The master of calculated risks

Discount Store News, Dec 8, 1997 by Laura Heller

Michael London is a cautious man. His method of doing business results from years of experience and a studied approach to merchandising.

He thoroughly analyzes categories and profitability, shops the competition and carefully plots his course.

In truth, though, London is no stranger to taking chances. With barely a year's tenure at Best Buy Co., he has certainly made some radical changes in the store's product mix and positioning.

London joined Best Buy as vp of general merchandise during a period of transition for the company. Lagging CE sales, minuscule margins on computers and poor ratings from Wall Street all created an atmosphere of uncertainty about Best Buy's future.

"I gave Best Buy more credit [than the skeptics] that it would be a survivor," London told DSN. "There were more challenges, but we also understood that. We didn't bury our heads in the sand. We said, `Okay, what are we going to do to change the way we operate?"

Not to back away from a challenge, London joined the company and immediately went to work learning the operations and familiarizing himself as quickly as possible with the format's strengths and weaknesses.

With more than 24 years of retail marketing experience, London knows the territory. Most recently, he held the position of executive vp of retail and commercial sales for NordicTrack and executive vp for Central Tractor Farm & Country.

But the bulk of his experience was gained during a 22-year stint with Lechmere, where he ultimately held the title of senior vp and general marketing manager.

Luckily, claimed London, he had experience with hard lines, and his background with Lechmere lends itself well to Best Buy.

"I had a pretty well-base background," London said. "Lechmere was a very organized and process-driven business. I understand the sense of urgency."

Making the jump from a small chain to a large-scale operation has presented some challenges of its own, "The biggest challenge was learning the operations," London said. He was given certain categories, assessed performance and then got right down to the job of making Best Buy stores more profitable and perhaps more relevant in today's market.

Best Buy is just now coming out of a period of intense change -- change brought about from within. The company took a long, hard look at operating procedures, streamlined inventory, tightened expenses and slowed expansion and store openings.

It also reworked its merchandising, paring down product offerings in some categories while at the same time branching out and expanding into others.

As a result, Best Buy stores look significantly different today than before London's arrival, and the financial outlook is brighter as well.

There is a hefty stack of folders on London's desk, which represent new projects he spearheaded during 1997. And each folder instigated a significant shift in Best Buy's product mix.

In perhaps the most dramatic of these changes, London took a closer look at the store's CD selection and discovered that Best Buy could afford to lose approximately 20,000 skus in its larger stores -- a bold move for a company that has built a reputation on its low-priced music selection and practically set industry standards in regard to CD sales.

But in fact, not only could Best Buy afford to pare down its CD inventory by getting rid of slow turning items, early indications are that overall profits in the music category have actually increased.

London filled the vacated space with several categories new to the company.

Books and magazines now occupy the bulk of the space left by CDs. A new center for digital and satellite system displays high-end, state-of-the art digital technology through which the company hopes to build a high-margin business focused on emerging technologies.

In addition, in the newly created space sits exercise equipment, a category considered to be more of a stretch than digital cameras but one which London believes can offer good margins and appeal to Best Buy's customer base.

Ever cautious, London points out that fitness equipment has a high degree of seasonality. The products are in Best Buy's larger stores and will remain there through the holiday selling season. After that, profitability will be examined.

This typifies London's try-it-and-see-if-it-works merchandising style. He is currently testing three different products in various Best Buy locations, just to see how they fly. Electronic dart boards, electric toy cars and greeting cards -- London's pet projects -- can be found scattered throughout Best Buy stores.

He has expanded Best Buy's selection of RTA furniture, offering a wider selection of home office furniture and entertainment centers that align nicely with the store's burgeoning home theater business.

DVD has flourished during London's tenure. Best Buy's interactive DVD display and strong merchandising of DVD software has propelled it to be the early leader in sales for the new technology for both hardware and software.

All this in just one year.

"In any given day, we probably have 15 to 20 merchandising projects we're trying to implement, both big and small," London said.