BEST BUY CO INC IN RETAILING (WORLD

)
April 2012

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SCOPE OF THE REPORT

Scope
 All values expressed in this report are in US dollar terms, using a fixed exchange rate (2011).  2010 figures are based on part-year estimates.  All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account.
Disclaimer Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors. Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies' opinions, reader discretion is advised. With recent withdrawals of its eponymous brand in both the UK and China, plus a full withdrawal from Turkey, electronics and appliance specialist retailer Best Buy is left almost totally reliant on its domestic US market. With slow growth forecast for the US and store closures announced, Best Buy has decided to change its strategy. In this report, Euromonitor International assesses the outlook for the company as it tries to reduce its reliance on "big box" stores and grow its presence in China.

Retailing

Store-based Retailing

Non-store Retailing

Electronics and Appliance Specialist Retailers

Internet Retailing

© Euromonitor International

RETAILING: BEST BUY CO INC

PASSPORT 2

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STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS

3% (2010-2011) value growth: 6. A change in growth strategy for financial year 2013  The company has previously tried to expand overseas by opening Best Buy branded "big box" stores. leading to the exit of the brand from these countries. this strategy did not work in the UK.6 (internet retailing) World retailing sales 1. China and Turkey and it closed stores in 2011.1% CAGR (2006-2011) Best Buy: Dominance in US lends it global leadership  Best Buy is the leading global electronics and appliance specialist retailer. US North America. internet involvement: retailing 6. The Headquarters: Minnesota.financial year end 26 February 2011 © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 4 Downloaded from www. Western Regional Europe. Note: Financial year 2011 .  The company is also keen on its "store within a store" concept whereby its smaller brands such as Geek Squad (computing support services) and MindSHIFT (managed service provision) are afforded small retail outlets within its "big box" stores.warc.com .STRATEGIC EVALUATION Key company facts Best Buy Inc. primarily through its chain of eponymous "big box" stores in the US.2% (electronics and World retailing value appliance specialist retailing). However.  The company plans to open 50 new stores in China under its acquired Chinese brand Five Star. Asia involvement: Pacific Electronics and appliance Major channel specialist retailers. Latin America. including 14 mobile "store within a store" outlets. share: 0.

Note: Q4 2012 financial period: three months ending 3 March 2012 © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 5 Downloaded from www. Instead the company said that it would concentrate on smaller store concepts and would look to open 100 smaller Best Buy Mobile stores that specialise in mobile phones and smaller consumer electronics.7 bn) -361 Losses associated with UK closures  Best Buy's financial year fourth quarter 2012 results included a US$2. it will close 50 of its "big box" stores in the US. fewer returns and improved supply chain efficiency.com .  Best Buy said that.6 bn 3 (US$1. Restructuring to cut costs planned for financial year 2013  Best Buy announced that in order to drive costs down and maximise its profitability. had it not incurred these charges.6 billion charge pertaining to the closures of its "big box" stores in the UK.STRATEGIC EVALUATION Best Buy fourth quarter 2012 results sees move to smaller stores 2012 Financial Year Fourth Quarter Net sales Year-on-year growth (%) Net profit/(loss) Year-on-year growth (%) US$16. in which Best Buy has a 50% stake. a venture it operated with Carphone Warehouse. its net profit would have shown a year-on-year increase. lower product costs. lower corporate costs.  The company plans to save US$250 million in financial year 2013 and US$800 million by financial year 2015 from improvements in its store format mix.warc.

warc. Best Buy's plan independence from to open more stores is a network providers. this has translated to lower prices and exclusives. growth elsewhere. The STRENGTHS WEAKNESSES Size is power in the buying stakes  As the world's largest electronics and appliance specialist retailer. Inability to push its Best Reputation and online Buy brand overseas marketing is poor  Lack of expansion into  Best Buy's online social markets outside North media sites appear to America has limited imply that many Best Buy's ability to customers have a offset slower growth in negative view of Best the US with faster sales Buy's customer service. especially in consumer electronics the US led to a fall in products area is rising. An improved social media strategy is required to counter this.STRATEGIC EVALUATION SWOT: Best Buy Inc. Buy's expansion plans. OPPORTUNITIES Multi-channel presence  Although Best Buy is losing out to pure ecommerce retailers. positive step. THREATS China provides Small format Best Buy opportunity for growth Mobile  Five Star is profitable  Best Buy Mobile's entry for Best Buy and into the specialised expansion of the brand mobile phone market could see Best Buy could earn it consumer making progress in loyalty due to retail China.com . with grocery and slowdowns would cause internet retailers severe problems for Best squeezing margins. Further so. its mix of store formats and online presence leaves it in a strong position moving forward. In the US. demand for electronics and will continue to do and appliances. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 6 Downloaded from www. Continuing economic Competition in electronics uncertainty ramps up globally  The economic  Competition within the slowdown. Best Buy has considerable buying power among its vendors.

the company will lose the opportunity to house more of these brands and will need to contemplate whether these stores can operate (again) as stand-alone chains.STRATEGIC EVALUATION Key challenges: Stores numbers to grow.warc. Given that the operations in China are already profitable. but shrink in size Best Buy will have to reduce its reliance on "big box" stores in favour of smaller stores  The Best Buy Mobile concept continued to expand rapidly through stand-alone stores in 2011 in the US and the company has announced that it intends to close 50 "big box" stores and open a further 100 Best Buy Mobile stores in the US in the short term. which would limit consumers' opportunities to use its stores as showrooms. Magnolia and MindSHIFT.  The electronics and appliance specialist retailing channel in China is forecast to benefit from one of the highest value CAGRs among the countries in which Best Buy operates.  As its "big box" stores close. Push for greater "exclusivity" to ward off the threat from grocers and internet-based rivals  While grocery and internet retailers can sometimes match the level of variety that Best Buy offers. such as Geek Squad. PASSPORT 7 RETAILING: BEST BUY CO INC Downloaded from www. © Euromonitor International Maintaining its "store within a store" brands amid "big box" closures  Best Buy has a number of other brands that it intends to primarily promote via its "store within a store" concept. Best Buy should continue to use its supplier relationships to build a larger portfolio of exclusive products. continued expansion could help underpin a change in strategy in the US.com . Chinese growth has to be a priority for Best Buy  Best Buy announced in March 2012 that it intends to open a further 50 Five Star stores in China.  The company also intends to extend its "store within a store" concept in its Chinese Five Star chain and this could be a way to build brand recognition for a smaller store chain in China. few of them have the buying power required to gain exclusivity on products. but buy their goods elsewhere.  Consequently.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

the UK and China. largely due to economic conditions in the US and parts of Western Europe. with its fortunes based solely on the Japanese market. plus lower than average regional growth in Western Europe and North America. reflecting increased competition in Germany and Western Europe as well as a recovery of the US dollar against the euro. A B C A (2007): Benefiting from the 2006 acquisition of a 75% stake in China-based retailer Jiangsu Five Star. the pace of Best Buy's sales growth rises. PASSPORT 9 Downloaded from www. Best Buy manages to grow. it becomes the fifth largest electronics and appliance specialist retailer in China. Competitor Yamada Denki saw mixed growth. Best Buy sees its growth lag global rivals. © Euromonitor International B (2009): Despite declining global.COMPETITIVE POSITIONING Best Buy struggles to expand international retail presence  The electronics and appliance specialist channel has seen growth globally every year apart from 2009 when it fell by 1%. US and European markets. while Metro AG saw a gradual fall in its sales growth rate.com .warc. including the UK. RETAILING: BEST BUY CO INC C (2011): With poor sales and eventual closure of its Best Buy branded stores in Turkey. Following the purchase. benefiting from further expansion into Mexico and Europe where it purchases a 50% stake in UK-based Carphone Warehouse.

2 3.9 1.7 1.1 1.2% in 2011. Note: 2011 data are provisional © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 10 Downloaded from www. Regional growth key to company growth  GOME Electrical has been the most dynamic player over 20082011.warc.4 Best Buy maintains global leadership  In terms of value sales. while its China-based rival. With the North America market expected to grow faster than the Western Europe market.com .  Europe-based retailers Euronics and Dixons have seen market share falls.COMPETITIVE POSITIONING Competitive context: Best Buy remains global leader Electronics and Appliance Specialists: Ranking of Top 10 Companies by Value 2008-2011 4-year 2011 % Company share share trend 2008 2009 2010 Best Buy Metro AG Yamada Denki GOME Electrical Suning Appliance Co Apple Inc Euronics International Edion Corp K's Holdings Dixons Retail           1 2 6 5 12 11 4 10 18 3 1 2 3 5 9 13 4 8 14 6 1 2 3 4 6 8 5 7 10 9 2011 1 2 3 4 5 6 7 8 9 10 6. reflecting the difficult economic conditions in the region. Best Buy's global market share grew from 5.9% in 2006.5 1. Suning. Best Buy will be difficult to catch over the 2011-2016 time frame.9 2. was the second most dynamic as the Chinese market flourished. to reach 6.6 1.7 1.7 1. in value sales terms.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

DOMESTIC STRATEGY US integral to Best Buy's success. the US market accounted for 14% of the world's electronics and appliance specialist retailing channel sales and will. largely through its eponymous retail store chain.warc. despite China's market size  The US market is Best Buy's main source of revenue and. However. which hit the US market hard. However. especially during the economic downturn in 2009.com . © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 12 Downloaded from www.  Sales value growth in the US electronics and appliance specialists channel has lagged behind global value growth at times. the company cannot ignore the fact that the US is no longer the biggest market overall in this channel with China overtaking the US in value sales in 2007 and accounting for 16% of the channel's sales globally in 2011. the US has seen a change in fortunes and sales growth is on the rise again. At the end of the year. therefore. in part. despite an increasing focus on international markets. driven. remain vital to Best Buy in the short term. by the popularity of tablet-style computers and smartphones. it contributed around 76% of the company's revenue in 2011.

© Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 13 Downloaded from www. Best Buy will need to differentiate itself through online exclusives.warc.  US consumers commonly use the internet to research product availability. the channel has been a source of growth for the company throughout the economic downturn.8%. internet sales in consumer appliances are expected to see a value CAGR of 7.5% over 2011-2016. instore pick-up for products purchased online and no or low shipping rates in order to attract consumers away from the large number of online competitors. However.  Further to this. while consumer electronics and video games hardware internet retailing is expected to see a CAGR in sales value terms of 3.com . At the same time storebased retailing of electronics and appliances is expected to see a value CAGR of just 0.4% in the US. private label sales. and look for comparisons in specifications and pricing.DOMESTIC STRATEGY US internet retailing promising but still no challenge to store sales  While internet sales make up just 6% of US sales (value terms) for Best Buy.

 The liquidation of Circuit City in 2009 meant that Best Buy's largest competitor disappeared and to some degree. bringing its store-based retail presence closer to consumers.DOMESTIC STRATEGY Best Buy to use smaller stores to sell smaller products  In 2011.  The size of Best Buy as a retailer of consumer electronics and appliances means that almost all suppliers are keen to maintain good retailer-vendor relationships. Best Buy became the default choice for consumers in many areas in the US. often in shopping malls. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 14 Downloaded from www.com . This provides a major selling point for Best Buy as a retailer. switching its product focus to mobile devices such as smartphones and tablet computers. who have traditionally been forced to drive to its "big box" outlets.  This has resulted in Best Buy being granted a large number of exclusive products that are only available at Best Buy stores. This is a shrewd move by the company which has opened a number of smaller stand-alone Best Buy Mobile stores. Best Buy accounted for 34% of value sales generated in the electronics and appliance specialists channel.warc.  The development of Best Buy Mobile in 2007 has been a major strategic change of direction for Best Buy.

DOMESTIC STRATEGY Computer-managed service provision boosts US strategy Napster sold. it announced that it was going to sell it to digital music rival Rhapsody. Best Buy acquired Magnolia Audio Video. MindSHIFT acquired. a high-end retailer of audio and video products and services. PASSPORT 15 RETAILING: BEST BUY CO INC Downloaded from www. seeing it move away from music.  The purchase of MindSHIFT bolsters Best Buy's presence in supporting consumers' IT needs. While the company aimed to build a stand-alone presence for Geek Squad.com . Best Buy acquired Napster Inc. which provides repair. If the services are popular they may help drive footfall at its stores and enable Best Buy to remain relevant in a product area that is moving online. The brand achieved a value CAGR of 24% over 2006-2011. in October 2011. but only a year later.  In November 2011. However. support and installation services. Pacific Sales specialises in the sale and installation of high-end and mass-market premium brand kitchen appliances. to access an upscale customer segment. The company operates the Geek Squad service. towards other services. In financial year 2005. the brand has struggled to maintain market share. Best Buy acquired Pacific Sales Kitchen and Bath Centers. where Apple is dominant and rivals such as Spotify are emerging. bringing Best Buy total sales revenue of US$426 million in 2011. Best Buy plans to build a presence for both Geek Squad and MindSHIFT brands within its "big box" stores. The purchase indicated a switch in strategy for Best Buy.  Moving forward. while Geek Squad goes in-house  In financial year 2010. such as the provision of computer services. Best Buy diversifies with Pacific Sales Kitchen and Bath Centers  In financial year 2007. and sales value experiencing a negative CAGR of 24% over 2006-2011 as consumers sought cheaper alternatives. plumbing fixtures and home entertainment products. the company began operating Magnolia Home Theater within Best Buy stores. it closed its six stores in financial year 2011. Best Buy announced that it had agreed to acquire computer-managed services provider MindSHIFT. © Euromonitor International Magnolia Audio Video purchased to move up market  In financial year 2001.warc. with a focus on builders.

© Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 16 Downloaded from www. before looking to purchase at discounted prices from online suppliers. which of the 12 product categories within internet retailing researched by Euromonitor International.com .warc. has one of the biggest 2011 internet sales values.  Since 2010.  This is particularly affecting consumer electronics and computer game hardware retailing. Troubling to "big box" retailers such as Best Buy is the practice of "showrooming" where consumers browse in store to ascertain the look and feel of the product while also discussing their needs and specifications with sales advisers. the rise of smartphones has cemented this mentality as a permanent feature of the market and while stores are attracting consumers. at US$27 billion in the US.DOMESTIC STRATEGY "Showrooming" hits Best Buy's hard. second only to the "other internet retailing" category. limiting sales growth  In the US. economic uncertainty affecting consumer expenditure and high levels of broadband penetration have made internet bargain hunting a growing challenge for electrical retailers. sales per visitor have plummeted leading to the closure and downsizing of many stores.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

which encouraged Best Buy to enter the market through the acquisition of Jiangsu Five Star in 2006. Note: Bubble size shows company sales (2011). a considerable increase from the two markets in 2005. Over the last decade the electronics and appliance specialists channel in China has grown at a rapid pace. but China has a bigger market overall and is forecast to benefit from higher growth than the other markets. As a large developing market.1-34. Best Buy had retail operations in 14 markets. Range displayed: US$0. However.9 billion © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 18 Downloaded from www.com .INTERNATIONAL STRATEGY Best Buy's global growth hits a number of hurdles along the way  The US remains the biggest market in sales value terms for Best Buy in 2011. By the end of 2010.warc. with whom the company opened a number of Best Buy stores in the UK. which it had entered in 2009. Carphone Warehouse. and withdrawn from Turkey. the company has since closed its Best Buy branded stores in the UK and China.  The internationalisation of Best Buy's operations continued with the opening of stores in Mexico and the acquisition of a 50% stake in UK-based mobile phone retailer. Best Buy sought to capitalise on rising incomes in China and established Best Buy branded stores in Shanghai and its surrounding provinces in an attempt to import its eponymous brand into the country.

com . © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 19 Downloaded from www. if electronics and appliance specialists want to take advantage of the growth.INTERNATIONAL STRATEGY China: Best Buy makes tactical retreat for self branded stores  The electronics and appliance specialists channel in China has grown rapidly over the past decade. which underperformed due to its comparatively high pricing and product mix that skewed towards international rather than Chinese brands. and growing. This leaves the company operating only its Five Star brand in the country.  Best Buy closed stores under its own brand name.  However.warc. The channel is forecast to benefit from a value CAGR of 10. which will keep margins thin. In an attempt to grow its share of sales in the country. Maintaining profitability will be difficult moving forward as the market is likely to remain very competitive with large-scale rivals such as GOME and Suning set to remain keenly focused on price. Best Buy plans to open 50 Five Star stores in financial year 2013 alone. they will need to position themselves accordingly. competition from grocery and mixed retailers.2% over 2011-2016. underlining the continued positive outlook for it. The appliances market is very competitive in China and specialist retailers face additional.

However. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 20 Downloaded from www. underlining how competitive a market the UK is for retailers of mobile phones.  However. Ultimately. through its holding in Carphone Warehouse. giving the company a platform to enter Western Europe. the leading retailer in the electronics and appliance specialists channel in the country. TescoDirect and AsdaDirect.3% in 2009 to 11% in 2011 and this comes despite the channel suffering from a contraction of 3.  Progress since the joint venture's announcement was slow.5% in value terms in 2010. enabling UK-based Dixons Retail.com . Best Buy has managed to grow its market value share since its acquisition. operating a similar business model to that operated by Best Buy in the US. minimising the opportunity for Best Buy to grow online. adds to the competitive environment. to improve stores close to where Best Buy was set to open outlets.warc.  Aside from the incumbent competition in the electronics and appliance specialists channel. Furthermore. the chasing pack of companies ranked from fourth to seventh are all mobile phone based and include the likes of Orange and Vodafone.  Carphone Warehouse is the only mobile phone specialist within the top three with Dixons Retail and KESA Electricals.INTERNATIONAL STRATEGY UK: Best Buy's slow progress enabled competitors to improve  Best Buy launched a joint venture with UK-based mobile phone retailer Carphone Warehouse in 2008. which is accentuated by the strength of Amazon in the country. slow progress in the UK led Best Buy to close its stores in the country. Best Buy also faces the might of international grocers. Tesco and Wal-Mart (Asda). up from 10. the establishment of specialist non-grocery sites. both of whom have moved further into the electronics and appliances product categories since 2005.

if not wholly. it was relatively unheard of in both China and UK prior to its acquisitions. are household names in their respective markets.  While Best Buy is a global retail brand and a particularly formidable force in its domestic US market.  To succeed in future. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 21 Downloaded from www.  By comparison. which has failed to achieve the same recognition of impartiality in China that it has in the US. Best Buy's culture was not imported into the brand.warc.  In contrast.  Key to this success is the fact that Future Shop's sales culture was retained. This meant that Best Buy had to invest a considerable amount of capital simply to achieve local brand recognition. Best Buy has enjoyed success through maintaining the brand name of the company it acquired: Future Shop. i. Does Canada provide the model moving forward?  In Canada. its competitors. such as GOME.INTERNATIONAL STRATEGY Why did Best Buy fail to establish its brand in China and the UK? Brand identity requires big investment  One of the biggest contributing factors has been establishing brand identity among Chinese and British consumers. Chinese sales culture clash  Another important factor has been Best Buy's noncommission sales environment.  Future Shop has a culture whereby its sales staff are highly interactive with the customers on the shop floor.e. Dixons and Comet. while Best Buy suffered by comparison. Best Buy should consider retaining the national identity and especially the sales culture associated with the acquired brand rather than trying to impose its US-developed culture on it. Suning. GOME and Suning's sales staff are largely. and as a result sales personnel are keener to sell and meet their quotas in order to increase their personal incomes.com .  This has resulted in higher sales per employee for domestic retailers. commission-based.

However. Leadership has been maintained in 2011. There are 26. Elektra and Coppel. with the exception of Sanborns. and register annual sales of only Mx$2. Without expansion.000 electronics and appliance specialist retailer outlets in Mexico. managing vast outlets of nearly 5. Best Buy will continue to struggle in Mexico and this may become the next market that it exits. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 22 Downloaded from www. Other retailers. Famsa. independent stores dominate the channel. small-scale. and all of them. despite only having six outlets.INTERNATIONAL STRATEGY Mexico remains fragmented and slow to grow  Best Buy entered the Mexican market in 2008 and by the end of its third year of operation was the largest retailer in the hugely fragmented electronics and appliance specialist retailers channel in the country. Many of these small stores engage in repairs to maintain loyalty with local consumers. offer a wide range of products. underlining how fragmented the channel remains in Mexico.  As such. such as Sanborns. which allows the company to offer deep specialisation and a wide product range. unless Best Buy can encourage consumers to visit its stores it is likely to struggle to make an impression in Mexico.  The difficulty for Best Buy is that home appliances and electronics are available through a wide number of other retail channels.  Also. which on average have a mere 50 sq m of sales area.2% at the end of 2011.6 million (US$211.com .000 sq m each.000) per outlet.  However.warc. Salinas y Rocha. Best Buy operates an almost unique business model in the Mexican market. Best Buy held a value sales share of just 2. offer credit facilities to encourage low-income consumers to buy.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

Best Buy has seen a 17% value CAGR in its internet retailing operations.5% CAGR from 2011 to 2016. However.MULTI-CHANNEL STRATEGY Internet sales a small but growing channel  Over 2006-2011. The best growth prospect for Best Buy is in the US where the consumer appliances internet sales channel is forecast to post a 7. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 24 Downloaded from www. while storebased retailing has seen a value CAGR of just 6%. internet retailing will only account for a relatively small share of sales for some time yet. despite this pace of growth internet sales account for only 5% of the company's total sales value as of 2011.  While internet retailing as a whole is forecast to enjoy faster growth in sales terms than the electronics and appliance specialists channel.com .warc.

 The company believes this will reduce costs by US$250 million in 2013 and US$800 million by 2015.warc. online sales of consumer electronics and video games hardware has seen overall value growth of almost US$9 billion with much of this coming at the expense of storebased electronics retailers such as Best Buy.MULTI-CHANNEL STRATEGY "big box" store format sees diminishing returns  In March 2012.200 in number in the US at the end of 2011 and the company has a presence in every state in the country. This was part of the company's announcement that it would close 50 of its US-based big-box stores and open 100 of its small mobile stores during financial year 2013. Best Buy announced that it wanted to focus on smaller stores in order to cut costs.com . alongside its selling space growth rate and has also seen its country sales presence fall from Turkey and Belgium.  Best Buy's large format stores exceeded 1. especially as consumers increasingly opt to try instore and purchase cheaper online. The company has seen its sales growth rate fall. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 25 Downloaded from www. As stores' local consumer bases begin to overlap. Over 2006-2011.  Internet retailing is also adding to the pressure on Best Buy. additional store openings face diminishing returns.

 Products can be shipped to all Best Buy's locations within the US. about the website being down for maintenance. On some occasions. while also featuring competitions to win prizes as well as articles about celebrities and their gadgets. was "liked" by over 100 people.warc. one entry by Best Buy itself. The Facebook page has nearly six million likes (March 2012).MULTI-CHANNEL STRATEGY Best Buy's internet strategy allows customers to vent frustrations Internet retailing with US at its core  Best Buy has online shopping available in some of its chains outside the US but its biggest market remains its home territory.  The company's YouTube channel offers little that would draw new customers into the site unless they were already looking for a Best Buy product demonstrated on YouTube.  In the US. customers can choose to purchase and pick up at a store or opt for home delivery. Twitter and YouTube. This offer is likely to become increasingly essential for operators of "out of town" stores. For example. off duty Best Buy employees actually add to the negativity with their own dissenting comments. Social media presence a vehicle for negative feedback  Best Buy has a presence on Facebook. but is often hijacked by disgruntled customers with complaints about poor customer service. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 26 Downloaded from www. which force customers to travel some distance for items. but suffers from a very low engagement rate of under 1%. which is often free for certain items as part of various bundled offers.  The page features products and deals from Best Buy.com .  The "Collect at Store" option enables consumers to check stock levels of products at their local stores and reserve these products.  Best Buy's Twitter page features a large amount of responses to customer queries with limited pro-active content.  Best Buy would do well to copy the example set by UK colleagues in Carphone Warehouse who primarily use their Facebook page to highlight new products.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

BRAND AND PRIVATE LABEL STRATEGIES "big box" stores unlikely to see strong growth in future  Best Buy tends to retain brands after acquisition. In 2008.com . then established its big blue box stores. with Five Star. including Carphone Warehouse. with the failures of the larger format in China and the UK.  "big box" formats have been key to Best Buy as the company operates many "store within a store" retail chains such as Magnolia Home Theater and Geek Squad and these rely on footfall within "big box" stores.  The US has seen a recent change of strategy with the company deciding to cut back on the number of its "big box" stores in favour of smaller outlets. it acquired Future Shop. Consequently it has been disappointing for Best Buy to struggle to establish its eponymously branded outlets in new markets. When the US retailer entered the Canadian market. especially as consumer behaviour appears to be turning away from "out of town" stores and choosing more convenient local options or purchasing online. This. The same is true in the Chinese market.warc. largely because they are locally prominent or operate within a more specialised sub-market. could herald the beginning of a new phase for the company. Best Buy strategically acquired a number of retail brands to boost its portfolio. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 28 Downloaded from www. with the most prominent failures being China and the UK.

 In addition to generating income from hardware sales. Best Buy has sought to expand into smaller format retailing through the Best Buy Mobile brand. are also sold. with retail sales of US$90 million. there were 177 Best Buy Mobile stores in operation. they are largely focused on selling services. the stores earn a considerable share of total income from fees paid by network providers such as Verizon and AT&T. However.warc.  These companies have thousands of stores and accounted for 65% of mobile phone distribution in 2011. PASSPORT 29 © Euromonitor International RETAILING: BEST BUY CO INC Downloaded from www. While these stores are set up to sell hundreds of SKUs. The store concept has so far proved successful and the company has indicated that it will continue to grow its presence in Canada and the US. Verizon and Sprint.BRAND AND PRIVATE LABEL STRATEGIES Best Buy Mobile: Expanding the Best Buy brand  After successfully dominating the "big box" electronics and appliance specialists channel in the US and Canada. such as insurance.and post-paid mobile devices.com .  At the end of financial year 2011. which specialises in the sale of pre. which will help drive footfall. the company will be directly competing against new rivals. Best Buy should be able to position itself as an independent retailer and grow its distribution share. If it does. it should be able to gain access to exclusive products from handset manufacturers. Note: 2011 year falls in end of financial year 2012 annual report data  With Best Buy's move into specialised mobile device retailing. primarily AT&T. Various other additional services.

while in Best Buy outlets there are interactive displays and a focus on self service. In Future Shop outlets there are various salespeople who engage in considerable interaction with consumers.warc.com .  One of the main differences between Best Buy and Future Shop outlets is the interaction between staff and consumers. Best Buy and Future Shop. the company operated 222 outlets under its Future Shop and Best Buy brands. according to trade sources the gradual introduction of Best Buy outlets did not hamper the performance of Future Shop as much as was expected. In 2011. Best Buy Canada Ltd acquired the Future Shop brand in 2001. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 30 Downloaded from www.  While Best Buy was expected to come into direct competition with Future Shop. Future Shop remained a separate brand with its own unique image. then in 2002 the company introduced its Best Buy brand. In consumers' minds.BRAND AND PRIVATE LABEL STRATEGIES Customer service orientated Future Shop leads in Canada  The second biggest market for Best Buy is Canada and the company operates two retailing brands.

portable media devices.  Geek Squad  Primarily known among consumers as a repair service brand. © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 31 Downloaded from www. and components. Rocketfish  The vast majority of these products can be attributed to one of three product categories: accessories.  Best Buy's private label ranges include: Insignia  This brand competes directly against some of the biggest brand names in consumer electronics. peripherals and cables among other things. home theatre systems and several other mainstream consumer electronics categories. the products manufactured under this brand are cables and flash drives. These products are sourced from manufacturers operating in Southeast Asia. and Best Buy has established a sourcing office in China to design.com . Best Buy has produced several SKUs with the Geek Squad branding. Dynex  Best Buy has a wide range of products under the Dynex brand including computer monitors. develop and test all of its private label products. office supplies. peripherals.warc.BRAND AND PRIVATE LABEL STRATEGIES Well-developed private label range. but unlikely to expand Best Buy branches out into private label manufacture for selected products  Best Buy manufactures several ranges of private label goods to cater largely for the more value-conscious consumers. video players. In general. Insignia products can be found in televisions.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

Major Appliances and Large-screen Televisions Domestic Vendors International Vendors Contract Carriers Ship to Ship to Ship to Ship to Distribution Centres Collected from Online orders Ship to US Best Buy Stores © Euromonitor International RETAILING: BEST BUY CO INC PASSPORT 33 Downloaded from www. the top five brands sold at Best Buy have always included Toshiba and Hewlett-Packard. this model may prove inefficient at keeping smaller urban stores well stocked.com . with five suppliers . Best Buy's 20 largest suppliers accounted for just under 65% of the merchandise it purchased. Best Buy supply chain set up for "big box" stores. Hewlett-Packard and Toshiba . Sony. develop.Apple. This system works well for larger format stores as they can hold a larger number of products.  Since 2005.  For its private label offerings. Samsung.OPERATIONS Supply and distribution  In financial year 2011.representing 39% of total merchandise purchased. reflecting the skew towards electronics and US consumers' brand preferences. However.warc. changes required for smaller format operations  Best Buy's existing supply chain requires vendors to ship products directly to distribution centres which are then transported to local stores. with Best Buy's push towards smaller formats and more time-sensitive exclusive products. test and contract manufacture its own line of products in association with factories in Asia. the company operates a global sourcing office in China in order to design.

STRATEGIC EVALUATION COMPETITIVE POSITIONING DOMESTIC STRATEGY INTERNATIONAL STRATEGY MULTI-CHANNEL STRATEGY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS OPPORTUNITIES AND RECOMMENDATIONS .

growth can only come via competing more aggressively.com .  Best Buy has already seen a failure of its own brand within China and it is essential that the company can make a success of its acquired Five Star brand. particularly Geek Squad into its smaller stores. Rectify customer service reputation  Best Buy needs to address negative comments online and its perceived issues with levels of customer service.  Best Buy should consider applying this strategy to both China and its second most valuable territory.2% value CAGR as the population's incomes grow and the Chinese consumer spending remains strong.  Best Buy's own Facebook page is beset by stories from disgruntled customers complaining about inadequate returns policies and other tales of poor customer aftercare.  Best Buy needs to re-vamp its online marketing strategy.  With electronics and appliance specialist retailing forecast a value CAGR over 2011-2016 of just 0. possibly learning from joint venture partner Carphone Warehouse and providing more online content that is helpful to customers. Meanwhile.OPPORTUNITIES AND RECOMMENDATIONS Key recommendations Grow small stores and add further in-store brands  The smaller store format has been seen to be successful in the US and Best Buy has already announced plans (March 2012) to continue to build this format. China is forecast a 10.4% in the US. possibly on price. © Euromonitor International Push for growth in China via the Five Star brand  The company needs to look to grow its market in China in order to reduce its reliance on the US economy. RETAILING: BEST BUY CO INC PASSPORT 35 Downloaded from www.warc. while reducing its reliance on "big box" stores.  The growth in popularity of smartphones and tablet-style computers coincides perfectly to give a rise in popularity of the ideal types of products for sale in these stores and Best Buy should consider ways to incorporate its other brands. Canada. and not just a catalogue of products.

Country Market Insight Reports The key drivers influencing the industry in each country.com . This research from Euromonitor International is part of a global strategic intelligence system which offers a complete picture of the commercial environment.warc.com or contact your local Euromonitor International office: London +44 0 20 7251 8024 Chicago +1 312 922 1115 Singapore +65 6429 0590 Shanghai +86 21 6372 6288 Vilnius +370 5 243 1577 Dubai +971 4 372 4363 Cape Town +27 21 552 0037 Santiago +56 2 915 7200 Sydney +61 2 9275 8869 Tokyo +81 3-5403-4790 Bangalore +91 80 49040500 PASSPORT 36 Downloaded from www. © Euromonitor International RETAILING: BEST BUY CO INC Learn More To find out more about Euromonitor International's complete range of business intelligence on industries.euromonitor. market shares. Global Company Profiles The competitive positioning and strategic direction of leading companies including uniquely sector-specific sales and share data.Experience more.. Market sizes.. Also available from Euromonitor International: Global Briefings Timely. emerging trends and pressing industry issues. distribution channels and forecasts. relevant insight published every month on the state of the market. comprehensive coverage of supply-side and demand trends and how they shape the future outlook. Strategy Briefings Executive debate on the global trends changing the consumer markets of the future. Interactive Statistical Database Complete market analysis at a levels of detail beyond any other source. countries and consumers please visit www.

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