Best Buy heads to West Coast; Concept III prototype to debut in Los Angeles - Los Angeles, California

Discount Store News, June 6, 1994

EDEN PRAIRIE, MINN. - Best Buy's on-again, off-again invasion of the Lost Angeles market is on. The chain will debut six to eight megastores, including the first of its long-anticipated Concept III interactive units, in the fourth quarter.

The CE chain has already signed leases for prime locations in Mission Viejo and on the Pacific Coast Highway in Hawthorne, and has several other sites close to signing. Long-term, Best Buy plans about 30 megastores in the market, with perhaps 15 to 20 set to debut by end of 1995.

According to senior vp, West region Ken Weller, the market is a key one for Best Buy. At more than $3 billion in annual consumer electronics sales (due for a boost in post-earthquake replacement buying), Los Angeles is the largest single market in the country, revaled only by metro New York. Unlike New York, however, Best Buy will not run into entrenched and powerful local competitors.

"Los Angeles is overstored in traditional consumer electronics outlets like Adray's and LA Tronics," Weller said. But there has been a significant paradigm shift in recent years, and there is very little megastore competition." The exit of Silo, most of whose stores remain unconverted by purchaser Circuit City, will probably play into Best Buy's hands, leaving roughly $60 million in existing sales up for grabs.

Best Buy's strategy will not vary markedly from its past invasions of Chicago and Atlanta, the Best Buy markets mist comparable to Los Angeles. "The first 12 or 15 sites will be stand-alone or strip mall locations directly off freeways with high visibility," Weller said. That way, the stores act as their own billboards, at least partially offsetting Los Angeles' notoriously high cost of advertising. "We'll leverage our locations as much as possible to keep costs and prices down," Weller said.

Real estate is also far more expensive in the market than in most other U.S. metro areas, Weller said, but Best Buy hopes larger and more productive stores will make up for higher site costs.

And the stores will be larger. Most will approach the 60,000-sq.-ft. range, compared to about 45,000 sq. ft. at larger stores today and 36,000 sq. ft. chainwide, with 250 parking slots, up from 160 or so at present. The new Concept III stores will, Weller said, continue the trend of "putting the customer in control. Concept II put the product on the floor, and Concept III will bring product information out onto the floor."

There will be "less interaction with sales staff" if the customer so chooses, he said. The goal is to present enough information so that the customer can make an informed choice without talking to a single person in the store. Presumably the store will involve higher-tech, interactive fixtures to provide in-depth information. Signage and POP material will probably be expanded, and Best Buy also plans to step up customer workshops and vendor-run seminars, inexpensive or free training classes, and other services aimed at binding customers closer to the store.

Another major element of Concept III will be a broadening of Best Buy's assortment to address the upper-end consumer. The addition of audiophile-level brands, high-end laptop and desktop computers, and advanced video products could differentiate Best Buy from its mass market competitors while stealing some of the thunder of the high-end boutiques that have prospered by avoiding mass brands.

Best Buy also plans to micromarket more, Weller said. "While most consumer electronics products are pretty much the same from market to market, there are still opportunities," he noted. Among them: recruitment of Asian and Mexican employees and managers to better reflect the ethnic makeup of the market, fine-tuning music and video selections, and customizing advertising campaigns.

The company will hit the ground running, Weller noted. Store managers with extensive knowledge of the market were recruited kin Los Angeles Last July, then trained in Phoenix. Weller himself was recruited from The Good Guys, which along with Circuit City will be Best Buy's major competition in California.

But Best Buy's major advantage Weller said, remains its box. "I'd like to say that our management or staff is infinitely better than the competition's but it's really the format," he noted. "We put the customer in control." He added that the decision to deemphasize extended service contracts also played a key role, forcing Best Buy to concentrate on its core business rather than simply reaping the easy money service contracts offer. "Deemphasizing them played a large part in turning control of the purchasing process over to the consumer."