Companies that once crippled the US electronics distribution industry, such as Circuit City, Radio Shack, and HH Gregg, disappeared. Share prices were halved by a huge online retailer called Amazon, which had to endure bankruptcy and shut down. But ‘Best Buy’ survived. Even steady sales growth.
Best Buy is the world’s largest electronics retailer. It started as an audio store named ‘Sound of Music’ in 1966 and now sells various electronic devices such as PCs, mobile phones, and DVDs. It has grown to become a global company, taking up about 25% of the US electronics market and entering Mexico, Canada, China and the UK. As a retailer of electronics, he has spent more than 40 years at the top.
However, the perception of the distribution industry began around 2010. With the advent of smart devices, the line between offline and online has been broken down, and traditional offline-based retailers have collapsed. Circuit City, the No. 2 electronics retailer in the United States, went out of business in 2009, and Radio Dunes, which had endured to the end, filed for bankruptcy in 2015.
The same was true for Best Buy, the industry’s number one. Revenue has declined since 2010, reaching $ 49.6 billion (about 60 trillion won), down nearly 30 percent to $ 35 billion (about 42 trillion won). However, in 2014, the company recovered its sales of about 40 billion dollars (about 48 trillion won) and last year, it recorded a rapid recovery rate with sales of 43.8 billion dollars (about 51. trillion won). How did Best Buy recover?
When electronics retailers began closing in the late 2000s, Wall Street predicted the fall of Best Buy. 40 years of tradition, titles as the world’s number one electronics distributor, was also useless. Quarterly net profit plunged 90% as well as sales, and 2012 shares hit their lowest in nine years. When Amazon’s stock rose 3%, Best Buy’s stock fell 5%.
The US media reported that it is only a matter of time before Best Buy falls, while credit rating agencies such as S & P have lowered Best Buy’s rating, and Wall Street has a Neutral rating on Best Buy. In addition, Brian Dunn’s female affair scandal, which was regarded as the chief executive officer of high school salesperson myth at the time, was added to the image hit.
In the meantime, Best Buy seated Hubert Joly, CEO of the hotel division of Carlson Kos, a holding company. Taking advantage of his experience at the consulting firm McKinsey & Company, the company has cut costs and drastic management strategies.
He was the first to hear from employees. Immediately after his appointment, he visited the site, not the office, to see what was happening at the store and to see what the employees were dissatisfied with. The biggest problem was the operating system. Inventory management was a mess, and employee discounts were suspended. Hubert immediately improved its inventory search engine and revived employee discounts to boost morale. As it sells electronic devices, the company also trained employees on cutting-edge technology to improve their understanding of the device. Based on this, the company also introduced the ‘geek squad’, a consulting service that analyzes consumer’s purchase tendency and product purchase history, and recommends devices in the home.
Since then he has changed the price. Revenue and net profit were on the downswing, but lowering prices is a top priority to compete with Amazon. At the time, Amazon’s price competitiveness was so superior that it was written ‘Best Buy, Order from Amazon’, and Best Buy implemented a ‘low price compensation system’ at the same price as ‘Amazon’. The electronics have struck the minds of consumers who buy offline if there is no price difference between online and online.
** Make the Disadvantage Advantage **
Best Buy’s net profit will be low even if it sticks to the same pricing policy as Amazon. Since there were over 1000 stores all over the United States, ‘store maintenance costs’ such as rent and maintenance costs are paid out. One of the reasons that Circuit City and Radio 쉑 could not afford low prices was because of these costs.
However, Hubert sought to shut down underperforming stores but sublimate offline stores. Seventy percent of Americans could reach Best Buy within 15 miles. I decided to use this.
That’s why we overturned the way we operated our store. In the past, electronic devices were brought together in a way that resembled the market and operated by ‘knowing, seeing and judging’. However, the department started to change the best buy like a department store by focusing on operating the stores that used each brand. Partnering with large companies to run their own brand zone in stores. In 2013, the company established a partnership with Samsung and Microsoft, establishing a ‘store in store’ in partnership with Sony in 2014 and Intel, Dell, and Dyson in 2017.
The offline reinforcement strategy was successful. In addition to exceeding the expectations of Wall Street in 2013, the company recorded a surprise performance every year. Since 2017, the share price has been the highest in 10 years and the highest in 16 years. Revenue per store is also on the rise, as the power of offline stores is showing.
It was also recognized by Amazon, a rival in recent years, as a winning store for offline stores. Amazon CEO Jeff Wedgers praises Best Buy for “their business strategy has a lot to learn.” Jeff Wedgers even joined hands with Best Buy. Last year, Amazon decided to sell smart TV models equipped with Amazon’s Fire TV (streaming set-top box) at Beitby offline stores and websites, and Best Buy decided to exclusively supply 11 smart TVs to Amazon.