Not everyone is convinced Best Buy Europe’s big-box stores in the UK will be a success, but the retailer insists the market is missing the bigger picture. By George MacDonald

While the US has often been a graveyard for the expansion ambitions of UK store groups, one British retailer’s American business is going like a train.

That’s Best Buy Mobile, the chain in which Best Buy Europe – itself a joint venture between the eponymous US electricals giant and Carphone Warehouse – has a share of the profits.

“When people look at the business and focus on the big-box stores they kind of miss the point.”

Andrew Harrison, Best Buy Europe

This year Best Buy Mobile is expected to make between £90m and £100m – at the top end of guidance – after delivering another quarter of strong connections growth.

But while there are no arguments about the success of the US venture, the fortunes of Best Buy Europe’s big-box stores in the UK have prompted differences of opinion.

The small number of shops open so far – eight are trading at present and another three open over the summer – compared with the higher numbers originally talked about, and the surprise departures of many of the directors who launched the first few are among the factors that have made the success or otherwise of the big-boxes a constant source of speculation among electricals retailers.

Blue box thinking

The constant debate about the merits of the big blue sheds exasperates Andrew Harrison, the Carphone Warehouse veteran who became chief executive of Best Buy Europe in February.

Partly it’s a case of not seeing the wood for the trees, he thinks. The big boxes, important as they may be, are only one element of the Best Buy Europe business, which also includes Carphone Warehouse – on track to increase EBIT this year by between 15% and 20% – and Phone House shops in Europe. Altogether there are 2,453 stores.

All the fascias are united in their appeal to consumers taking advantage of the opportunities opened up by digital communications and technology – what the retailer labels ‘the connected world’, which is also a Carphone store model carrying a wider product range than its traditional shops.

Pointing to that variety of ways in which Best Buy Europe caters for customers, Harrison says: “When people look at the business and focus on the big-box stores they kind of miss the point.”

And the influence of Best Buy extends far beyond the eponymous shops, says Harrison. It is evident in the extended ranges in Carphone’s wireless world-format stores – of which there are 106 at present and will be 400 by the end of this financial year – in the ambience, the presence of Geek Squad troubleshooters, how product is displayed and the shift away from commission-based selling.

 “There’s a combination of ways you can go to market and speeds that you can go to market,” says Harrison. “We think, despite what people might say, we’ve had quite a significant impact in the marketplace.

“We’re keen to go at our own pace in our own way to make sure we get this right. We believe we build it through the unique things we bring: we’re part of the largest consumer electronics retailer in the world, we have great customer insight in terms of how to build propositions, we have a phenomenal asset in the Geek Squad and as a combination of our stores, big or small, we have more than our two biggest competitors in the UK put together. That’s the way we like to look at it.”

Harrison downplays the senior management churn. “The whole people thing is slightly misinterpreted,” he maintains, adding: “I don’t think we get the credit for the amount of effort it takes to open up something like this from scratch.”

He explains: “It would have been very easy for Best Buy to buy an incumbent retailer but it chose to build up from the ground, to build its own IT system, its own supply chain, to recruit all the people, because it wanted to do it in the right way.

“That takes time, it takes people and it takes resource. Once you’ve got that business up and running you’re into a different phase and you need to look at how you’re joined up in doing things and sharing your resource.”

Boxed in

Ahead of a strategic update next month, Harrison is non-committal about the extent to which there may be more big-box openings. “We have only committed to 11 stores,” he says. “It doesn’t mean we can’t and won’t have negotiations about others.

Fourth-quarter facts

  • Carphone Warehouse Europe like-for-likes down 1.7%
  • Carphone Warehouse full-year like-for-likes up 0.9% and EBIT to rise by between 15% and 20%
  • Best Buy Mobile US connections up 25.9%
  • Best Buy Mobile US full-year profits to be between £90m and £100m
  • Best Buy UK “delivering high levels of customer satisfaction across our big-box stores and online platform”

“I am 60-something days into my job. Part of what I’ve been doing is taking stock and reviewing where we’re up to on all fronts, and what I think the strategy is going forward. We’ll evolve the business in the way that’s best.

“In this environment, why do I need to rush? Everyone around us seems
to be having their own questions about what their strategy is. We’re in a
fortunate position of having a blank piece of paper and being able to pick our time.”

He refuses to be drawn on the likely conclusions of the review other than to say: “It will give a flavour of where
we see the future of all our business, and hopefully answer some of the questions people have about where we want to go and how we are going to achieve our plan of the connected world.”

Harrison is excited about the opportunities for the smaller stores and the connected world model, again drawing attention to the benefits of linking with Best Buy. While the latter’s big shops are focused on technology in the home, Carphone’s strength is technology for use “on the go”.

The rise of smartphones and tablet computers is a dynamic bringing big commercial benefits as a result of convergence – the consolidation in a single device of things that a decade ago would have been separate – camera, phone, entertainment for instance.

“The reason I am excited is that 10 years ago we could never have sold maps in our stores,” he says. “We could never have sold CDs. Now we can have a conversation with customers about a navigation or music subscription.

“We’ve worked hard to bring the connected world alive and create environments where we talk to people about all the things they need from these devices, whether it’s the handsets, the accessories, the content and services, extra disk storage or cloud storage to 24-hour technical support.”

It is a move on from the original incarnation of Carphone, which Harrison compares to a traditional travel agent where “what’s on display is for reference”, and has demanded a shift in focus reflected in the recruitment of former Marks & Spencer man Matt Stringer last year to run the Carphone UK business.

“We have had to evolve more into a retail business,” Harrison says. “That’s why I brought in a retailer to head it. What you see from the way we have evolved the wireless stores is it looks more like a retail store than a place where you can fit four sales consultants.”

Role of the store

Despite selling so many of the products that are helping online retail grow at the expense of some traditional retailers and channels, Harrison has no doubt that stores will continue to have a pivotal role.

“While it’s easy to deliver products through just an online experience, the connected world is much more of a multichannel experience and the need for retail and a physical space is really important,” he says. 

As part of its multichannel operations, Best Buy Europe is an investor – along with Carphone founder Charles Dunstone, former M&S chairman Sir Stuart Rose and payments firm Monitise – in Mobile Money Network, which will enable consumers to make purchases while on the go and without the need to log onto apps and websites or enter multiple card details.

“It’s not really based around the interests of Best Buy or Carphone, it’s more about how we can get the industry to move to a much more standard platform that can stand on its own against some of the online retailers,” says Harrison.

He is referring to the threat posed by online giant Amazon, whose diversity of product categories and ability to store customers’ details makes it a powerful default option for mobile shoppers at present.

He expects the first Mobile Money Network product, Simply Tap, to go live this summer and to be able to reveal the venture’s first retail and media partners in the next few weeks. “What we’re trying to provide is something very easy for all retailers to join if they want to – it’s being well supported by the retail industry,” he says.

Wireless world

Other priorities for Harrison since taking the helm have been to enhance the European business. He has changed the management structure to better enable flexibility in customer-facing operations – reflecting differences in culture and consumer preferences – while making the most of shared systems and strengths behind the scenes. Harrison says he is looking forward to ramping up development of the wireless world model in Europe.

And after that it sounds as if other international opportunities are likely to be exploited. “The US business has been a huge success,” Harrison says. “Are there other opportunities globally for what we do within mobile phones? There are great opportunities in the Best Buy family in China and further afield. The ‘world’ bit of connected world is very important to us.”

While the focus from the outside world may be on the fledgling big-box business in the UK, Harrison clearly sees that as just one point of connection with consumers as part of a much bigger network.