Tuesday, March 11, 2014
By THOMAS LEE, DAVID SHAFFER and PAUL MCENROE Star Tribune
(Continued from page 2)
A shopper looks at televisions at a Best Buy store in Franklin, Tenn., after the store opened at midnight, kicking off Black Friday. Former executives are attempting to buy the troubled chain to take it private.
The Associated Press
Children take a break Thursday from waiting in line at Best Buy in Carbondale, Ill. Richard Schulze, a former executive, is expected to offer as much as $8 billion to buy the company. His message is simple: His team created Best Buy – and only they can save it.
The Associated Press
"They were customers nobody could differentiate," said Lopuch. "An awful lot of money, millions went down a blind alley."
Best Buy also struggled to reach women shoppers, who, research suggests, control most household buying decisions, including electronics.
"(They) didn't realize the power of women in the electronic market. It was the dude. It's all about dude stuff," said Flora Delaney, a retail consultant and former Best Buy executive.
Of the four customer personas Best Buy created, only one was a female -- Jill, the married soccer mom. Yet young, single, professional women also buy lots of iPods, laptops and movies.
"If you look at who is eating their lunch today -- Amazon, Target, Wal-Mart and Costco -- who buys from those retailers? Women, women and more women," Delaney said.
As a strategy, Customer Centricity also failed to anticipate how fast the Internet would revolutionize shopping. Best Buy would invest considerable time and money on its stores when consumers were flocking to online retailers in greater numbers.
"It was misguided," said Carol Spieckerman, president of Newmarketbuilders, a retail consulting firm. "And if it's misguided and you get everyone behind it, it's a fatal distraction."
Meanwhile, Amazon.com was rapidly expanding its merchandise from books to toys to movies. Apple CEO Steve Jobs was revolutionizing the music industry with the iTunes online music service.
Fenn said he realized that CDs, one of Best Buy's traditional cash cows, would be obsolete after watching his teenager download music off the Internet.
"Physical media was going to change in another decade," said Fenn, who was passed over in 2002 as CEO in favor of Anderson.
Before Fenn left Best Buy, he arranged to meet with Richard Branson, the founder of the Virgin Megastores, about collaborating on an online music store, something that could compete with Apple's iTunes.
Ultimately, Schulze canceled the meeting, Fenn said.
It was not as if Best Buy lacked ideas -- or success.
One of Anderson's first big decisions as CEO was to purchase a little-known computer repair firm called Geek Squad. Today, Geek Squad is a profitable multibillion-dollar business that offers everything from IT support to small business to custom car installations.
Under Anderson, the company also bought the Five Star electronics chain in China and launched Best Buy Mobile, a highly profitable and fast-growing smaller store format developed by then-Best Buy International CEO Robert Willett.
But former and current executives also described a chaotic, adrift culture. The company encouraged employees to experiment but without real follow-through. Armed with waves of consultants, Best Buy indulged itself on well-meaning projects that never came to fruition.
"Best Buy dabbled in many things but did not take it past the finish line," said Spieckerman, the retail consultant. "They let it die on the vine."
Best Buy solidified its dominance in the U.S. market when chief rival Circuit City filed for bankruptcy in 2009. Several experts credit Anderson's Customer Centricity strategy for Best Buy's success. Since Anderson launched the strategy, Best Buy's revenues had more than doubled from $19.6 billion in fiscal 2002 to $45 billion in fiscal 2008.
"It's a key reason why (Best Buy) has survived in the tumultuous consumer-electronics marketplace, while Circuit City is gone," said Ranjay Gulati, a business professor at Harvard University.
Other analysts say Best Buy's victory over Circuit City had more to do with its old formula of saturating markets with big box stores. At the time it filed for bankruptcy, Circuit City operated fewer than 600 stores in the United States, compared with 1,100 for Best Buy.
Like Circuit City, Best Buy today has "all of this space that they have to do something with," said Laura Kennedy, an analyst with Kantar Retail, a consulting firm outside of Boston. "That was going to affect Best Buy whether or not Circuit City survived."
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