Friday, December 11, 2009
Game Lounge - rehash
For those who haven’t seen my previous posts or submissions around this idea allow me to rehash for a moment. The Best Buy Game Lounge would be a gaming network setup inside of a Best Buy store that allows for customers to play either computer or console (Xbox 360/ps3) games together in either cooperative or competitive modes. Customers would pay an hourly fee to have access to these machines. This gives the customers an experience that can’t be duplicated through typical online play, a great VPE for gaming customers, and a competitive differentiator that other retailers would find difficult or impossible to duplicate due to many factors.
Game Lounge – how it works
Let’s move onto the nuts and bolts on this to see why this innovation has the potential to be very profitable. For the purpose of this example of cost I will use 8 (eight) Xbox 360s (Arcade) @ $200, 8 (eight) of any HDTV @ $300, 1 (one) 8-port switch @ $32.99, and misc. Cat-6 cables @ $10. This means that the entire LAN would cost about $4043 excluding any other costs (labor, electricity, rent, etc). We can use this number to find our breakeven point for the equipment.
Price per hour/Hours needed to hit breakeven/Hours needed with 8 machines full
3 / 1347 / 168.375
5 / 808.6 / 101.075
7 / 577.57 / 72.19625
Essentially if we assume the machines are full for an average of 2 hours a day Monday-Thursday and 4 hours a day Friday-Sunday we will arrive at an average 20 hours a week, this assumption also provides that there are no other customers paying for use. At that rate the LAN equipment would pay for itself in as little as 4 weeks or as much as 8 and a half weeks. The next aspect to look at is the other costs. These costs such as labor, electricity, and rent are costs that we already incur. There is a slight increase in total electricity and labor costs because this is additional, but the electrical costs are minimal and the labor pays for itself.
In terms of this assumption the labor we would use is one associate “zoned” in the Game Lounge for this single LAN. This associate is responsible for taking payment, measuring time, ensuring proper conduct from those at the gaming machines, etc. During the time the associate will also have other tasks to perform in the immediate vicinity.
Essentially if we assume that the average salary for anyone in retail (Best Buy or anywhere else) is about $10 per hour, then it whenever two people are playing at $5 or $7 dollars per hour or three people are playing at $3 dollars per hour, then 90-140% of the employee labor cost is being offset. Also, the associate would be able to perform tasks such as farming or greeting/stacking customers in an adjacent department depending on the layout of each individual store. This scenario was also assumes that we use only have one LAN comprised 8 computers for each associate that we use in the lounge.
One of thing to keep in mind while thinking about this innovation is that it is scalable based on area and demand. This means that one associate can manage multiple LANs comprised of 8-16 machines. A large part of the testing of this innovation would be to determine the average number of LANs/players the average associate can manage easily. With that said another assumption that I will make is that the average associate will be able to manage about 24 people regardless of how they are spread out between LANs, this is based on the experience that I have had in the past with LAN gaming and Midnight openings at Best Buy.
A quick note on “Measuring Time”: There are a great many ways to measure time for multiple machines that are being used from something as simple as a kitchen timer to the very elaborate computer programs, whichever we use really doesn’t matter as long as the customers and employees can all tell when the time has expired for each customer/machine.
Once the breakeven point for the equipment is made we are also able to sell the equipment for whatever cost and derive 100% margin from that sale as well. This is something to consider when it is time to upgrade the equipment that we are using. For the gaming consoles (Xbox 360/PS3) this will only need to be done once every 2-8 years. Depending on the frequency at which new gaming consoles come out (which has been trending longer and longer). The computers are a different story, and should likely be upgraded at least once per year. This is due to the changes in PC gaming which happen frequently.
In order to draw customers into the store we must have machines better than what they typically have at home. Part of the VPE of having a gaming LAN in the store is machines that can outperform the average customers’ home PC. This is also a benefit to us because customers are more likely to want to purchase a computer like the one they are playing. Because of this we can inspire possibility while explaining to the customer why Best Buy is the one place they should consider when purchasing this type of PC.
Value Proposition – Unbeatable Experience for the Customer
As I stated before the Game Lounge is about creating an experience that can’t be matched by online play and it is also an experience that other retailers would have trouble creating due to their lack of powerful people. One of the greatest things about Best Buy is the emphasis on its people and the power they have unleashed in each of their associates. It is partly because of this value that Best Buy can pull this off where others cannot. Another part of the reason why it is Best Buy that can be successful is because of the culture of knowledge they have cultivated in their employees, because line level associates are more knowledgeable they will be able to handle changes and adaptations to the business better than other companies’ associates.
Margin Driving – benefits to Best Buy
There are several benefits for Best Buy these are some of the most important: building great customer experiences, margin, and driving the service culture at Best Buy.
Great Customer experiences are obviously a benefit to the company because of organic growth. A happy customer returns to do business where an unhappy will potentially lapse and not shop with us again for months, years, or ever again. By creating an area of the store that is designed to deliver good customer experiences, we will gain more lifelong customers.
Margin is obviously a big focus right now. The TV wars have taken their toll on TV prices and Margin. It is coming to the point where TVs have as little margin as Computers. For a long time computers have been a loss leader that drive traffic and present an opportunity for us to show the world how we are building a service culture. TVs are getting to that point as well, which is troublesome for me when I think about the business as I have seen it evolve so far as TVs have been a product that drive margin. We can always hope to turn to appliances as a product that carries margin, but for now let’s focus on the Game Lounge. If the Game Lounge were able to drive a very conservative $100 a month in bottom line revenue for each store it was in, that would be a $1.2 million gain in margin. Now obviously there is more margin possible than that as I stated earlier the breakeven for $4000 in revenue is possible within one to two months, which means out of the rest of the year each store would have $48,000 of revenue in which to make a profit, or $48 million companywide if this rolled out that far. And these estimates are based on very small usage of one 8 machine LAN.
This innovation will help drive the service culture at Best Buy. First and foremost this is a service that we are offering to our customers, but it also inspires the art of possibility. This works as more than a revenue/margin driver, it allows customers to see what is possible. It also shows them that we are capable of doing complex networks, so we will obviously be able to handle their home network.
Next Step – Hobby Gaming
The complementary products to LAN gaming are based in hobby gaming. For those unfamiliar with hobby gaming you might want to look into companies such as: Wizards of the Coast and Games Workshop. The companies produce many games that appeal to the same customers that would frequent the Game Lounge.
The big innovation over the way other retailers sell this product is to have a place to play. By devoting a small area with a few tables we will give hobby gamers a reason to visit our store which will increase traffic. By hosting leagues such as Arena and other assorted tournaments on a monthly/weekly we can also drive sales of targeted products (e.g. a Warhammer 40k tournament drives the sales of Warhammer 40k models, paints, etc).
Having these products and hosting a place to play are great value props from a customer perspective, but they also have great benefits for Best Buy notably: 30+% product margin and increased customer traffic.
Anyway, I am going to leave it here before I get too long winded… Anyway as always your comments and suggestions are always appreciated as the point of this blog is to inspire conversation.
Tuesday, November 24, 2009
There are a great many things that we do well in our video game department, but there are always opportunities in any area of our business for growth. In this update I am going to talk about a few of my ideas of how we can improve our gaming business to be a better experience for our customers as well as making the business more competitive and to be more profitable.
Let’s start with Midnight Releases and the events that take place on those nights. Currently the number of stores participating is growing, but each store is really handling these midnight releases in their own way. This strategy needs to have some standardization either through a standard operating platform or a playbook if we are going to grow these events moving forward.
I suggest three different levels of Midnight release event. Level 1 would be very basic, for smaller releases or for stores that don’t have a large number of gamer-Employees. At this level only a skeleton crew would be in place to work the release. The store opens the doors at 12:01am and sells through copies of the game until the last customer is served.
At Level 2 we open the store at 10pm. We setup consoles for the customers to play the game that is coming out, with a line queue, and a 10 minute timer. We setup 4-8 consoles depending on the perceived amount of traffic, and allow the customers to play in a sort of “free play” arcade setting. This gives customers the ability to check out a game before the release, which gamers really enjoy. At 10 minutes to midnight we allow customers to begin to queue to purchase the game, and again we close the store after the last customer is served.
Level 3 is very similar to level 2: We open the store at 10 and setup consoles. The part where it becomes different is that in level 3 we host a tournament featuring the game that is being released. Gamers enjoy these tournaments for a few reasons such as playing the game early, competing against others, and the environment that is created while being around other people who share common interests. At my store (1123) we have hosted four midnight release tournaments this year: Madden 10, Halo 3:ODST, Transformers (movie) /w Guitar Hero tournament, and Call of Duty: Modern Warfare 2. The customer feedback that we have received thus far has been overwhelmingly positive. We have typically given away 2-4 games and a handful of gift cards during these tournaments. Free Stuff is always a good reward for our customers; it is another big way to win hearts and minds.
A quick note: During holiday hours this becomes a little tricky, luckily the last big games of the year typically are released in November, and perhaps we would have a rule where we only host level 1 midnight events during December due to labor constraints caused by extended hours and increased customer traffic during this time of year.
Another big part of this event is driving customer awareness. When polled for this last release most of the customers said that they found out about this through word of mouth. This is great news due to the limited number of times the average customer comes into our store or runs across our advertisement. The biggest thing that we did in our store was to generate our own advertising for these events. We created smaller flyers that could be stapled to receipts, we made 8.5x11” posters to display in the gaming department and at the doors, we rented a portable road side sign, we wrote on the windows of the store with chalk markers, placed a projector at the front lanes with a rolling “ad slide show”, and posted messages on local store Facebook page. If every store hosting a midnight release could do even half of these things, they will be able to inform customers around upcoming events. This coupled with better applications on BestBuy.com, a small blurb in the weekly ad, and perhaps a commercial on a network like G4TV could have a large impact.
Xbox live is a large and growing network and can be a vehicle for many brands to get their Logos and more importantly their messages to customers. I feel that Best Buy could utilize many areas of Xbox Live to drive brand awareness for gamers, these areas include: Avatars, Napster, Shows, and Games.
For those of you who aren’t aware, Avatars are the Xbox live representation of the player. When you create an Avatar you are able to customize their physical features and their clothing. There is also a Marketplace where you are able to purchase different clothing from participating brands. At present companies like Penny Arcade, Adidas, and Skull Candy offer clothing for 80-240 Microsoft points the equivalent of $1-$3. There are also a selection of cloths and accessories from video game titles. By using this system, Best Buy could have a range of Best Buy branded attire like digital versions of our uniforms, or t-shirts with logos.
Napster is currently a great plus for us, but it is hard to compete directly against the iTunes juggernaut. By mimicking the Netflix and Last.fm applications that have been recently launched, we would be able to bring Napster to more homes and gain a better foothold. Also, Napster could be brought to the Playstation Network as well. This brings Napster to more homes, but it also helps our company build relationships with customers and with console manufacturers.
A long while ago I submitted an idea to the IdeaX site around creating a Web based TV show or podcast. Basically it would be a show where we take a look at new products while explaining its features and benefits and highlighting all of the reasons why Best Buy is the place to get it from due to our services, expertise, Geek Squad Black Tie, etc. If we made these available through the Zune Marketplace (Xbox Live Video Marketplace), we would be able to distribute these to more customers and again build a relationship in customers’ minds between Gaming and Best Buy.
Next let’s discuss game creating and distribution through Xbox Live. A few years ago Microsoft made it possible for the average person to create video games using XNA (http://creators.xna.com/en-US/). They allow for anyone over the age of 18 to submit games. This means that Best Buy could create a series of games and distribute them for a very small amount of capital. We already have a slew of programmers employed in programming roles along with hundreds if not thousands of employees at all levels of the company that can contribute with either programming, game design, level editing, or various art. Basically stated we could internally crowdsource the creation of games. The benefits of creating our own games, is that we can send a brand message or at least drive brand awareness. The other great thing that may happen is creating an icon that represents Best Buy in the gaming world, much the same way that Nintendo has Mario or Sega has Sonic.
Professional Gaming and gaming leagues represent a huge area opportunity for Best Buy. My strategy for gaining the most customers in gaming through this method starts with hosting local gaming leagues and national tournaments and ends with us supporting a hand full of professional gaming teams. This strategy also incorporates an idea I submitted to IdeaX around a Best Buy Gaming Lounge (http://bestbuyideax.com/ideas/1360).
The first part of this plan that to implement is the above gaming lounge idea. (Essentially a pay by the hour gaming network were we allow customers to play on a LAN.) Next, we create a local level league, in the same vein as Wizard of the Coast’s “Magic: The Gathering Arena” (http://www.wizards.com/Magic/Magazine/Article.aspx?x=events/magic/arena). Customers would pay a fee to join a one-two month league, where they are able to play against each other for points. The winner(s) receive(s) prizes at the end of the competition. The goal here is to give customers an experience they can’t get at other retailers along with maintaining a breakeven model with the network. With the proper amount of traffic these areas do have the potential to drive huge amounts of revenue after they reach the breakeven point.
Next, we use a national gaming tournament featuring three different games as a promotion to drive awareness of gaming at Best Buy and the Gaming Lounge concept, along with using it as a scouting tool to build our own gaming team(s). The national tournament would start out at the store level and move to a district level for the quarter finals, the semi finals and finals could be held in more central locations. Gaining vendor support from the companies that produced the games and from the consoles manufacturers among other advertisers is going to be the key to making these tournaments successful and provide a worthwhile ROI.
The final stage of this strategy revolves around sponsoring professional gaming leagues such as the MLG, along with sponsoring our own team(s) to compete in leagues like these. This strategy will give us more credibility among gamers. The better the role models of game feel about Best Buy, the more likely the gaming community will shop at our stores.
Digital Download Stations
Recently Sony Released the PSPgo a handheld gaming console that unlike most other video consoles because it lacks a way to access physical media. This means that games have to be downloaded from the Playstation network instead of being able to be purchased in a store. This means that customers have less reason to shop at our stores to supply games for their device. We do carry the cards so that a customer can purchase using a method other than a Credit Card, or for a gift purchase, but this is only a small solution to what will be a growing issue in the future.
When we look at the growth of downloaded music when driven by a force like iTunes, I feel that it is only a matter of time until other forms of entertainment start to go this way. Netflix, Blockbuster, CinemaNow, and eventually Hulu are streaming video content for a fee. Google, Sony, and Barnes and Noble are all offering digital copies of books for download. Sony and Microsoft are both offering digital versions of their games in a way that bypass the retail stores. The convenience that comes from being able to make purchases from home and have it delivered nearly instantly, is the most contagious part of the digital download model.
To help maintain traffic and to get ahead of the curve, I suggest installing digital download stations in the gaming department. Actually I recommend putting them all over the store for the gradual replacement of the Media department, but let’s focus on the future of gaming for now. Currently we have the Nintendo DS download play – stations in our stores (although most associates/customers don’t know they are there – better signage could help). These wireless servers allow for customers to bring their DS into our store and play a game while they are in the general vicinity of the server. I would suggest that we partner with Sony and Microsoft to create similar download stations for devices such as the PSPgo, and the Xbox 360.
This solution helps to maintain customer traffic, while at the same time providing a solution to customers who lack broadband internet access. If we can help with the development of the technology and make it a Best Buy exclusive (even if it is just for a limited time), it also becomes a competitive advantage for us, along with aiding in the preservation of the traffic driving model for retail.
I know the Blue Shirt is an Iconic piece of Best Buy branding, and I want to ensure that everyone reading this knows that I understand the power of the Blue Shirt and what has gone into creating the brand. With that said, I think that we should modify the uniform in gaming while keeping a Blue Shirt as the underlying design. Either by adding patches to the uniform, similar the MECP certification that associates in CarFi wear or a total modification to a Blue T-shirt with vendor logos and product placement (similar to the GameStop uniform).
Patches would be a simple modification and we have the tools in place through learning lounge to certify associates in gaming. All it would take is a little extra vendor support and a change to sop. These patches would visually reinforce the certified expert message that we have been sending to customers for years, they would also help drive the individual employee towards learning more about the products they work around every day.
The more drastic change, a standard t-shirt, would be another great way to gain vendor support in gaming. By keeping the shirt blue we can maintain the brand, but by adding logos or products from the video game industry we can gain the perception of expert level knowledge. If someone is wearing an Xbox branded t-shirt, the average customer will likely assume that person to be an expert. Vendor support and perception of expertise are two reasons that GameStop uses this very tactic.
Used Games – Leverage Trade-in
As I mentioned in the previous blog, the best way for Best Buy to get into the used games market would be to purchase GameStop. Without doing this, the next best way that we can start gaining in this area is through our Trade-in Program. The current message in that I have seen broadcast around this program is that we have a trade-in program for old electronics, beyond that there isn’t much of a message, and the communication to the customer has been pretty lax. I would recommend adding more prominent signage in the participating departments (IE. Gaming, Digital Imaging, iPod/MP3, CarFi, PC) featuring different more targeted messages. In gaming for instance the targeted message would be, “Trade in your games and buy iPods, computers or nearly anything in the store, or trade in your other electronics for games – one store many options!” or something similar to that, with a different message in each department.
The trade-in program flyers are great, but it isn’t something that most customers will typically pick up on their own. Most customers tend to walk past sign holders without ever noticing what is in them. One behavior that store employees can do to drive awareness is to carry these flyers around and hand them to customers during interactions while talking about the program, customers respond well to this approach.
Win with Mom
One of the things I notice is that Moms buying video games will shop at places like Target first, and one of the reasons is that they are already shopping at those stores for their needs and the video games are typically for their kids. One of the big areas that we can win these customers over in video games is with our GSBTP and our coverage of ruined games. Protection is a huge advantage that most retailers do not offer, and gives great piece of mind when spending $40-60 on a new game. There are a lot of things that can be done to win these customers over and asking the customers is the easiest way to find out what the best and more important things to change would be.
Aggressive branding of Reward Zone Gamers Club
Reward Zone Gamers Club is a great new brand for our gaming department. By creating a brand like this we have set ourselves apart from many of our competitors, but do our customers know about the benefits? The next part of driving this brand is to get aggressive with the marketing. As I suggested earlier we could use patches or even pins on the Blue Shirt. We could and should increase the amount of in department signage and in store demos that mention Gamers Club. Our midnight releases should also be branded with the Gamer Club logo and brand messages, this should be included in any advertising that we do along with any collateral that we hand to customers on and around those nights.
Building Gamers Club into a strong brand is a great way to set ourselves apart from stores like Wal-Mart and Target. Now would be a great time to start advertising the benefits of gamers club to Moms in the forms of media that they are likely to read, watch, and listen.
Customers with Gamers Club should get a new Reward Zone card that indicates that they are a part of Gamers Club. These new cards should also list the features in shortened bullet point form on the front and back of the card. This way more customers understand the benefits and how it works.
Lan Party Setup – a new Geek Squad Service
A service I feel that we should offer revolves around the LAN party experience. This is an experience that companies have tried to duplicate with varying success through initiatives such as: Xbox Live, Playstation network, Sega Meganet, etc. The face to face interaction is one thing that can’t be duplicated. This is why people still come together to play under one roof. With this said, I propose that Geek Squad should have a temporary network setup sku for setting up a LAN. While this would allow us to support more customer needs it would also allow for our Blue Shirts to be able to inspire gaming customers with the art of possibility around doing this for them.
Gaming Optimization – a new Geek Squad Service
Another service that should be implemented to drive gaming awareness and customer loyalty is an individual game optimization for the PC. This would involve optimizing the computer and the game settings to perform at the optimum level, given the customer the very best experience along with allowing them to play with a competitive advantage over others who installed the game without optimizing.
This idea does take a special type of agent, one that is a PC gamer and understands how to properly determine the best setup for a game given the PC the client is using. I would recommend starting this service supporting only a handful of games at first, the first game being World of Warcraft – due to the number of players and the number of agents/BBY employees that already play this game. Along with the competitive nature of the game, these factors make it a great choice.
Wednesday, November 11, 2009
I have worked for Best Buy for three years now, and I can’t accurately count the number of times when a friend, relative, or new acquaintance asks a question that normally starts, “I know you aren’t at work but…” and then ends with them asking for advice around technology. I really enjoy these situations for a few reasons. It shows that people consider Best Buy and me sources of knowledge that they can trust. Personally it is part of what makes my current role at Best Buy satisfying. I enjoy helping people with technology and making life easier and more enjoyable through the latest advancements.
The idea I am going to put forth in this update is that Best Buy should offer advice on technology throughout the entire home. This currently happens in two different ways. The first and most obvious is though our Double Agents and Geek Squad Installers around Networking and Home Theater respectively. We also offer advice in store to customers about their technology based on the conversations that we have with our customers. My suggestion is that we take what we do now and expand it. Let’s start offering Technology Consultations around anything and everything in a client’s house.
There are reports out there that an average person currently only uses about 20% of the potential features/benefits from the technology in their home. The point of having a Technology Consultation from a customer lens would be to have an expert come to your house, a professional that knows how to use the technology, coach you around how to use it, and educate you around what you need to do to unlock the potential. This Professional would also use the art of possibility in order to inspire the customer towards the great things that they could be doing in their home.
This service provides benefits to both the Customer and to Best Buy. For the customer they gain the use of the features and benefits of the technology that they have existing in their homes, along with an understanding of the pieces they want/need to add to make it all work, and they gain awareness of other technologies they may want to implement in their home. The benefits for Best Buy are that this will drive customers into the stores to purchase products and services, the customers will also be more loyal, and this creates customer awareness of more of the services and products that we offer.
The next issue is the logistics. In our current services model in home services can be expensive proposition on our end. The costs to put an Agent of any sort into a customer’s home is certainly what drives the price point on the in home services, so the question becomes how do we offer this service to the customer while maintaining profitability and productivity? There are a few solutions that I have to this issue we could offer the service for free relying on a great customer experience to drive enough customers to pay for the service, we could offer the service for a fee then offer a discount coupon for product, services, service plans etc, or we could provide this service without actually going to the customers’ homes.
First, let’s look at the pros and cons of offering the service for free. Pros: Drives awareness, customer education, brand loyalty. Cons: It is expensive to send in home technicians to clients homes. The point of this service is not to bankrupt the company, so if we were going to offer this service to our customers we would have to run extensive testing to ensure that we are going to gain a return on investment (ROI). The average cost for a company to put an employee into a customer’s home is between $50-100, which means that the average customer would have to spend an average of $250, assuming the average margin in retail being 30% and more if that margin is lower. That makes this idea DOA as far as I am concerned, as an idea that involves employees in customers’ homes can be an expensive endeavor, and without a way to pay for it we could never win the hearts and minds of those in charge of in home services.
Next, consider charging for the service. This sounds like a winning solution as well, due to the fact that each counseling session will be paid for, thus we have instant ROI. This is something that we currently do in Home Theater and in PC Networking, so adding this wouldn’t be very difficult and could probably be added to the stores overnight if we so chose. It would only take a small bit of training for Das, HEAs, and GSIs, a blurb in employee news, and a mention at the next morning meeting to make it successful. This could be a win-win situation for Best Buy and its customers, but let’s not forget the third solution.
That brings us to my actual innovation. What if we didn’t have to go to the customer’s house in order to provide a technology consultation? The answer is that we could provide this service for a greatly reduced cost to ourselves and to our customer. The way we could do this is very similar to the way that we currently provide customer service via Twelpforce. Customers would submit a list of their current electronics, pictures of their house, and descriptions of what they like to do and what they want to do. Then a one of our entertainment coaches would look over the submissions, and submit a quote back to the customer letting them know what we would charge to do what they wanted. This quote would include all of the products, services, etc; they would need to put together the perfect solution. Also, because the low cost to provide this service, we could offer it to our customers for free.
Let me know what you think, post a comment here or on Ideax: http://bestbuyideax.com/ideas/3705?
Saturday, October 31, 2009
Bear with me, this one will have numbers…
Best Buy: Let’s save ourselves a lot of time effort and money and just buy GameStop.
I know that we have been considering jumping into the used video games market for a long while; here are two of the first URLS that came up on a Google search for best buy tests used games:
There are a lot of reasons why I feel that we should be looking at this company for acquisition. GameStop is a power house in used games, it has over 6000 locations, two e-commerce sites, well-known brands, a magazine, a source for old games.
There are a lot of reasons why I feel that we should be looking at this company for acquisition. GameStop is a power house in used games, it has over 6000 locations, two e-commerce sites, well-known brands, a magazine, a source for old games.
Let’s look at the model they have for used games and why we should be interested. In the first quarter of 2008 used video game products represented $415M or 23.9% of their gross. This year as video game sales dipped 2.8 percent, GameStop did $545M in the first quarter, a gain of 31%. In all of 2008 GameStop sold $2.02 Billion in used games with a gross profit of $974.5M, which is 48% margin, this is huge considering the profit margin on new video game products is close to 12%. GameStop drives a large amount of its profit through used games, and we are obviously interested in this market and have done some testing to see how we can get into the resale business. We have rolled out our own trade-in program, but it isn’t as immediate as GameStop’s model and may not be able to attract the same customers due to the instant gratification they are used to. I would say that by acquiring GameStop it would make it a thousand times easier for us to transition into the used games market.
Next, let’s talk about the sheer number of locations. GameStop currently boast’s over 6100 locations; this is a huge number of locations on par with of Wal-Mart’s 8,159 worldwide locations. They operate in 17 countries, which is huge in terms of our quest for global domination as it gives us a foothold in many more countries than we currently have a presence. This would give us 7 times the number of physical locations we have currently meaning we can then bring our brand messages to more customers.
GameStop currently operates GameStop.com and Ebgames.com. GameStop.com was ranked 243, Ebgames.com ranked at 2043, and BestBuy.com ranked 69 in the US via Alexa.com at the time of writing. (BBFB.com was over 300,000.) By acquiring GameStop we would add two very powerful gaming based e-commerce sites to our arsenal.
GameStop, EB games, Electronics’ boutique are very well known brand for gamers. Most gamers perceive that the staff is typically passionate and knowledgeable in the areas of video game hardware, software, new releases, etc. This comes from being in this specialty market for over two decades, an employee used game check-out program, and being a sponsor of MLG (major league gaming). It is hard to compete with their long term devotion to video games. Although Best Buy has sold video games for a very long time, the average hardcore gamer doesn’t see us in the same light, they don’t consider our employees an equal expert in knowledge of video games. This lack of knowledge in games comes from the fact that a new game comes out about once a week, and at GameStop the employees are typically allowed to bring home “used” games, which sometimes include the new games that they take out of the case to create their hollow/dummy displays. Also, due to the new op model there are less Gamers working in Gaming, where the department is being covered by DI, Car-Fi, and PC enthusiasts. (Labor being the biggest SG&A controllable drives me nuts and I will likely comment on it in a future blog.)
GameStop also uses its huge amount of locations as the primary advertiser of its magazine -Game Informer. Game Informer reaches 3 million subscribers each month, and is rank 4th in magazines reaching males 18-34. Game Informer is a great way for GameStop to keep its customers current on both video games and offers in store. It is essentially a monthly ad that customers subsidize. By acquiring GameStop we would then gain this publication and be able to utilize it to bring our brand messages to 3 million customers per month. These subscribers also happen to be our bread and butter customers that we impress with our current strategies and inventory.
Another large benefit that GameStop offers to its customers is the availability of older games. By selling used games this gives GameStop the ability to offer games that are upwards of 10 years old. Our current Latest and Greatest model means that as games get over a year old they are normally phased out, unless they are very popular and then with luck might make it to the second year past their release. By acquiring GameStop we would have the ability to give the customers a larger “out dated” selection.
So those were the reasons that we should be looking at the company, but there are a hand full of benefits we gain that may or may not be obvious. Let’s walk through a few of them:
First and most obvious is the Trade-In program. This is one of the big reasons why I even considered this as a viable idea for the future of our company. The part that might not be obvious is the logistical advantage we gain by acquiring a company that is very good at this; we have a place to move our games. Regardless of where it is being traded in, we can move the titles between Best Buy and GameStop. Most customers right now don’t know that we have a trade-in program or that we sell used games via Dealtree, but millions of customers already know that GameStop buys and sells used games. This means that we would be able to skip a lot of advertising dollars letting people know that we do this at Best Buy, and if we aren’t selling a lot of titles from one store we would be able to move them to another via our established DDC shuttle routes and a then shuttle from BBY DDC to GS DDC.
Next, more locations means more customers. This has been the growth model for GameStop for a long time (Wal-Mart as well). The more locations they can open, the more customers they will reach. We aren’t served with this model due to the way the Best Buy operating model works, but with the GameStop acquisition we would be able to spread the message of why Best Buy through 6100 new locations. We would be able to sign customers up for Reward Zone, sign up customers up for Best Buy Card/Reward Zone Master Card, give information on Geek Squad Black Tie Protection (and offer the plan with GameStop purchases), offer scheduling for Geek Squad in-home services (along with GS pre-setup consoles), etc … Via over 6100 new locations.
Another great gain would be a well established Brand for our gaming department. Instead of just Gaming, we would have GameStop in every one of our locations as well. We could utilize this very much the way the Geek Squad brand has galvanized services vs. the “black shirt” techs we had previously. This would make our Gaming department more marketable as a whole and help us make up ground with our gaming customers.
We would also have one less competitor in retail gaming. Again this is obvious, but it is worth calling out. By acquiring GameStop we will eliminate one of our biggest competitors in this field. This will also give us the ability to crush our other competitors. How do Wal-Mart, Target, K-mart compare to our current gaming department? The easy answer is that they don’t. They can’t offer half of what we offer; they are farther behind us than we are behind GameStop in terms of ability and benefit to the customer. By making this acquisition we would further strengthen our ability to serve customers in the area of gaming.
Two words: Profit Margin. Last Year GameStop drove 2 billion dollars in gross margin. That is absolutely huge from a company that did 8 billion in gross sales. This means their profit margin was 25.7% where we drove about 9.5 billion margin on 40 billion in sales leaving us with about 23.8% margin. This doesn’t seem like it would have a huge impact on our numbers (if we 2.2+9.5/40+8=24.375) as we would have only gained 0.575% margin that half a percent is still 2 (TWO) BILLION DOLLARS!
There are probably hundreds of benefits, small and large, but I am long winded as it is and am moving on with the goal of making a conclusion of this piece.
Here is a brief and assuredly inaccurate (pulled info from the interwebs) list of business we have acquired: Audio visions for 7 million, Magnolia for 87 million, Speakeasy for 97 million, Napster for 121 million, Five Star for 184million, Future Shop for 377 million, Pacific Sales for 410 million, Musicland for 685 million (then sold for just its liabilities), and 50% of The Carphone warehouse for 2.2 billion. Also, GameStop spent 1.44 Billion acquiring EB Games not too long ago.
Can we do it? As of Aug 09, GameStop was only sitting on about 250 million in debit with projections of making 500 million in free cash by the end of the year. Currently GME (GameStop’s symbol) is sitting around $24.30, with around 90% of their 164.68 million shares owned, we could swoop in and take 10% of the company for about 400 million dollars, then we could start taking chunks as often as possible to affect a hostile takeover, or we could just offer to buy the company for 4-6 billion dollars. I know that their director just sold off about 2.3 million shares a few weeks ago; they may be in the market to sell or if their stock price drops enough maybe we can scoop up enough to have controlling interest.
This obviously is just a thinking exercise and not a true business plan which would require a lot more research on the matter than I have at my disposal. Let me know what you think, either through comments on this page, or via @MichaelASander on Twitter.
Monday, October 26, 2009
I have been wondering for a long time: What is the best way to educate customers as to who we are and more importantly why they should do business with us. During the keynote speech at the 09 DMA the speaker told a story about Accidental Death & Dismemberment Insurance and the takeaway is asking yourself how does the customer answer the question: "What's in it for me?" While he was talking about that, I started thinking a little more deeply about how I much love I feel for the company that I work for and the lack of a content in the messages that we currently send to our customers. In this blog update I am going to attempt to convey how I feel and some ideas for improvement. Bear with me as I try to get my points across, and please remember that the opinions and views that I express in this blog do not reflect or represent any thoughts, views, policies, or anything else of that nature for/of Best Buy LLC, and are solely the views and opinions of the contributing writer.
Features vs. Benefits has been a big part of the training I have received and coached to others during my tenure at Best Buy. I am very aware that no one buys a feature unless they are showing off, but that most people make the decision to purchase when the value of the product or service in question outweighs the price at which it is being offered. One of the areas where I feel we struggle the most is in explaining all of the benefits of doing business with us to our customers and sometimes even to our own employees. The question "Why [should I shop at] Best Buy?" can be answered a great many ways, it really depends on what product or service we are talking about, but can this be answered by the average loyal customer? What about our lapsed customers or even by the average associate? I would pose that there is going to be a wide range in terms of those who can truly answer that question and how they answer it. I believe it would be an interesting experiment to run and give us a lot of data around our message.
The Best Buy brand message is simple: "We improve people's lives by making technology and entertainment products affordable and easy to use, while learning from challenge and change, unleashing the power of our people, showing respect, humility and integrity, and having fun while being the best, while we promise to make sure you know all that we know, to delivery an experience that inspires you, make a difference, never leave you hanging, and blow you away with the latest and greatest.
Maybe it isn't so easy after all and I didn't even begin talking about Geek Squad services or Geek Squad Black Tie protection or Best Buy Mobile or Insignia or any of the other Brands that we currently offer for that matter. The point I am trying to make with all of that is that our brand message is more of an encyclopedia that can't be conveyed in a 30 second commercial, or even in a 5 minute conversation with a customer. Personally I have talked with customers for 20 minutes or more around specific reasons "Why Best Buy" is the place that will meet/exceed their end to end needs.
The fact is, right now in this current model we do rely heavily on the "blue shirts" to deliver our messages, and as someone who wears a blue shirt I am thrilled that Brian Dunn believes in us enough to give us the opportunity and responsibility to make or break our great company. I can't think of many companies that would let its front line employees control its destiny in such a way, and the companies that come to mind don't have hundreds of thousands of interactions with the general public every day of the year (excluding the three where we are closed).
The reason I am writing this is to spark conversation, and ideas around what ways we can improve upon the delivery of the information that we want our customers to know about us. It seems to me that at this point there are a million reasons why Best Buy is the greatest place to shop, and until we can get that message out to the public we will have to continue to fight with places like Walmart and Amazon on price, when price isn’t even one of the top concerns for technology customers (http://gizmodo.com/5375829/remainders-+-things-we-didnt-post/gallery/?selectedImage=1). Informed customers make the best decisions. They typically get the right product, coverage, and services to meet their needs. This is part of why Best Buy employees (current or former) make great Best Buy customers as they know why they want and know what Best Buy has to offer in terms of accessories, Geek Squad Black Tie Protection, services, financing/reward zone master card, etc. This is also a reason why so many Ex-Employees continue to shop at Best Buy even after they move on to other careers. So with that in mind here are some of my ideas.
Lets make the "Why Best Buy" message accessible. This fix is pretty easy, we already have tools in place (a dozen different .com sites, lots of social media: Facebook/Twelpforce/etc.., weekly flyers, buyers guides, commercials). The only thing that has to be done is to put more of the information into these formats and let our customers know the information is there for them in the interest of transparency. Maybe we could turn it into a marketing campaign where the goal is trying to get the customers interested in all of the reasons that make Best Buy such a great company, perhaps a hunt and find game with different quizzes that they can take to earn prizes.
We can print a Quarterly Catalog. Look at Ikea's success with this direct mail catalog. This is a great medium for informing customers as we can inform them as to what we offer and to go into more benefits of our products on each page. This is really the next evolution of the Buyer's guides we have been using. If we used a quarterly Catalog as a Buyer's guide, we could then go deeply into how each feature benefits different activities, and cast a spotlight on products that bring these features out. We can also educate customers around how Geek Squad can make it easy for them, and how we can help customers protect their products with Geek Squad Black Tie. We can talk about how our financing gives more buying power and streamlines large purchases and how Reward Zone Master Card will double your points and the life your certificate (6 months vs 90 days), and that you can use it anywhere to get back up to 2%. We can inspire ideas of how you can setup your camera to wirelessly transmit the pictures you have taken of your family vacation the moment you get back home to your computer, and how you can then instantly view those on your TV, or share them with family all over the world. I feel that the weekly ad has enough emphasis on selling and offering product, this would be more about fulfilling the promise of make sure know all that we know. I think a cool name for it would be "Encyclopedia Best Buy".
Have a presence at more community events to drive awareness. A while back I submitted an idea to IdeaX around a mobile team to support community events - by using a team like this we can educate customers who may never come to our stores, listen to our commercials, or our other marketing attempts. This is a way to have a very personal one customer at a time type of education much like our efforts in store and via Twelpforce. By putting our brand out there we also become a local business instead of a “giant faceless monster here to eat your babies”. Forgive my attempt at humor, but I really fail to understand how we aren't a local company. I understand that part of the profit goes up the ladder to Minnesota, but from there it is divided among shareholders who live in everyone's community. Also, it isn't as if we are being bussed in from corporate HQ, generally we live in the communities where we work, and thus we spend our earnings in the local community. Presence at community events would just help people understand that we do have faces and that Best Buy is a place to go for help.
Better employee education. I read posts everyday on the Internet that an associate didn’t have knowledge to meet the customer’s needs; then I read feedback that that an associate at Best Buy blew me away because they knew so much. Clearly every store is going to be different, and beyond that every employee and every interaction will be as well. What this shows us is that most customers have come to expect a certain amount of knowledge from us, which can be a double-edged sword. At our store part of our local culture that helped us through our Grand Opening was L2T2. Despite the visions of druids L2T2 was really simple - everyday your goal was to learn two things and teach those two things to other people. We don't really focus on this anymore and it is easy for mature stores move away from their foundational excellence. I think the best way we ensure that we have the most knowledgeable employees is moving 80-90% of the head count to full-time. Employees that are in the store more often have a better chance of having more knowledge. The next part is to require that all associates become board certified quarterly. The board we be composed of employees from across the district, the questions would range from general Best Buy knowledge to general product knowledge to more specific product knowledge based on rank. Very much like the old ranking system of Magnolia Pros. Employees then would have their rank on their name badge so everyone would know where an individual stands. In terms of the logistics for this program we would use a Net-meeting program like Skype and each session would be a 5-10minute process and the board would meet for 8-10 hours a day meaning each board would be able to process 48-120 employees a day. Meaning each store would take a day or two to process making this a two week rolling process with a huge speed impact given to having multiple boards. The advantage to this over the current process is that employees and training dept gains better localized knowledge of where we are succeeding and struggling.
Let the customer decide which is the most relevant part of Best Buy. The issue that consistently comes up when I have conversations about this with people is that there is a too much to deliver and it is nearly impossible give weight to one piece of what we do over another, which leads to why I am so frustrated with our current marketing: no one seems to know everything we offer, or at times anything we offer, beyond product before walking into the store. Its great that they came in, but the next question is the one I ask most customers, "what brings you in today?" The answer is usually the product, although sometimes they still give their trained response "just looking". The point is that we are doing some amazing stuff, and other retailers can't or won't compete with most of it, but because we haven't given this knowledge to our customers they don't have to compete. If customers knew the differences between Best Buy and the other retailers I can't think of a reason they wouldn't shop here for most products other than just price, which we match vs. other local retailers. If its price alone Amazon is a great place to shop, but what if you would like to have an expert come out to your house before you buy anything and recommend the best solution for the room, then help you pick it out in store, hook you up with an amazing 0% interest financing plan, schedule delivery and install, and be there if something goes wrong even four years after you bought it. I don't think Amazon can compete with that even if you do save a few hundred bucks when you buy it, who cares if you can't use it? There was a recent study that many people only use 20% of the features/capabilities of what their currently technology can do. They have the products in their house, but simply aren't using these products for many reasons such as not having the know how to do it, using the product on the wrong setting, or not using the right cable.
So I guess the question then becomes how do you let the customer decide what is the most important part to them? It’s easy; you ask them. Lets start giving lists of our features/benefits to our customers through the many forms of surveys that we offer now. Lets also start polling customers that are shopping the competition, and putting links up all over the Internet. We can find out what is most important to a wide variety of customers. We can then sort and target them with the messages that fit them. Essentially letting the customers decide how they want to be marketed to based on the answers they give us. It would be interesting to try it.
The last idea I want to talk about… Advertise! Apple is a great example of how advertising is supposed to work. With a legion of loyal fans and giant success with their iPod this company knows how to use advertising to accomplish its goals, like forcing even Microsoft’s hand at times. Let’s stop and look at the iPod for a moment. Apple wasn’t the first company to produce an Mp3 player (or a DAP for those in the know) the first MP3 player was Saehan’s MPMan which was quickly followed up with Rio’s PMP3000, and this all happens three years before Apple places the iPod on the market. Apple leveraged its fan base for its initial release of the iPod, then turned to advertising to move beyond Apple fans and into the mainstream, there was nowhere you could turn without seeing those silhouettes wearing the iconic white earbuds against brilliant backgrounds. Maybe it doesn’t exactly drive home my point about giving customers knowledge around what we do, because those ads didn’t tell people much about the product, but it did get them excited enough to find out what it was. What if we created an ad campaign for each of the features we offer? ROI be damned. We just move to educate customers around all of the Why Best Buy. A commercial for Geek Squad Black Tie Protection would be easy, as we have already filmed one that we ran in our Home Theater department. (The customer accidentally knocks over her “Big Sip” spilling liquid on her camera, a Geek Squad Agent comes to the rescue and uses the force to undue the damage). It would be an easy task to reshoot this with new actors, or get a new release drawn up and have the existing actors paid for their work to go national. It would be great to see a 30 second commercial focused on Financing, or Reward Zone Master Card. I would love to see a print ad for Home Theater Installation. What about an ad for Geek Squad Autotechs installing a GPS in a Car Magazine? What about our Appliance department being featured somewhere (wait Best Buy carries appliances?) The list goes on and on, and I don’t want to leave Best Buy Mobile or Rocketfish or Insignia out of this random list at the end (or Init, or 5-Star, or Speakeasy, or BBFB, or Pacific Sales, or Magnolia, or Dynex, or AudioVisions, or Napster, or Future Shop, or Carphone Warehouse).
Anyway, I guess that about sums up my portion, if you are still with me I encourage you to post your ideas, views, theories, or miscellaneous comments. Keep in mind the question, “How can Best Buy let customers know about the millions of great things we have to offer?”
Tuesday, August 25, 2009
What are the major opportunities for our appliance business at Best Buy? How can we correct these issues moving forward to grow the business and give customers the experience they deserve?
Opportunity #1: Customers don’t associate Best Buy with Appliances
Solution #1: In-store Events (Hoover Tent, Dyson Demo, pro-chef, etc)
One of the ways that we can drive traffic and awareness through our existing appliance departments with very minimal amounts of change to our business would be to host in-store events in our appliance departments. Many of our vendors can facilitate demos or in-store events.
Hoover has a tent they can bring to our stores. They will set up a section of laminate wood flooring and demonstrate how their products work. This demo is great for a few reasons: it is free vendor provided labor, it drives traffic through our appliance department, and there is typically a severe spike in sales that day (3-10 times the normal business for a day).
Dyson has area rugs that can be brought to our stores by vendors. We can use these Dyson rugs to have our associates demo the products to show off all of the features and benefits of these amazing machines.
We can bring in local chefs and have them do demonstrations on actual ranges in the store. This demo takes a little more to setup, but is a great way to bring in the community especially in areas where we have new stores. We can use our BBFB contacts to bring in chefs from local restaurants to prepare food in a demo kitchen. One of the big reasons the local restaurants will want to help out, this is free advertising for them. We reap the benefits of driving more traffic through the department while making a local connection to our communities.
Above three small demos were mentioned, and only in the case of the latter do we have to spend any of our capital on the setup. We should reach out to our vendors and see what they can do in terms of sponsoring some of these events as well. As an example: at the 2008 Appliance Summit in Boston, Sara Moulton a celebrity chef, put on a presentation for Best Buy. The principal sponsor was KitchenAid. Our vendors are willing to provide funding for training for our employees; it isn’t a stretch to ask them to contribute to educating the customer in this same manor.
Solution #2: Buyer’s Guide/Catalog
Years ago we switched over to a customer centric model in our stores, where we distance ourselves from price and talk about features and benefits. Our weekly ad has not changed in the same way. The ad is a vehicle for driving traffic into the store, and should probably remain similar to the current form, but we should consider adding a buyers guide to our current ad line up. Take a page per department, and highlight some of the reasons why the products mentioned in the ad would be a good for a customer. Bringing TRUST and a customer centric attitude to our ads would be a great way to differentiate Best Buy further from our competition, and it would also set up the experience a customer is going to have in the store.
Another option would be to have a stand-alone Catalog. A monthly or quarterly catalog would be another great method of educating our customers around benefits of the product, instead of just the price that we offer.
These global solutions are directly related to creating awareness of appliances, if we are educating our customers about the features and benefits of what we offer, and place a larger spot light on appliances, we can educate more of our customers to what we have to offer as a company and as a brand.
Solution #3: Greater presence felt in store (Move appliances to the front of the stores)
One more drastic measure would be to move the appliance departments to the front or the center of the stores. Having appliances presented as a center department will drive more traffic through the appliance department, and customer awareness will improve.
Customers, for the most part, already know we have TVs, Computers, Cameras, Video Games. With departments they don’t always know we carry, such as appliances, customer awareness is key. Many customers report to our sales associates that they have purchased their appliances recently (elsewhere) and didn’t even know we carried appliances until their visit today (usually a week or two after the purchase is made). Typically they come in for something in an adjacent department, and notice our appliance department. This is a big loss for our company. If we are using 2,000-8,000 sq ft of floor in our stores for a product that a large percent of the population doesn’t know we carry, are we wasting 5 million sq ft of retail floor space across the country? Major appliances carry a decent product margin, along with solutions this can be a large vehicle for growth, look at what Lowes has done with Appliances.
Solution #4: Better Advertisement of Appliance Department
Currently the ad for appliances is on average 2 pages. They are typically buried in the ad 1-2 pages from the back cover. Very rarely are the appliances ever mixed in with other product. Last year during our back to school drive time: Lowes ran two ads a week, with mini-fridges and microwaves on their front cover, the middle of the ad, and on the back cover. During those ads, we ran back to school ads with computers, TVs, and video games.
We struggle as a company to show customers why Best Buy in our ads, and as a direct result our customers don’t know what we have to offer. If a customer doesn’t have a reason to come into the store, they will never talk to our associates and never be informed why Best Buy!
Solution #5: Win the Weekend flyers
Off and on we have used flyers as an in-store hand out for customers. Usually these flyers are used to highlight an otherwise unadvertised sale in PC or Home Theater. We could turn these into a national ad, distributed the same way as our current standard Sunday ad. Each week on Wednesday customers would receive a 3 or 4-day ad that would start on Wednesday or Thursday (we would have to test which has the greatest impact). This Win the Weekend flyer can be used a solution to many opportunities such as: Strong Sales Ads from our competition, Slow Sales Week, Poor replenishment on Sunday ad items, and most important to our Appliance department -> to educate our customers as to WHY BEST BUY!
We can use this win the weekend flyer as a tool to inform customers that we carry appliances, what Geek Squad Black Tie Protection does, how Reward Zone silver works, or anything else that we feel as a company that our customers don’t know enough about.
Opportunity #2: Our company’s exclusive brand: Inglis
Solution #1: Inglis VS Kenmore - How does Inglis win
Inglis is a brand that makes up the low end of our price point, which is great for our price-focused customers, but isn’t a great solution VS Kenmore. The issue comes when a customer is comparing our store to Sears and they want a Kenmore, we don’t always have a solution.
If we had a middle price point and/or premium private label the impact would be huge. First, we would have a direct competitor to Kenmore. That would give us a good solution, and would give us the ability to use the same strategy Sears has used for a long time "Kenmore is sold exclusively at" Second, customers buy appliances they have had good luck with in the past, and don’t typically buy brands they have had a problem with. If they buy a low end Inglis product, knowing that it is a Best Buy private label, they may think poorly of Best Buy as well as Inglis a direct result.
What about dropping Inglis and moving to Insignia. Then we could use whatever manufacturer came up with the best machine at the lowest cost, use a brand we have been developing for years, and have customers seeking out our brand.
Solution #2: Fixing the current No Brand recognition issue.
What is the point of having an exclusive brand that no one has every heard of. If we are going to have our own brand, or one that Whirlpool makes exclusively for us, shouldn’t our customers know that it exists?
As part of our contract with Whirlpool, they should be responsible for marketing this line of product to the general public. Before customers pick a store is the time to win with a unique brand, as most customers shop less than two stores, and we are not currently one of the top two (as far as market share). This will allow us to draw more customers into the store, who may have gone elsewhere.
Opportunity #3: Women!
Solution #1: Maria is the CFO of her household! Respect her.
Women make or influence up to 80% of purchases made of all consumer goods, according to most reports. If women are making the decisions in our stores, especially in appliances, why aren’t we more appealing to women? Currently, Best Buy as a company doesn’t seem to struggle bringing men into our stores, and is typically thought of as a store for men the way that Khols, Target, and Lowes are recognized as stores geared to appeal to women. The question is how do we win our female customers over to our side? I advise that we take a good hard look at the data points from our female-centric Denver store.
Solution #2: Gain more insight!
One of the biggest things we should and normally always do before any major transition is gain more insights from our customers and employees. The ones most willing to give insights are going to be among our best customers, the ones who we have built the most rapport with.
Reach out to our customers in the Reward Zone Silver program. Lets ask them what they would like to see. Lets get out there and talk to customers who are leaving Lowes and Sears stores, ask them why they are shopping at these stores. Lets take a look at how Target and Lowes were able to rebrand their stores in the last 10 years to capitalize on a group of people that retail seems to have been shunning since the beginning.
Solution #3: Run an aggressive Ad Campaign.
Lets get proactive: Lets use the data others have collected and find out what our target audience watches, reads, and listens to. Run an ad campaign that informs our customer that we carry appliances, and why Best Buy. We can use product placement in television shows and movies to draw attention to appliances in Best Buy, which also drives Best Buy brand awareness as well. Imagine if you heard 1 customer a week in Home Theater saying they didn’t know we carried TVs, why do we allow it in appliances?
Take a look at the top two appliance retailers in terms of market share. Sears #1, Continues to advertise everywhere that they sell appliances. Lowes #2 does the same. During certain times of the year it is hard to miss the ads these run specifically around appliances. Sears has been the biggest appliance retailer for nearly forever, and Lowes is quickly closing ground between the two. How are we competing in this race, what are we doing to win?
Opportunity #4: Small appliances, do we sell these?
Solution #1: Move traffic Appliances @ greater volume
K-mart and Walmart each carry large quantities of each SKU in several categories Microwaves, toasters, and blenders. They put these on pallets, endcaps, and in-line with massive numbers. If you go to a local K-mart or Walmart you will find more of any of these things than you will in an entire district's inventory.
Many of these small appliances are grab and go/impulse items. We typically hide these away on shelves in our appliance departments, but since we don't drive much traffic through these departments we lose out.
We should start building carts to go in the raceways, building 4 foot sections near the front lanes, building endcaps in high traffic areas (even far from the appliance department). This will drive more sales of these items, and give the customer a hint that we also sell the major appliances as well.
Solution #2: Greater Store & Ad Presence
If we give small appliances better displays in stores such as the Breville vignettes that are in some stores we might be able to attract more customers. Also if we had solutions for the small appliances, such as extra pieces for the Kitchen Aid Mixers, we would also be able to gain more customers.
Currently very few of our small appliances are actually found in the ad. I can't remember the last time I found an iron or blender in our ad. If we gave small appliances a full page every now and again, we would be able to drive more traffic through our appliance department.
Solution #3: Mirror Williams-Sonoma
What if instead of just normal traffic appliances we had more of a Williams-Sonoma department attached to our appliance department in our Upscale Suburban stores. This would give us a huge advantage over Sears and Lowes in our major appliances. This would also give our customers more reasons to visit our stores.
Opportunity #5: Relationships with Builders, Contractors, Realtors, and Landlords.
Solution #1: Builder's Reward Zone
Customers in these fields can and do buy multiple appliances every month! Realtors can influence the decision of where to buy an appliance. Realtors who flip houses typically furnish houses with appliances. Let's reward those customers who buy appliances the most. Why not have a Reward Zone for customers who buy large volumes in appliances? For every $5000 that you spend in appliances on you Builder's Reward Zone pays you back at $500. A solid 10% discount on everything they buy from us. This gives customers who are buying a lot of appliances through us a reason to shop here, and shop here again in a month (when they get their certificates).
Solution #2: Product to rival project card
Best Buy Card is a great product that rivals the project card (from Lowes), but are we marketing this card to those who are buying $10k-$50k in major appliances every year? This is a great product for those who are flipping a house and are on a tight budget waiting for a house to sell, no worries, just pick up the appliances and only pay 1% a month until it does then pay it all off with no penalty.
Opportunity #6: Not so great Delivery options
Solution #1: Same Day/Next Day delivery - Free
Customers with a broken appliance want everything to be back to normal as soon as possible. Ask yourself, "How long can I go without my fridge?" Obviously there are some logistics issues with getting this done. Lowes uses a subcontractor and still guarantees this as a Next day service for free. This is a great promotion, we should look into who they are using, because if they can do it, why can't we?
Solution #2: Advanced Delivery/Install
For our customers with a non-standard setup (odd dryer vent, weird washer connections, etc.) we should have personal that can come out and assess the situation to make sure the customer is taken care of. This way we have a solution for our customers with older homes or where the area isn't up to code.
Opportunity #7: Price shoppers
Solution #1: Appliance Complete Solution Packages
When customers come into our appliance department and get the complete solution we should reward them with a package discount. This will help drive better attachment of solutions to the main product sale, just as it did in Home Theater (HD advantage).
There would be three levels:
Accessories + Geek Squad Black Tie Protection = Level 1
Level 1 + Installation = Level 2
Level 2 + BBY card or RZMC = Level 3
At each level we would give the customer an additional boost to their current reward zone offer. Double, Triple, or Quadruple the points. Depending on the level.
Solution #2: Spiffs and vendor kick backs – for the customer
It is well known that Lowes and Sears employees are on commission. The vendor's also have spiffs on most products, and during certain drive times there are better brand specific spiffs. Why don't we have these on our appliances aimed at the customer? If a Whirlpool Cabrio at Lowes has a spiff of $65 shouldn't our price on that item be $65 less than Lowes, while we point the price difference comes from the fact that we aren't on commission and we pass that savings along to the customer?
Solution #3: Highlight the price match policy!
Every customer that is shopping between several stores should know that Best Buy will match the price of any appliance store in the area. Obviously we have a lot of competitive differentiators, other than price, but for some customers it all begins and ends with a price.