News of Best Buy’s UK launch has caused a storm, but will it really transform electricals retailing? Joanna Perry speaks to Best Buy chief Bob Willett about how it plans to replicate its US success.
A particularly vicious-looking dinosaur dominated the final presentation slide when Best Buy International chief executive Bob Willett addressed a room full of UK retailers a few weeks ago. His point was that if retailers do not stay relevant to their customers, their businesses won’t last.
In the UK again last week, the near 40-year retail veteran was looking at potential store locations for Best Buy’s planned UK debut in spring next year. Retail Week caught up with him to find out how Best Buy plans to prey on its competitors’ market share and if he is ready for his rivals to bite back.
So far, Best Buy’s growth has been relentless, thanks to a business model and culture that have kept it growing through tough retail conditions in North America. In Canada alone, the company has 37 per cent market share and the Best Buy fascia has gained 11 per cent of the market in the past four years.
But Willett is at pains not to sound complacent. He says: “I’m not arrogant enough to believe that going into another market is easy. Three years ago we did a huge piece of research on retailers that had gone global. We wanted to make sure that we learnt from their mistakes.”
Best Buy believes that its inverted structure – termed “customer centricity” – puts the customer at the top and people like Willett at the bottom, is one of the reasons for its success. So to understand why Best Buy thinks it can succeed in the UK, it is essential to examine how it approaches its potential customers and how well it knows them.
Willett explains that Best Buy’s strategy includes trying to get under the skin of customers and competitors before it enters any market; the retailer has two years’ research on the UK. That research is ongoing. In particular, it has ramped up work with Tesco Clubcard operator Dunnhumby to ensure Best Buy understands what its competitors provide and what customers really want.
Like Tesco, Best Buy is big on customer segmentation and in the US business decisions are made with five customer profiles in mind.
Willett will not be drawn on where the first Best Buy stores will open in the UK, but says that the sites are being chosen specifically to target the customer groups identified in the segmentation exercise.
However, don’t be surprised if the slated spring opening is pushed back. He says: “This isn’t a race to get a store open – it is a race to get a store open that exceeds customers’ expectations. I delayed the opening of our China store on three occasions to make sure that I got it right.”
Servicing the UK
Despite the downturn in the global economy, the retailer is convinced that a rigorous focus on adding value to simple product sales through service is the right model. Willett says: “I believe that the UK consumer is crying out for service.”
Best Buy has identified a global trend in customer demand and expectations and Willett says a tipping point has been reached. In research with customers in every country it operates in, Best Buy has discovered that customer service and the customer experience has become more important than price and convenience.
He says that the balance of power has moved squarely to the customer thanks to the web. “Consumers are demanding much higher levels of service, whether online, from a call centre or in stores. If you don’t exceed their expectations, you won’t increase your operating profit.”
For instance, Willett says that Best Buy wants to teach customers the rudiments of how to use the products they buy before they leave the store. He also plans to expand the services offered by the Geek Squad to include TVs and mobile phones, as well as push the idea of signing customers up to a monthly service that gives them access to a named “geek”.
Moving down the pyramid to staff, he says that Best Buy wants to be the number one place to work, as well as the number one place to shop.
Best Buy does not pay its staff commission in the US and this seems likely to be the case when it opens here. Willett says of US staff: “They have incentives and rewards, but we want to pay them to do what is best for the customer.”
Carphone Warehouse, now part-owned by Best Buy, has also just taken the decision to axe commission in favour of higher basic wages in an effort to improve customer service and team work (Retail Week, August 8).
Best Buy store staff are also given the freedom to make decisions and Willett says that it is the job of management to break down barriers that prevent them from serving customers better. He insists that he genuinely means this and it is not something that Best Buy only does superficially. For instance, in Best Buy stores, although there are centrally driven promotions, managers also have the freedom to create their own special offers.
Managers are regularly scored by their staff on a scale of one to five; those who score below a four are given short shrift. Staff are also encouraged to make suggestions and Willett says that the retailer’s 167,000 “blue shirts” – so called because of their uniforms – come forward with ideas. As he puts it: “Very few good ideas come from boardrooms.”
One example of this would be Best Buy’s return to selling musical instruments in the US. He says that the idea to test the category in some US stores came from employee feedback that Best Buy was getting lots of requests from customers.
Rallying the disenchanted
On the subject of where blue shirts might be drawn from for the UK stores, it sounds as though Willett is interested in poaching disenchanted staff from his UK competitors. He says: “People don’t leave jobs for money, but because of frustration.”
He is dismissive of the idea that staff working for competitors at present will have a poor customer service culture too ingrained in them to become blue shirts. “I don’t think that there is such a thing as bad soldiers, but there are bad officers,” he says.
Closely tied to the service and experience that staff will help to create is Best Buy’s multichannel proposition. The retailer commissioned research from several consultancies that found there was a close alignment between retailers’ web site performance and their brand value. It believes that the web will be an even more important part of the multichannel mix in the UK than it is in North America, with 17 per cent of sales of the type of product it stocks generated online in Europe, compared with less than 10 per cent in the US.
Best Buy will launch a UK e-commerce site, Bestbuy.co.uk, which appears to be under construction, and the retailer is inviting customers to register their e-mail addresses and receive updates at present.
Finally, Willett asserts that Best Buy is different because of its willingness to develop private-label goods. Its Insignia brand, for example, is the biggest selling TV brand in the world. The retailer will bring all its private-label brands – which account for 12.5 per cent of the retailer’s total sales of US$40 billion (£21.44 billion) – to UK stores.
However, in the spirit of customer choice, although the company has an agreement to supply Carphone’s Talk Talk service, Best Buy will provide broadband services from other suppliers if customers demand them.
All of this, according to Willett, means that when the retailer launches in the UK it will be uniquely positioned in the market. He says that John Lewis is the only other retailer with a proposition even close to its own. However, it will be Tesco that he watches the closest. He believes the grocer is the finest retailer in the world and the competitor he is most worried about.
Willett will not discuss the poor customer experience that many argue is common to some consumer electronics retailers in the UK, but says that any improvements retailers make in anticipation of Best Buy’s arrival will be good for everyone.
Despite being a newcomer to the UK, Best Buy is unlikely to push the boat out on advertising its launch. “We are not big on media spend,” says Willett. “I want to spend it where it matters – on employees.” He thinks shoppers will come to his stores because they are curious and come back for the service.
He finishes by saying that he hates doing interviews about plans and would rather be judged on results. Even then, in the short term he is more concerned with what customers and staff say, because if that’s positive then the required financial results will follow.
Some seasoned retail watchers are sceptical that Best Buy can transform the UK consumer electronics sector. But in the same week Willett was interviewed, Vodafone announced a massive customer service push and Comet revealed a new-look web site with service at its heart.
Best Buy’s UK launch may not drive its competitors to extinction, but it seems likely it could speed up their evolution.