We have a new team at Best Buy called the Secondary Market Team. Most people don’t have a clear idea of our vision in this area or what the team is doing. This is a team that gets me very excited about the future at Best Buy, let me tell you why.
Secondary markets refers to all the buying and selling involved in “non fresh” product. Things like vendor overstock, consumer returns, refurbished, used, etc. that are often sold through alternative channels like auction sites, clearance centers, overstock stores, etc. You might be shocked to learn that secondary market electronics sales represent an estimated $15B market in the United State. This is a space where Best Buy has only just touched the surface of all the opportunity. Getting our “fair share” of sales in this market is easily a $1B revenue opportunity for us.
In addition, we know consumers need solutions to assist them in disposing of their old products as they upgrade or replace what they have. We are committed to helping our customers make their dreams come true and the Secondary Market capability helps enable this. Our participation in Secondary markets combined with our recycling efforts allows BBY to assist and support our customers through the entire life cycle of the product, including end of life disposition. For products with little to no resale value, we offer a recycling program at all our stores. For products that retain resale value, we are rolling out a “Buy Back” program in our next fiscal year which will enable us to “buy back” products previously purchased from Best Buy to help our customers realize the residual value in the products they originally purchased from us.
But perhaps the biggest opportunity is to think of our Secondary markets team as a platform for new value proposition development. Now that we have the ability to receive, process, and re-sell products in these markets, it opens up opportunities for new business models which were not previously feasible. Things like extended product support or “trade in to trade up” privileges may become viable because we have the ability to extract the value from secondary market products through alternative channels.
We’re still developing the capability and testing where we can take it but look for new programs and ideas to be coming as a result of our investment in this exciting new capability.
Secondary markets wonderful opportunity IF you check out products and stand behind them, the way car companies’ “certified pre-owned” cars have the image of being fixed and ready at a slightly higher price than ordinary used cars. “As is” merchandise would definitely dilute BB brand and cause consumers to doubt even your new merchandise quality.
Couple thoughts- We should take this a step further and help facilitate the sale of used products between our customers. The obvious leader in this is Amazon and quite a bit of their revenue comes from the commissions on those sales. There’s no reason we couldn’t offer “buy new or used from $x” on bestbuy.com. Could be a great chance to offer a used product service warranty as well.
The buyback program is nice but when I explored it, it didn’t feel like it always gave market value for my products. That was a while back- maybe things have changed.
Love the cohesiveness of this approach. Really looking at things from a holistic perspective. Good thinking here…
Interesting idea. It seems you’ve got challenges with cannibalization from main retail, and competition with the Overstock’s of the world.
I think the idea of end of life disposition is potentially more promising, depending on what is included in that effort. Commodities are depressed now, but if this includes recycling you have a potential opportunity with things like rare metal.
I also think disposition might also influence the buying likelihood. I have 3 PC’s in my home (workstation and two laptops). I won’t buy another workstation, even though my current system is 3+ years old. Why? What would I do with it? I know many family members with perspective. Their homes are filled with electronics, which discourages them from buying and adding to the clutter.
It might work best if you combined disposition with some method of inducing purchase at Best Buy. They’d be more likely to purchase after disposal, and they’d have an incentive to act on that at Best Buy.
Look forward to seeing how it plays out.
I think you’re exactly right that there’s a very large opportunity here. Happy to talk to you guys about what we’re doing at Dawdle.com and see if there are ways that we can work together. We already have a relationship with Kevin Matheny and Dave Micko on the Remix API team.
I like the idea of Best Buy getting involved in secondary markets. I love finding “open box” items at Best Buy. Although one thing to consider is how entering secondary markets will impact BBYs brand image. Resellers often have a cheaper image in the eyes of the consumer. While I think this is a market Best Buy can enter while maintaining its image, it is something to be conscious of.
Thanks for the update!
Being from the Twin Cities and watching the forward thinking and growth of Best Buy has been encouraging. Most people don’t realize what a retail powerhouse the Twin Cities is and Best Buy is one of the great leaders.
Barry, as we proceed down this path, we should keep the broader opportunties in mind as well. A secondary market model based on micro-financing principles, for instance, can help expand technology access to populations and regions that do not have it today (or what they do have is severely outdated or limited). The CSR team has some good thinking around this, and Mary Capozzi should get line of sight to the team and help advise as this is built out.
I like the thought.
Think of it as “sustainable retail.” Looking at all aspects of the product life cycle and how you can capitalize at various touch-points along the chain. Including re-cycling. Aveda Corp. does a nice job a taking about and acting upon sustainable environment strategies. They bring terrific products to market and provide a common touch-point (shared value) with their audience. In your example you have several opportunities to reach a variety of consumer types depending on where they are at in their life. And an opportunity to expand beyond your traditional reach of new product buyer and bring in incremental revenue streams to BB. Nice idea.
[...] Buy is Getting into the Secondary Market According to a blog post by Best Buy CMO Barry Judge; "We have a new team at Best Buy called the Secondary Market Team. [...]
Apple does a really good job with their own internal secondary market with refurbished Macs and iPods. I’ve taken to buying most of my Apple products as refurb units because their quality control makes them every bit as good as a brand new models. Most other people I’ve talked with who have tried Apple refurbs seem to agree.
Barry, no doubt you and your team “get it”. You’re stretching the brand beyond what was defined as the core business proposition. Service, secondary markets, introducing the brand to the social marketing circles, etc…nice to see a brand invest during these times. Good luck!
I agree with watching the brand image. Amazon has a great setup. Maybe even an instore kisok? With the current economy giving customers more choices is never a bad thing. The overall idea is a good way to drive bby even farther. The only major issue could be the customer not feeling their getting a good value.
I love the idea of reselling, and as a company, we’re missing a huge opportunity. Look at what Gamestop does for video games. This is a company that sustains itself as our competitor because it offers a differentiator that Best Buy has not been able to match. I have fellow BBY employees that shop at our competitor because they’ll buy back video games and hardware! I believe that if our company could breathe life into a buy back/ resell strategy that worked AND didn’t tarnish the reputation of the world’s leading electronic retailer, we would continue to see new growth and continue to be the benchmark of innovative retailers worldwide.
My 13 year old goes to Gamestop. He recently was there and texted me saying “Dad you are missing the boat. I told you to do take back used games 2 years ago!” He was 11 at the time. I think he is right. I am missing the boat and some sales and some traffic. I hope this project gets after this opportunity.
Remember Tech Trade In ? We did used games trade in and sales in Chicago. Could be some small nuggets of learning both good, bad and ugly there. Let me know if you want a download
The program would make sense as long there is strict control in place. Video Games make sense, but at the same time some hardware does not. Best Buy would have to choose carefully on what product categories to resell.
Now with our recycling program in place, it should be possible to determine if Best Buy could give a customer a gift card worth the value of the resellable product or recycle the product. Basically, a gift card can be issued, and Best Buy collects their information (e-mail address or phone) to notify them if they will recieve a buy back credit or if the buy back was deemed unsellable, then recycled. During that process, Best Buy inspects and attempts to refurbish the product. Since the gift card number would be stored into Best Buy’s system, Best Buy should be able to credit the gift card once the buy back product is deemed resellable.
The other issue that would come into place is how would the customer see/shop the “used” products. The stores sometimes have problems moving Open Box products out the door, especially computers. It usually meant unusual mark downs. DTDeals’s partnership with Best Buy is a start, but posting electronics online tends to be tough to determine the condition of the product, and if the customer can enjoy the product in its condition. I have seen stores that sell used instruments with little space left for stuff, and their storage area packed. But at the same time, the used instruments are the most profitable and keeps their buisness afloat. So Best Buy would have to do a lot of research on how would this affect the overall customer experience in the store, if Best Buy does decide to resell within the store.
Best Buy has to carefully look into the market to determine the logistics and the viability of the service. Video Games, Movies and Music (Physical Media) is just the start, which is pretty easy to track. But once we expand into electronics, the logistics become difficult. One solution is to create a physical outlet store (just as Disney does with their old stuff), that would seperate the Secondary Market experience from the Best Buy experience, but this would not help Best Buy’s overall impact with the Secondary Market. Tracking the merchandise would also balloon the inventory system aka RSS. So a seperate tracking system may need to be implemented.
Personally, I say keep Best Buy’s Secondary Market initiative towards Physical Media. As far as used electronics go, there needs to be a strict standard on what Best Buy accepts and denies. Best Buy’s customers tend to shop at Best Buy for the latest, greatest electronics, not used, beaten up devices. Best Buy can create a website with used electronics (not DTdeals), but how would Best Buy gaurantee the electronics the customer purchases.
I think secondary markets are a great opportunity across the company . . .
. . . except in gaming. While I agree with Steve in the mediation position between a buyer and a seller (creating a sort of Amazon/eBay/cheapassgamer affair), I simply can’t see the investment ever becoming worth it in the gaming space.
Used games work for Gamestop because it’s critical to their operating model. We work on, buy it large, stack it high, let it fly. In the post-mortem that I have seen in used gaming tests, I’ve seen that we can’t implement used gaming because we simply don’t have the culture for it. Stacks of used games piled high while money walked out the door.
Gamestop is almost predatory in its used game sales because even THEY know how difficult it is to sell a used game, even at decent prices and decent discounts for Edge card members. As you know, they even have facilities on standby with industrial grinders to resurface games that keep getting returned because they simply don’t work.
The reason I say it wouldn’t be worth it for us (although with enough of a push, it COULD happen) is that the secondary market for gaming is going to evaporate in the next 5-10 years. Each new generation of consoles will bring in less and less software and the secondary market will simply get smaller and smaller. Gamestop is expanding as fast as they can now to take advantage of this business model while they can, but the inevitable shuddering of many of their locations as physical games disappear is just that: inevitable. By the time we perfected used game sales, the point of diminishing returns will have long-since past.
When I wrote my Plan for gaming two and a half years ago, I felt that this was a strong area we needed to pursue, but the industry’s changing fast now. If this were a decade or two ago, selling used games would’ve been the top of my list of my priorities. Now? Well, we’ve got plenty of opportunities in gaming that aren’t quite as risky and will put us ahead of the curve in game sales for decades to come.
Sev Maynard and I wrote a Used/Secondary Markets whitepaper a couple of years ago when we looked at used games. Let me know if you are interested in looking at it.
Charlie, good to see you again! Strange, I never heard Sev mention used games . . .
Great post!
I am glad to see Best Buy is doing some things to address the environmental impact of cycling through new models of electronics. We often give away, sell on eBay or junk our old stuff when the new model comes out. a buy-back program makes the whole process easier, and makes me fell better about buy the item from best buy in the first place.
When I started my last company, which specialized in online services for mall-based retail, there appeared to be tremendous cost savings and channel management opportunities in this area. For example, you could take RMAs and extend that process into the retail store, thereby helping to triage process flows and thereby reduce logistics costs.
These days I am interested in leveling the playing field when it comes to the dynamic between the consumer and the employee. We’ve developed a Link Management System that enables any employee to demonstrate how their store’s merchandise stacks up against the “Best Of” articles or “lowest price” circulars.
I know that last summer Best Buy’s Futureshop locations in Canada began testing the used gaming business, and I imagine it went well seeing as they exploded from just 6 test locations into covering most of the country. And I read the Kotaku article a few weeks back quoting an inside source with Best Buy as saying that used gaming was going to be beginning around the end of March beginning of April. But I’m curious as to what makes Best Buy think this will be more successful now as opposed to several years back when they tested this out in California? And is the Kotaku article correct, is Best Buy testing already in the states?
There are dangers in trying to be all things to all people. But its worth a try. Maybe it should be unaffiliated with the Best Buy brand, though. Call it something else with a separate website. That way if product quality issues arise or BB makes the decision to back out, the BB brand name will not be affected.
Love the idea of recycling old products though.