Best Buy bullish on new store format

DSN Retailing Today, May 23, 2005 by Laura Heller

Not satisfied being the No. 1 consumer electronics retailer, Best Buy has continued to explore ways to increase market share, attract new customers, build higher-margin services and create store concepts that will effectively build a network of complementary store formats.

Best Buy's Customer Centricity program features most prominently in the retailer's quest to remain ahead of its competition. The effort defines key customer segments, identifies those segments served by individual locations and remerchandises those stores to better reflect this customer base while more fully empowering store-level employees to make changes and launch initiatives.

Barry, Buzz, Ray and Jill, as the customer segments are called, have gotten a lot of attention in the press with Wall Street originally viewing the efforts with skepticism. But Best Buy soldiered on and this spring announced plans to expand the program after the 67 centricity test stores produced overall comp-store gains more than three times that of the rest of the chain.

"We believe so deeply in this transformation that we are going to accelerate it in [the current fiscal year]," said Best Buy ceo, Brad Anderson. "We are planning for all of our U.S. Best Buy stores to convert to our customer centric operating model within three years."

The retailer also is expanding its efforts to woo small businesses, launching Best Buy for Business departments in some stores, rolling out the Geek Squad home computer repair service to all stores, opening five standalone Geek Squad stores to exclusively serve small-business customers and last month announced plans for 20 to 50 additional units in the next 12 to 18 months.

Then there are the Studio D and Escape store concepts located in or near Chicago, each designed to serve specific markets with technology-related concepts. Studio D focuses on the female market with an intensified focus on service and instruction. Escape caters to techies with cutting-edge gadgets and hot new imports.

Another concept, Eq life, emphasizes pharmacy, health and beauty care may seem the farthest stretch for the retailer, but it also shows Best Buy's willingness to take chances in the pursuit of new growth prospects.

BEST BUY CO.

2004 SALES*: $27.4 billion

NUMBER OF STORES: 668 Best Buy (U.S.), 20 Magnolia Audio Video stores, 114 Future Shop stores, 30 Best Buy (Canada)

Source: Company reports * For fiscal year ended Feb. 26, 2005