Best Buy is the largest electronics specialty retailer in the United States. Best Buy stores sell home office equipment, audio/video equipment, cameras, appliances, personal computer services, DVD’s and CD’s. The mission of the company, “to bring technology and consumers in a retail environment that focuses on educating consumers on the features and benefits of technology and entertainment products” is based off of a fundamental vision “to make life fun and easy for the consumer”. In keeping with this mission, Best Buy locations are visible and easily accessed and a new customer-focused store concept has been recently introduced, “Customer-Centricity” to make the consumer’s visit to Best Buy pleasant. The effectiveness of the mission is apparent when you consider that the net sales for Best Buy from 2003 to 2005 steadily increased from $20.9 to $27.4 million.
The company is sub-divided into five different divisions to serve consumers. A Best Buy U. S. operation is the largest of the 5 sub-divisions. It consists of 668 stores (not including divisional operations) across 49 states. There are twenty Magnolia Audio Video stores which span across Washington, Oregon and California. The stores are similar to the other Best Buy stores in U. S. except they specialize in high-end electronics and house commissioned employees. Also, for the convenience for their high-end consumers, a service department is included in each Magnolia Audio Video location. Best Buy has a presence in Canada through its 30 Best Buy Canada stores which mirror the Best Buy U. S. stores and 114 Future Shop locations which mirror the Magnolia Audio Video Stores. Geek Squad Inc. is the final division of Best Buy which offers residential and commercial computer support services 24 hours a day. The Geek Squad guarantee is that ‘if for any reason you are not completely satisfied with our service, we’ll remedy the problem free of charge.” Geek Squad is located in all U.S. and Canadian locations. There are six stand-alone locations with 20-50 stand-alone locations planned for the future. These divisions, in addition to Best Buy’s online sites; www.bestbuy.com, www.bestbuycanada.ca, and www.futureshop.ca help distinguish the company in today’s market.
Strengths – S Weaknesses – W
1. Largest Electronic retailer in U.S. 668 Best Buy stores in 49 states, 20 Magnolia Audio Video in WA, CA, OH. 1. . Best Buy removed popular Adult only video game from website and stores causing decrease in Entertainment Software Sales 2005
2. Strong brand. Been in business 37 years 2. None of the Best Buy stores in Canada carry appliances.
3. Entertainment Software Sales constant 15% international revenues 3. Best Buy U.S. has 8 distribution centers serving the U.S. stores. 5 are owned, 3 are leased.
4. Canadian sites language is in French and English 4. Future Shop stores have commissioned sales staff.
5. Net Sales steadily increased from $20.9 million to $27.4 million from 2003 to 2005 5. No international stores outside US and Canada
6. Major competitor, Circuit City does not carry appliances which is 6% of Best Buy’s annual revenue 6. Trucking services are used to transport goods to store locations in Canada from British Columbia and Ontario
7. Canadian presence through 114 Future Shops, 30 Best Buy Canada and Canadian sites: www.bestbuycanada.ca and www.futureshop.ca
8. Company focus on “Customer- Centricity”
9. Best Buy is large retailer with one stop shop philosophy
Opportunities – O SO Strategies WO Strategies
1. Online sales are promising in market. Forecasted to rise 19% annually and comprised of approx. 4% retail sales in 2005 1. Increase Appliance market share by adding Appliance department to more stores. (W2, O5, S6, S7,S9, T9, T2) 1. Introduce appliances as new product at the Best Buy Canada stores (O5, W2, S6,S7,S9, T9, T2)
2. Consumers like the simplicity of online sales but visit store locations to test products before they purchase. 2. 2. Increase online sale marketing (S4, S7,S8,O1,O2,O4,05) 2. Incorporate a “family- oriented” marketing campaign (W1,05)
1. Smaller chain stores cannot afford to lower prices 3.
2. Online retailers can offer products at a discount online due to shipping cost savings 4.
3. One stop shopping is popular and preferred by consumers 5.
Threats – T ST Strategies WT Strategies
1. Circuit city, major competitor carries most of the same products 1. Increase appliance market share by adding Appliance department to more stores. (W2, O5, S6, S7,S9, T9, T2) 1. Introduce appliances as new product at the Best Buy Canada stores (O5, W2, S6,S7,S9, T9, T2)
2. Sears, a direct competitor with Appliance department, has similar philosophy to hire knowledgeable salespeople within product lines Introduce Magnolia Audio Video in Canada. (S2,T1) Launch website in key countries outside U.S. and Canada (W5, T6. T7, T8,T9)
3. With the closing of Good Guy stores, production staff was moved to CompUSA stores in California and Hawaii Purchase leased distribution centers supporting U. S. Best Buy stores (T4,W6)
4. Gas prices have increased 20% Institute “family-oriented” marketing plan (S3, T1, T9)
5. Circuit City, major competitor has acquired 900 stores in Canada with acquisition of InterTAN Inc
6. Staples, direct competitor in office products, computers and technology is world’s largest office products company and has stores in 21 countries outside U.S.
7. OfficeMax, direct competitor in home office products, has 931 stores in 49 U.S. states, Puerto Rico, U.S. Virgin Islands and Mexico
8. Office Depot, which competes with Best buy through computers, and technology sales operates in 21 countries outside the U.S. and Canada through catalog and internet operations.
9. International Council of Shopping Centers state many chain stores may need to increase revenues by 2-3% to remain competitive
Best Buy has many competitors both directly and indirectly related to the products that it sales. Because of recent activity of these competitors, Best Buy will need to make some choices to remain competitive and keep its steadily growing net sales. Since the International Council of Shopping Centers, forecasts that many chain stores will need to increase their annual revenue 2-3% to remain competitive in today’s market, the choices that Best Buy makes will be detrimental to the success of the company in coming years.
Recently, Best Buy’s major competitor, Circuit City, acquired another company named InterTAN which increased its store volume in Canada to more than 8 times the amount of Best Buy stores. In order to defend itself, Best Buy should look into opening new stores in the Canadian market and as an attack, it should take on a market development strategy to introduce appliances in its existing or newly added stores in Canada where they are currently not available. Appliance sales have been a constant 6% of Best Buy’s sales in the U.S. for several years. Since Circuit City does not have a market in appliances, this would be a good tactic to re-market the Best Buy brand to its Canadian market and increase its appliance sales, thereby increasing its annual net sales.
Staples, OfficeMax and Office Depot are direct competitors in home office products, office products, computers and technology. One of the most significant threats of these companies to Best Buy is that they are located in areas outside of the U.S. and Canada, where Best Buy is currently. Staples is the world’s largest office products companies with actual locations in 21 countries outside of the U.S. and Canada. Office Depot also serves 21 countries outside the U.S. but it serves these clients through its catalog and internet operations. OfficeMax has 931 stores in the 49 states, Puerto Rico, US Virgin Islands and Mexico. In order for Best Buy to remain competitive with these companies, it will need to branch out of its current demographic starting with its online operations. Currently, Best Buy has three online sites to service its customers, www.bestbuy.com for its U.S. customers and www.bestbuycanada.ca and www.futureshop.ca for its Canadian customers. If Best Buy were to add the countries serviced by its competitors: Puerto Rico, U.S. Virgin Islands, Mexico, and countries in South America, Europe and Asia to its online operations demographics it could increase sales and maintain its edge. Once a market has been created, a plan should be put in place to offer actual Best Buy locations in these areas.
Aside from the adding more stores and introducing new products to its Canadian market and creating a new market internationally, outside of the United States and Canada, Best Buy should continue to penetrate its current market in the U.S. since it constitutes most of its revenue from this market. Best Buy should also consider some cost-cutting initiatives which could include buying the leased distribution centers it has that services the U.S. divisions and finding an alternative shipping methods outside of the trucking service which is used to transport goods to store locations in Canada. Due to the rising costs of gas, another supplier may be a more beneficial option.