Best Buy is one of the world’s largest consumer electronics retailer, it is ranked number 72 in
the 2018 Fortune 500 list of the largest united states corporations. Sales boomed in the 1980s
as Best Buy expanded nationally and made some risky business decisions, like putting its
sales staff on salary instead of commission pay. This decision created a more consumer-
friendly, low-pressure shopping atmosphere and resulted in an instant spike in overall
revenues. In the 1990s, Best Buy ramped up its computer product offerings and, by 1995, was
the biggest seller of home PCs, a powerful position during the Internet boom.
At the turn of the century, Best Buy faced new competitors like Costco and Walmart, which
started ramping up their electronics divisions and product offerings. Best Buy believed the
best way to differentiate itself was to increase its focus on customer service by selling
product warranties and offering personal services like installation and at-home delivery. Its
purchase of Geek Squad, a 24-hour computer service company, proved extremely profitable
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and strategic as home and small office networks became more complex and the need for
personal computing attention increased. By 2004, Best Buy had placed a Geek Squad station
in each of its stores, providing consumers with personal computing services in the stores,
online, on the phone, and at home.
Today, Best Buy has adopted a corporate strategy it calls Customer-Centricity. It has
segmented its broad customer base into a handful of specific targets such as the affluent tech
geek, the busy suburban mom, the young gadget enthusiast, and the price-conscious family
dad. Next, it uses extensive research and analysis to determine which segments are the most
abundant and lucrative in each market. Finally, it configures its stores and trains its
employees to target those shoppers and encourage them to keep coming back again and
again. For example, stores targeting affluent tech geeks have separate home theatre
departments with knowledgeable salespeople who can spend time discussing all the different
product options. Stores with a high volume of suburban mom shoppers offer personal
shopping assistants to help mom get in and out as quickly as possible with the exact items she
needs.
Sometimes a store will experience a new type of lucrative shopper. In the coastal town of
Baytown, Texas, the local Best Buy observed frequent visits from Eastern European workers
coming off cargo ships and oil tankers. These men and women were using their precious free
time to race over to Best Buy and search the aisles for Apple’s iPods and laptops, which are
cheaper in the United States than in Europe. To cater to this unique consumer, the local Best
Buy rearranged its store, moved iPods, MacBooks, and their accessories from the back of the
store to the front, and added signage in simple English. The result: sales from these European
workers increased 67 percent.
This local ingenuity paired with the ability to cater to each market and segment’s needs have
helped Best Buy survive the electronics storm while competitors like CompUSA and Circuit
City have failed. The business is tough, with thin profit margins and continuously evolving
products. However, with over 1,300 stores, including locations in Canada, Mexico, China,
and Turkey, Best Buy has a 19 percent market share and a trusted, consumer- friendly brand.
Questions:
1. Based on the above case, what are the keys to Best Buy’s success? (5 marks)
2. From your perspective, how else can Best Buy compete against new competitors like
Walmart and online companies? (5 marks)
3. What are the challenges it faces in today’s retail environment from a macro environmental
“general environment “standpoint? (10 marks)