With a dwindling market share and increasingly public PR fiascoes, electronics mega-chain Best Buy has seen better days. And after the publication of a lengthy Forbes article detailing the ways in which the retailer is its own worst enemy, some have begun the countdown clock until the boys in blue go bankrupt. We would normally expect Best Buy to treat the Forbes piece the same way they would a complaining customer — by looking the other way and going on a smoke break in the back parking lot. But the CEO of Best Buy must have realized that shareholders know how to use the internet, because he’s gone online to respond to the haters.
“As CEO, I know that criticism goes with the job,” writes CEO Brian Dunn, “and I’m well aware we have some challenges. I also know that errors we make often translate into a poor experience for our customers, and that is simply unacceptable.”
Dunn first goes through the criticisms he feels are deserved:
The cancellation of some internet orders just before Christmas was our fault, and it’s not representative of how we EVER want to treat our customers. I’ll spare you the technical explanation of how and why it happened, but we know we did not deliver a good experience and we’re truly sorry. We’ve worked to make amends with customers whose holidays were made less happy because of our mistake, and we’re working diligently to make sure it doesn’t happen again.
[W]e need to move even faster, particularly in creating a more seamless experience between our stores, web sites, call centers and services teams. We recognize people can and do shop from anywhere, and they expect thoughtful, helpful interactions from us every step of the way. We continue to invest in a number of areas — from employee training, to critical system enhancements — to ensure our customers always receive the kind of experience they deserve and expect from us, wherever and whenever they choose. But, simply put, that work needs to happen faster — and we’re taking significant steps to accelerate the pace.
Hey Brian… on the whole Christmas cancellation thing: Don’t spare us. We’d actually like to know how and why this debacle occurred. Going public with the source of your screw-ups might actually improve your image.
Moving on, BD then takes issue with the things where he thinks the critics are mistaken:
First, some believe the internet has made physical retailing (i.e., stores) irrelevant. There’s no doubt that the internet, and the mobile web in particular, have changed the way people shop, but there is strong evidence that consumers continue to value the experience of shopping in stores. A recent study by the NPD Group, a leading market research company, notes that nearly 80% of consumer electronics revenue still moves through physical stores. Additionally, approximately 40% of customer purchases made through Bestbuy.com are picked up in one of our stores. And the truth is, traffic in our physical stores increased in our third quarter and has been trending positively for most of the year.
Finally, there are those who question the validity of Best Buy’s business model. This misguided perspective is especially troubling for me, because it blatantly and recklessly ignores overwhelming evidence to the contrary. Best Buy is a financially strong and profitable company that has generated more than $2.6 billion in cash flows from operating activities in the first three quarters of the fiscal year. We also delivered positive operating income in each of the first three quarters of fiscal 2012. We grew total market share in the third quarter according to the most recent public data available. We have closed down certain operations that were not profitable, which we expect to have a positive impact on our earnings going forward. And we are focusing the company on areas where we see the greatest opportunities for growth and profit: mobile devices and connection plans; enhanced digital and e-commerce strategies; growth in our services business; and expansion of our established business in China.
So there you have it, straight from the Chief Geek.
My Thoughts on Best Buy’s Recent Media Coverage [Brian's Whiteboard]
Thanks to Keith for the tip!
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Best buy is not going bankrupt. There is still high demand for being able to get electronics instantly without shipping wait, and also to be able to touch and explore devices before purchase. Best buy is a terrible place to shop, but other places that died were even worse like circuit city. And a lot of people are too dumb to know what to get ordering online anyways, they need a sales person to talk to. Best buy is a lot like walmart, as bad as the places are people can’t resist shopping there.
Last time I was in a Worst Buymore was when it used to be a Circuit City about 5 years ago. Flat screens from newegg.com, walmart.com and Costco and bought with Credit Cards that double the manufacturers warranty to that given with Costco to 2 years total. Currently waiting for a reciever that I had initially ordered on walmart.com and canceled after finding it on newegg.com for $80 less. Actually had 2 walmart.com’s that were site to store that I cancelled after the second had arrived (first unit had only 3 HDMI inputs and needed 4). Walmart makes it very easy to cancel ship to store with the order and return barcodes, requiring only a couple minutes of employee time to complete.
It doesn’t take a rocket scientist to figure out the whole Christmas thing.
They book orders and take orders based on proposed inventory which is from vendors. Effectively overbooking for things not actually in stock but in their order chain. When the vendors or shippers fail to deliver, that pushes everything back.
This is one of the failings of the newest version of “just in time” inventory management using centralized drop shipping.
Example:
Best Buy lists an XYZ TV on its website for sale. If you order the TV, Best Buy will actually drop ship it from the ABC mfg facility. Best Buy has an XYZ TV on order from ABC company. ABC company says it can fill the order in 7 days as the TV is on the line and near completion. There is a power outage at ABC companies mfg facility or a parts problem so it is delayed, and in turn your order is delayed.
It’s a problem with the fact that Best Buy sells things it actually doesn’t have in its possession and relies on its vendors to set the schedule for its delivery. It is also why you save some money, less shipping, less initial cost.
“Traffic in our physical stores increased in our third quarter…”
The shareholders only care about profit. Fooling people into your stores with door crasher specials where you only have one or two of the items will only eat into your customer confidence even more.
I always feel that the BB employees are like the door to door religious types. They know that they are doing something wrong but they haven’t yet quite figured it out yet. They try their upsells to avoid an arbitrary wrath but until they finally quit they sort of go along with it. Occasionally you find one who I think sadistically loves screwing people with extended warranties.
You know, hats off to him for two things: 1) He’s not afraid to say he’s sorry. How many CEOs out there can apologize when they fuck up? 2) He recognizes the reality of the business, and the impact online shopping has on retail stores. Now he just needs to figure out how to bring Best Buy stores up to date to keep up with the times.
I personally like Best Buy, but I actually do my homework before stepping foot into that store, and I walk out with what I want at a price I’m happy with, typically lower than retail. People buy on impulse because of the ads they see. This will burn you eventually, and rightfully so. They’re in sales, so of course they will want you to buy the $120 HDMI cable made by Monster Cable, but they don’t hold a gun to your head, forcing you to buy that cable.
Hey Brian: Fuck You.
This is the same kind of stuff that was being told to us right before Circuit City went under. I worked there right before it closed and our managers kept telling us things were fine, the company had loads of money in the bank, and cash flow was up. At the same time, everyone in the store that didn’t drink the CC KoolAid, knew that it was only a matter of time for it all to end.
Seeing this guy’s picture and reading his statements just serves to make me less inclined to shop at Best Buy. Clearly the man is clueless.
The key strengths of Best Buy IS their stores. It is a “store of last resort” and “a store for when I need something right now”. We know their prices are higher but that what we get for convenience.
I want to see Best Buy survive just for the window shopping experience alone, but I know that only buying stuff keeps companies in business, which I will refuse to do unless I have no other viable choices.
The shareholders and the board should demand better treatment of customers and employees for the sake of the long term health of their investment in Best Buy.
It is a fact that businesses that treat employees poorly tend to spend more on recruiting and training new employees than those that treat employees well. Also companies that treat their employees well have employees that tend to treat their customers just as well, which increases the likelihood of repeat customers. We also know that it costs many times more to get a new customer than to retain an existing customer.
Since Best Buy doesn’t seem to treat their employees all that well and their customers are treated far worse, these added costs can drain Best Buy dry if the CEO, Brian Dunn, is stupid enough to let it happen. From the looks of his response, apparently Dunn IS that stupid.
I would sentence Dunn to being an undercover boss for the next 6 months in every customer facing department at Best Buy.
Best Buy Survival Guide
1) Make i easy to search online for IN STORE ITEMS ONLY. Sometimes I am willing to pay a bit of a premium over an internet retailer, but not when I have to manually comb through search results to see what isn’t “online only” You have lost about a grand from me this past year for that very reason. I get annoyed, decide I can wait for it, and then give money to Amazon or Newegg. just fix it, OK? This goes along with…
2) Stock a variety of the same stuff. Only having 3 kinds of bluetooth keyboards, 6 mice, and 3 video cards in your store is pure fail. Your selection is bare bones now and only at the higher end. Keep in mind people are broke, stock lower cost items in addition to more of them. Again this has probably cost you about another 300 or so that went to Amazon or Newegg.
3) Stock replacement parts for shit you sell. You sell my tablet, the Transformer, but you DON’T sell replacement chargers, the 10 dollar cases that Amazon has, or the USB dongle either. Sell the companion parts, AT REASONABLE PRICES, this has cost you about 400 for various products.
4) Don’t sell obviously overpriced items to old people. My grandparents were gifted a new home theater from a rich relative. When the FAIL squad showed up to do the work they then sold my 89 year old grandma 2 3 foot cables for 800 DOLLARS. and a remote they’ll never figure out for another 250. See, old people have tech savvy grandsons like me, that return the stuff and make a quiet scene at the return counter. The store tried not to take it back so I sent the whole damn theater back, bought them better stuff from a competitor, and installed it myself. The rich relative was happy because my grandma was happy, as was I, but I was more happy when most of my family returned gifts they bought from you. That was about 10k total there you lost. STOP TRYING TO SCAM OLD PEOPLE!
5) You have loss prevention people, take stuff out of cases so I can hold it and see it. If I want to shop through glass or wait 20 minutes for a fucking key I’d rather do it at home in front of my computer.
That is all!
“First, some believe the internet has made physical retailing (i.e., stores) irrelevant. There’s no doubt that the internet, and the mobile web in particular, have changed the way people shop, but there is strong evidence that consumers continue to value the experience of shopping in stores. A recent study by the NPD Group, a leading market research company, notes that nearly 80% of consumer electronics revenue still moves through physical stores.”
First, I’d like to know who comprises the NDP. Second I’d like to compare 3 months of U.S. purchases from Amazon, to every retailer in the U.S. looking at velocity. Are Amazon’s sales increasing over time, and are the store based retailers keeping up in their stores (no fair counting on-line purchases)? Just because you have a statistic from a snapshot, it doesn’t mean you have the market buddy.
Second, Kodak is fighting to stay relavant right now because they missed the “digital photo” boat. Maybe that’s something BB should think about?
“Additionally, approximately 40% of customer purchases made through Bestbuy.com are picked up in one of our stores.”
I assume you mean, when you actually have the product?
“And the truth is, traffic in our physical stores increased in our third quarter and has been trending positively for most of the year.”
Of course, all those pissed of Christmas order customers have to keep going in to stores to get answers, since they don’t get emails….