Best Buy's credo: better is best: serves up gourmet fare - upscaling for discount retailer

Discount Store News, May 20, 1996 by Teresa Andreoli

MINNEAPOLIS - Upscaling - it's not just struggling regionals anymore. Even Best B the country's second largest CE/computer/appliance store, has opted to better its assortment in order to better serve its better-paid better-educated core customer. And the success of high-end stores during the Christmas season is anything to judge by, the chain may be on-trend in-offering higher-quality goods to consumers who are willing to pay extra for the added value.

During the grand opening of five Philadelphia-area stores earlier this month, Best Buy unveiled its Gourmet kitchen needs area. The at-times pricey, thicker-margin category brings add-on sales to its recently expanded major appliance department. The chain has also added an exclusive line of ultra high-end loudspeakers called Eosone.

"We have above-normal demographics," said Richard Schulze, chairman and ceo of the 257-unit chain. The typical customer is 36 years old and part of a household earning $50,000 annually. Best Buy appeals to both genders (53% male, 47% female) and 41% of its shoppers hold a college or postgraduate degree.

"We want to enrich our product assortment and align our mix with what our customer wants to buy - higher-performing or more highly preferred brands," Schulze told DSN.

The opening in Philadelphia, Best Buy's newest market (which it entered with one unit last fall), jump-starts chainwide rollout of Gourmet, scheduled for June. Four of the five just-opened units are 58,000 sq.. ft. (one is 45,000 sq. ft.), similar to the chain's Concept III prototype, although these units have no kiosks. It intends to open eight more units in the market during the next 18 months.

The Gourmet kitchen department stocks upstairs brands such as Cuisinart's nine-piece non-stick cookware set at $319.99, DeLonghi's convection toaster oven at $159.99, a cobalt blue Versailles frying pan from T-Fal at $39.99 and Toastmaster's wide-slot hunter green toaster at $27.95.

Also seen in abundance: nonperishable foods and condiments, such as Kari Lee's Country Mix chewy chocolate chip cookie mix at $3.99 for a 16.5-oz. bag, Thai Kitchen barbecue sauce at $3.79 and pastas and jams. Specialty products are organized into four categories: Asian, Southwestern, Italian and "breakfast" (such as pancake mixes and jams).

The company tooted the Gourmet concept in March in a suburban St. Paul, Minn., store. The category as a whole carries margins in the low to mid 30% range, as opposed to 6% to 9% for computers, the high teens for appliances and the 13% average for the entire store.

The high-end cookware, small appliances, housewares and specialty nonperishable foods sit on black wire shelving above washers, ovens and dishwashers. Formica-looking fixtures separate the white goods, adding a kitchen-like appearance to the displays and eliminating the monotonous "wall of white" that a row of shoulder-to-shoulder major appliances can form.

Best Buy began its white goods, expansion late last month, and the new stores included General Electric, Hotpoint, GE, Profile, Amana and Tappan brands, all new to the chain. With the Gourmet area strategically positioned literally right above white goods, Best Buy is making a more pronounced kitchen and home; goods statement. Best Buy hopes to bring its major appliances sales up to $800 million last year's $500 million volume.

Another area of the store feeling a pull toward higher-price, higher-end product is loudspeakers. The Philadelphia openings marked the debut in Best Buy of Eosone speakers. Exclusive to the chain, the brand was designed by Arnie Nudell, president of Genesis (the company that makes $90,000, 7-ft. tall, 4,000-watt speakers). Best Buy's Eosone models range from a $249 channel speaker to a $1,099 left-and-right tower with a built-in powered subwoofer.