other brand and site.
Best Buy seems to have made the decision long ago that it is not even going to try for the price-conscious customer, even though slim margins in many categories have made BBY more competitive than you might think. But by shunning the likes of pricegrabber and fatwallet, I think BBY is missing an opportunity.
Compare TV prices on pricegrabber, and the average consumer sees only a handful of companies from whom they would consider buying. Even at a slightly higher price, Best Buy’s existing value props (reputation, easy returns, etc.) would make a lot of customers think twice before clicking on an unknown retailer.
I like the concept at it’s core, but believe a connection back to the Best Buy brand ultimately would be more beneficial than harmful. It allows for a more artful transition into other channels when their needs exceed the solution(s) offered by the alternate brand.
Foolish Andy makes a good point about supporting multiple brands with one work force. Best Buy has existing opportunities to shore up it’s existing multichannel experience before taking on the challenge of adding more brands.
I like your thoughts, Barry. It’s actually pretty much impossible to disagree with you, which got me thinking. The hard part isn’t whether to leverage BBYs infrastructure to reach other customers online. The hard part is deciding what to focus energy and resources on: how many different strategies can BBY pursue and still be successful? Launching a true alternate brand and value prop will require strong leadership and a dedicated group of people, plus some real money – especially for marketing. Those resources will compete with other things BBY might do.
I happen to think it’s a better bet than many other things BBY might do, but it’s a real decision to be made.
The other thing on my mind is this: there’s lots of buzz about BBY pursuing an alternate online brand to reach other consumer segments, but it all feels a little clinical and dry. Price-conscious shoppers, youth, women, these are very broad designations. Think about the great experiences in any store, physical or online. Behind every one you’ll find someone – some human visionary – with a passionate belief in a better way to…you name it: buy shoes, buy books, learn about cooking, bring fashion into the home, get clothes that really fit, etc. This is true for BBY as well. The current store experience was the brain child of founder Dick Schulze, current CEO Brad Anderson, and other key leaders who realized that a warehouse style store with tons of selection, staffed by a non-commissioned but knowledgeable sales force, with an inspiring presentation of choices, would be a better way to buy consumer electronics.
The real need in developing a .com strategy for a competing brand, in my opinion, is an impassioned POV about the value proposition…a vision for a really compelling customer experience…an experience that would be different from, even threatening to, Best Buy.
It’s a bit like a bunch of scientists in a lab trying to create great food by deconstructing how the tongue works, analyzing the chemicals that stimulate the various taste receptors, while down the street someone who grew up in a family restaurant in France, then spent 3 years in Thailand, has opened a little joint that’s blowing everyone’s mind with tastes and textures married from these diverse experiences.
BBY needs a visionary .com chef to cook up its alternate brand online, and it needs to back that chef with a talented team and money.
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Barry, I agree – with the knowledge Best Buy has of the marketplace, and what its customers want and need (witness the increasing ways it has to listen to them via social media), and the talent pool you have access to, I have no doubt Best Buy can successfully build new brands — organically, as you mean (beyond just acquiring and trying to integrate existing brands)
the secret is to get out there, launch and learn…even fail, then rework — that’s really what it’s about today: iterate, adjust, refine — really involves letting go to a degree, so the marketplace guides the brand….essentially lets you become one with the consumer, so the brand then flows to where you want to be
cheers,
Graeme
what I was agreeing to in that last comment didn’t come through….it was this quote from your previous comment:
“On the branding point, it is possible that another Brand could be have attributes and a culture completely outside of Best Buy. It is not easy to your point but I do think possible if constructed with that aim.”
At the end of the day, I agree with you – online is a great place to experiment with either different brands and/or different product assortments. For instance, while EQ Life died, it may have been a success with a more focused strategy, and with a more clear value proposition. Much like BBY is doing with Musical Instruments, there is a market for electronics in the fitness space. Nike + proved that.
One right way to approach this, in my opinion, is to create virtual boutique stores. They can be BBY branded or not. They can be linked to BBY or not. However, starting boutiques within Reward Zone, for instance, allows you to test the concept with core customers first, then expand to a larger virtual store, and then expand, if necessary, to physical stores. There should be a way to leverage the brand in some way, potentially.
To be successful also requires a different mindset. Zappos is a great example. Digital retail brands that are really “making it” online take a very different approach: they are very patient with profit; they are highly “digital” – they embrace digital technologies and ways of communicating and shopping in ways that befuddle analog brands; they are very service oriented – but have to do it without a physical store to support them. Zappos, Amazon, NewEgg have been successful in going down this path. Dell, arguably the original digital brand, has had a harder time recently, in part because they don’t truly have “digital” at their core. They are good distributors, but that does not mean they are ready for the next phase of digital retail.
The concept is very powerful, but it requires a very different way of approaching things, one that the land-based folks have a harder time wrapping their heads around.
Chuck makes an excellent point.
Find a great idea from within (from anyone!) and fund it, rather than letting a buncha marketers (no offense) make the decision.
I really like the comment regarding personalization above. It strikes me that Amazon is not one store but hundred’s of millions of stores. I still think a brick and mortar brand has unique challenges in the online space due to it physical presence and thus a second brand can be a real viable option. However, I do think vastly better personalization and customization on BestBuy..com could boost its share rather dramatially. Something for me to consider.
The big question is- what do people want? Good way to find out is let others build it. Now that we’ve opened the APIs (REMIX), we’ve essentially handed out the keys to let people take Best Buy’s dotcom data and make it meaningful.
If you look at what Google did with the Android Developer Challenge, they put out $10M in rewards for people who built the best applications against the Android APIs. Some pretty cool stuff came out of it.
http://code.google.com/android/adc.html
It got people interested, gave them a reason to develop against the platform, and ideas were produced that Google may never have thought of.
We could do the same…. Could be an awesome way to listen.
I’m not sold on the idea that we need a second brand online to market to customers who don’t like Best Buy. For one thing, any connection would be hard to conceal, as pointed out above. For another, I don’t think that “dislikes Best Buy” is something we can build an effective marketing campaign around, although I’ll defer to you on that.
I do like the idea of additional brands, though.
A different brand could help us extend our reach into new product areas without creating confusion. We already have customers who are confused and frustrated that the online store does not have the same selection and prices as the store in their neighborhood. As we look into line extensions like fitness equipment, I think we increase the risk of muddying the image of the brand.
Also, a different brand can simply present a different image, and as you pointed out today, if it’s a separate legal entity might be able to avoid charging sales tax on purchases, which helps the value proposition. Might be some tricky legal gyrations on that one.
And to chime in on the personalization/Remix angle so dear to my heart: Yes, absolutely. We’re so close to being able to give customers the ability to define their own experience, I can almost taste it.
I believe there are strategic advantages to a dual brand. By doing so, there are a number of opportunities that could be tapped that would be difficult to capture through the existing brand.
The obvious advantage is starting with a clean slate – no baggage or predispositions, good or bad, right or wrong with respect to brand.
But the real opportunity, as I see it, is in defining a new customer experience – leveraging a true customer-centric methodology. That will involve a change in the way customers are viewed, a new way of messaging to, communicating with, and building conversations with them. It will require new metrics, new thinking, and new methods of interacting with customers.
Amazon was mentioned above and provides an interesting example. I have been a loyal B&N customer for years – I love visiting their retail locations. This is the first year that I did not renew my membership with them, and my first year as an Amazon Prime member. I still love the B&N stores, like to browse there but find that I have access to a wider variety of merchandise at better prices through Amazon. They used to have 90+% share of my wallet, now they’ve got about 10-20%. And it just took a few compelling offers followed by a very favorable customer experience to switch me over. Granted, Amazon has tried for years – for me the value proposition has only recently clicked through Amazon Prime.
For Best Buy, I believe a similar type of opportunity exists. Initially a second brand strategy could by tailored for certain audience subsets and pesonas, tapping new markets and capturing long-tail opportunities. It could retain customers that may already be at-risk.
In my experience working with clients in this area, it is a very slow migration from a product-centric culture to this more customer-centric one. A new online brand would likely deliver customer-centricity in a much faster timeframe than with trying to shift the existing organization. By delivering that new experience, customers can be engaged in new ways. Longer term, this could ultimately facilitate the building of deeper relationships with customers and provide a huge strategic advantage for Best Buy through its new online brand.
Barry – I work in Finance at BBY. I developed a website located here: http://www.Jingletree.com. My target market is working professionals. The aim is to provide a website where people come daily vs. only when they are in the market for Best Buy electronics. Jingletree.com pulls in RSS feeds from news, business, entertainment, sports, magazine and online deal sites. These feeds provide a quick glimpse at many sites and easy links into topics of interest for the user (like a iGoogle). Now that it is set up it requires zero maintenance yet the information is continuously updated. Once a loyal following is created, this site would provide Best Buy with a new (and free) marketing channel.
Would you support this site & help get that loyal following?
I’m late to the party on this one! I agree there are value props and strategies you can do online that simply aren’t feasible instore. However, I don’t think you need a dual brand strategy. Best Buy has such name recognition already, I think the question is more about how to give consumers what they want and probably to some degree EXPECT from Best Buy online– which is the cutting edge technology products and information but MORE than they can get in store. The key is extending the value Best Buy already has in the consumer’s mind– by providing products and services online that are connected to making life simpler through technology, the latest and greatest.
BBY could extend into tech clothing for example (stuff that holds your technology)
http://www.scottevest.com, or has technology buildt in.
Or into Health related technology http://www.yonex.com/tennis/technology/clothing.html, http://www.miowatch.com/, http://www.ingenious.carleton.ca/2005-10/78.htm
These are not products BBY typically sells but seems like a natural extension and fits with growing trends in “health”. Maybe its even not actually carrying inventory on these products but rather connecting the consumer to them somehow– direct links to the sites with cool stuff.
PS I think Eq life was an idea ahead of its time
I really like the new category angle. Best Buy needs to focus on delivering on a consumer benefits like the ones that you ascribe above. And if we get good at being the Brand that can make these benefits come true, then consumers will want more from us as in the example of getting into more categories. For me, the only long term sustainable growth strategy for a retailer is to get more relevant via expanding the definition of what that Brand can do via new categories and services. You are spot on.
Bottom line – ask the customer. Let customer insights drive your decision. If you think there is an opportunity from these insights, test it out and assess the results. Just make sure you haven’t put too much money into it if it hasn’t worked.
Skeet:
Right on.
Hello, I am so mad about the way best buy has treated us very bad. My TV 42? Plasma has not worked in a month. I have made so many phone calls and worked so hard to get a technician it has been unreal. We were lied to and deceived and manipulated into buying this TV because they did not have the one we wanted. The sales man told us to purchase a warranty and if anything like if it fell off the wall, or a baseball went through it they would replace it immediately. WRONG. Now we find out none of that was true. My TV will not turn on now for a month, and now they don’t have the TV we have to replace the one we have. I have added this problem to ripoff report and realized 1,070 people has had bad experiences with Best Buy, I will never recommend them to anyone, also I will contact Attorney General in Illinois to let them know. When I called to get a technician here I was lied to again and was told they would be here on the 14th then spoke to a manager and said that wasn’t true It showed the 19th, This started the beginning of October. I feel this is a horrible way to treat customers. And at this point I am just mad as hell about Best Buy, you shouldn’t’t even have that name. So I also find out if the tech can’t fix it and I need another TV I have to wait up to 5 days more this is a bunch of crap. And now how can it be replaced with something they don’t even have anymore. Someone from the top needs to contact me or it’s only gonna get worse from here. I will contact every newspaper possible about customer treatment. At this point I don’t even wan’t this one fixed I want to be compensated for what we been through with a better TV. I would like to be contacted immediately before this has to go any further than it has. Today a Tech showed up and now you have to order parts and wait for help again. I would prefer this TV be replaced because I never want to go through this trouble again and now the TV we have Best Buy doesn’t carry anymore. We would like a TV for our Thanksgiving dinner.
Cindy Malony
Makanda, IL.
[...] Barry’s closing thoughts on a recent post epitomizes openness and transparency: “There are obviously different points of view on this. I am interested in hearing feedback and on mine and differing thoughts.” [...]