Best Buy storms Florida coast - opening new stores on state's West Coast

Discount Store News, Nov 4, 1996 by Pete Hisey

TAMPA, FLA. -- Best Buy invaded Florida's West Coast two weeks ago, opening four stores in Tampa, Brandon, Lakeland and Sarasota. They will be followed next year by several others: in Clearwater, St. Petersburg, Fort Myers and Naples.

The Company will open stores later this year in two new markets: Memphis, Tenn., and Tucson, Ariz. With three other fill-in units also due to open, the chain will end the year with 273 stores.

According to chairman Richard Schulze, the latest tinkering with the Best Buy store is aimed at boosting margins and hence profits. With one exception, a unit due later this year in the high-traffic Dadeland area near Miami, the chain is concentrating on more productive 45,000-sq.-ft. units at the expense of the more plush 58,000 Concept III stores.

The Tampa stores mark the first time that the entire new major appliance strategy has been in place (earlier openings contained most, but not all elements), but Schulze said that even so, appliance sales have shown the biggest gains storewide. "With five new brands and our new gourmet strategy, we see a lot of room for growth," Schulze said. "We're No. 4 in the nation in appliance sales and either first or second in most of our other categories. So we see plenty of growth potential in appliances."

Sales of high-margin extended service plans have also ballooned, increasing from barely measurable to nearly 2% of sales. According to Schulze, all Best Buy sales staff are now required to offer an ESP for any appropriate product.

"We wouldn't bother with a microwave oven or a boombox, but with camcorders, big screen TVs and PCs, we expect them to talk to the customer," he said. Follow-up telephone contact, conducted by the Gallup organization, queries consumers about the shopping experience, including whether or not they were offered a service contract.

Schulze denied industry reports that appliance sales staff have been put on a commission plan. "That would run counter to our overall strategy to be a low-pressure retailer," Schulze said. A team bonus plan has been put into effect, but that is true in all departments, Schulze noted. "If a department exceeds plan, there's an upside for everyone in the department."

The company is on a storewide mission to boost margins. In computers, the lowest-margin area in the store, the accent has been firmly moved away from leader pieces to fully featured, upscale CPUs like the new Toshiba, Sony and Fuji multimedia PCs with prices ranging up to $3,000, and margins well above the high single digits commanded by entry-level PCs.

More important, the company now emphasizes higher-margin peripherals, products like Iomega's Zip Drive or Play Inc.'s Snappy frame grabber. These products, as a rule, deliver margins in the high 20s or low 30s and are not subject to the rampant price-cutting common in the CPU and printer markets.

The company's upgrade and home installation center, according to regional manager, Southeast Richard Robokoff, "has taken off. Particularly the in-home setup service, where we teach new owners about their computers and make sure they're running perfectly."

Schulze noted that the upmarket move not only boosts margins, but also "mirrors our demographics. Our customers are on average 36 years old with a household income over $50,000; 41% are at least college graduates, and 48% are female. Entry and mid-line products are not a solution for these consumers."

The gourmet section, high lighted by Wolfgang Puck triply cookware and a wide variety of specialty food and cooking items, like flavored oils and vinegars, salsas, spices and the cryptic "taco spreader" utensil, is the most recent attempt to "mirror" Best Buy's demographics, but the company is also testing books, magazines and other product categories.

One major new effort in the upscale movement is in computer software.

The power aisle that runs up the right-hand side of the store used to be populated by dump bins filled with low-cost impulse items like $5 discontinued software, Post-It Notes, Back-to-School items like book covers and notebooks, and the like.

Today, that aisle features themed four-way roadblock displays merchandising the latest and hottest software--and particularly featuring the value bundles that are sweeping the industry. At the Tampa opening, one display held a two-pack of 7th Level's hit Monty Python games, Complete Waste of Time and Quest for the Holy Grail, priced at $59.99, and a similar pack from Broderbund featuring Myst and the new mystery title, In the 1st Degree, priced at just $5 more than the stand-alone version of Myst.

Further up the aisle, bargain graphics bundles from publishers like Corel took over from games, and still further, the accent shifted to kid's educational titles and general family special-interest titles.

Overall, the presentation in software has been greatly improved, with the mix edited to accentuate hot new games and kids' educational titles. Utilities and reference titles, which had formerly occupied prime real estate at the front of the department, have been moved to less auspicious locations in the middle of the department, away from the power aisle.