BEST BUY: CREATING A WINNING CUSTOMER EXPERIENCE

CONTEXT

At the end of 2014, Best buy was one of the largest retailers in the United States with 1400 domestic
stores. It also had a strong web presence. The retail market was facing tectonic shifts due to entry of e-
commerce websites in the picture. Customers would engage in “Showrooming”, wherein customers
would visit physical stores to try out products and finally make their purchases from online retailers. In
2013 Best buy responded by introducing price matching guarantee but the profit margins kept on
reducing and so did the perception that Amazon offered lower prices and more choice.

Also, the millennial customer segment was rising and they had an annual buying power of about $2
trillion. Best buy had experienced a decline in transactions with millennials since 2010 as they viewed
best buy had higher prices as compared to Amazon.

Competitors:

 Amazon: Amazon offered a very breadth of choices for the shoppers and low prices. Due to
information rich website pages, Amazon also became the destination for product research. The
comfort of shopping from home, personalization and efficiency in customer service made it
popular among the users.
 Target: In 2014, Target was America’s second largest discount retailer. It had three digital
platforms: Coupon app Cartwheel, Target subscriptions and its online store. Target was
challenging best buy (which had already introduced shipping from all of its stores) directly as it
rolled out a ship-from-store program in 140 stores.
 Walmart: America’s largest retailer Walmart had launched two order fulfilment centres to
handle online orders. Walmart announced an online order fulfilment program similar to Amazon
Prime for its online order delivery purposes.

E-commerce and Omnichannel experience: The retail industry was shifting towards a combination of
digital and physical stores. Omnichannel retailing aimed at bridging the gap between brick-and-mortar
and online stores for the consumers. For example, online to offline commerce was gaining ground.
Smartphone with a penetration rate of 60% had led to increase in Mobile shopping. Although traffic
rates were high, conversion rates were low for mobile channels. Best buy along with other retailers had
low performing mobile Apps.

PROBLEM STATEMENT

How can best buy leverage its assets to create a unique customer experience and improve its appeal to
millennial?

ALTERNATIVES

 Improve the in store experience

 Enhancing the ownership experience

 Offer a rent to own model

ANALYSIS

1. Improve the in store experience:

Pros: Focus will be in providing excellent customer experience. Employees will be trained to provide
product information to both online and offline users, hence making the product information easily
accessible. By matching customer needs to products availability , Best buy will be able to fill gap
between the demand and supply.

Improve the representation and service of millenials in both online and offline channels

Store within store(Re-balancing) would create incremental revenue for best buy. More customers will
visit the store because of the presence of prominent brands within the store.

Increase in sales would be 1-2% by managing products and by leasing stores as well as charging margin
per incremental revenue.

Cons: High training cost of employees and cost of maintaining frequent database. (190 million)

2. Enhancing ownership experience

Pros: Would create a price category and hence can cater to each category (wrt price points) of users. An
incremental revenue of 1125+1150+575(Platinum, Gold and Silver) per customer will be generated.
(Total revenue = 1 billion)

Cons: Installation repair and insurance cost. (approx 200 million)

3. Innovating on the business model

Pros: Useful for customers with bad credit as leasing is not dependent on credit checks. Customers who
cannot pay the fee of electronic appliances upfront will also be attracted to this model. This will be
specially advantageous in case of millenials where most of them are price sensitive.

Cons: Phones will lost to default

RECOMMENDATION

Best Buy should focus on strengthening its customer service . Millennials looks for brand value rather
than loyalty hence, product matching with customers to ease the process of buying for millenials can be
advantageous. Millenials have a general perception that Best Buy has costly assortment of products (as
compared to Amazon), hence interacting with employees having product expertise(by creating in store
experience) would help them understand their needs better.

Whatever the offline stores are losing in revenue can be covered by leasing the stores(to brands) within
the Best Buy store. Additionally, it would also improve the customer experience.