Why we hate the store we love to hate

[TechTalk]

Since they aren't paid commission, they can sell what is good for the customer, not just what is good for the store.

What worked for BestBuy in the 1990s was the above quoted statement and the fact that consumers would often window shop at other retail stores and then drive to the nearest BestBuy to make their purchase.  Why did they do this?  My guess is that consumers trusted the advice that was provided to them by BB's non-commission sales associates and they typically were able to save themselves a few dollars in the process.   However, I believe that price truly has become the only criteria for most consumers now that:

* Gas is more expensive nowadays.
* More and more consumers are starting to realize that BB's sales people no longer simply "sell what is good for the customer".
* And most importantly online sales have really taken off in recent years and retail discounters, such as, Costco and Wal-Mart have gotten into the consumer electronics game as well.

In summary, the tables have turned and now BB is seen by many people as the more expensive shopping option (at least for consumer electronics)!

It seems as if every month there is a new article on the consumerist website (consumerist.com) about BB and their shady sales/business practices.  That said, if you look at the business environment that BB operates in, I don't see how BB can reinvent themselves or act any differently then it does.  First, BB can no longer compete on price and second their market share has been shrinking.  The status quo or attempting to maximize profit on every sale seems to me to be the only viable option.  When the typical BB sales associate is paid slightly above minimum wage, I don't see how this company can focus on how to better serve customers.

As TRexx wrote in his post, their growth strategy appears to be similar to what other retailers, such as, The Gap are currently trying which is to focus on markets in foreign countries.  As I mentioned in an earlier post to this thread, I believe that BB's market share in the U.S. and its stock price will continue to decline, however, I think it is still too early to say for certain if this company will be out of business within the United States in the next 10-15 years.  For example, two years into the future, the federal government could require that all online retailers now need to charge sales tax.

[The Gorn]

BB is the more expensive option. Virtually anything you can name can be found cheaper elsewhere or online than in BB stores. If I am mistaken, it would be interesting to list where BB is actually still competitive.

I don't believe that lack of state sales tax alone makes Amazon the more attractive shopping alternative. Even if they taxed their merchandise, Amazon still has a significant price advantage over normal retail.

IE, B&N only discounts recent books and best sellers. Amazon discounts almost every book title. And that's just books.

[TechTalk]

...would be interesting to list where BB is actually still competitive.

Large Appliances?
About two months ago, my parents called me because their washer machine finally went kaput.  I did some research for them and emailed them a list of washer and dryers that I recommended that they should look at. 

My parents told me that they wound up buying a washer/dryer combo from BB because BB had the best price, didn't charge for installation and delivery, and my mom could use her rewards card to earn more points.  Apparently, she uses reward points to purchase printer cartridges.  Yes, I know that many retailers don't charge for installation and delivery, but some stores, such as, Sears still does and it was one of the stores that my parents said they had visited.

The washer and dryer were installed promptly, however, the seal on the wash machine door had some cosmetic damage which caused a small amount of water to leak from the machine during usage.  My parents had to wait about a week or so, but they did get the damaged part replaced.  In summary, my parents (retired Baby Boomers) seem to be very satisfied with their purchase from BB.

[The Gorn]

^ Large appliances - fascinating, and thank you for a great example.

Ok, so Best Buy does well at major appliances.

So why are they still in consumer electronics, again? (I will give them a chunk of the cell phone/mobile market - every retailer just has to cash in on the fatted calf of cell contract commissions.)

Given what you say, perhaps they should and will eventually collapse down to selling and servicing high tech major appliances. (Assuming, of course, that major appliances are a profit center and are not a loss leader for them.) There is a strong case to be made for locally based sales and service of large, big ticket items that are impractical to drop ship directly to consumers.

[TRexx]

The CEO made a comment that as long as he can get people to come into the store, he can make a sale because of his knowledgeable sales force.  Since they aren't paid commission, they can sell what is good for the customer, not just what is good for the store

I'm sure he believes that.

Install an executive that is paid enough and he will believe anything in front of a camera.

It's interesting that the CEO has been with the company for many years. He started out as a salesman when they were small chain ("Sound Of Music") in Minnesota.

I think he really believes that he has the best stores and can beat any store in the area. That may be true -- they drove CircuitCity out of business.  But it's irrelevant.  His competition is Amazon and the rest of the dotcoms which don't have his real estate and labor costs.

[John Masterson]

I live a six minute drive from Best Buy headquarters, and I shop at the flagship store four blocks from their headquarters.

It was there that I got the rude treatment when I was shopping for iPads.

Headquarters aerial view:

[DG9]

Wow, I remember "Sound of Music" didn't no that became BB!  We were just in a BB yesterday, tons of workers, no service, got to the register and the checker spent the whole time flirting with another employee during the entire transaction.  We were invivsible, no wait. it seemed to annoy her that we were there.  It really has become an Amazon showroom for us. Bye, bye, BB...

[Carrie Cobol]

Have any of you guys read Jim Collins' books:  Good to Great, Built to Last, and/or How the Mighty Fall?  They are high level business analysis books.  He seems to do a good job of collecting massive amounts of data about American corporations, analysing it to answer some specific question, and then documenting the findings in a book.  They seem to be written at the high-level CxO perspective, which I love.  As a career geek, I struggle with being a literalist so I appreciate things that make me step back and take the big picture view. 

One thing I haven't seen him address, probably because it's more of a mid-level concept, is the disconnect between what the CEO wants the company to be and what it actually is.  For example, BB is supposed to be a friendly, helpful store where you can get your questions answered, browse and buy things.  But as is documented here and in the linked article's comments, the actual store experience is the complete opposite.  I suppose this falls into the culture category.  I'm still fascinated at how the bottom levels of a company can move in one direction while the top level thinks (incorrectly as we see here) it's going in a different direction.  Collins does mention that a toxic culture is one of the ingredients in failure, he just doesn't go into it with much detail.

[David Randolph]

How do stores become so bad? The top people don't spend time in the stores incognito.

http://hbr.org/2011/11/office-depots-president-mystery-shopping-turnaround/ar/1 talks about how the new CEO of office depot figured out what was wrong with the stores. The management team had been using customer satisfaction surveys to see if customers were happy with the stores. The surveys said that customers were happy. But sales were going down. When the new CEO went under cover to visit stores, he got an ear full from unhappy customers. The "customer surveys" weren't asking the right questions and the top managers were using them instead of actually visiting stores and talking to customers.

Top management in any organization tends to get disconnected from reality. Thus, the POTUS finds that in his second term, it is hard to find people who will actually tell him reality. CEO's of major companies don't know what is happening on the factory floors or in the interactions with customers. The effect is Hubris.

[TRexx]

Unfortunately most unhappy customers won't waste their time complaining to management or filling out surveys. They just walk out and never come back.

Inattentive cashiers are my pet peeve.  More than once I have walked out of a store, leaving my order at the cash register. 

[Carrie Cobol]

The concept behind the Undercover Boss tv show is good in that it pulls these CEO's out of their mahogany offices and into overalls to see what the bottom-level is like at their companies.  Unfortunately it seems that after the first couple of shows, the only way they could motivate companies to participate was to let them use the show for aggrandizement.  And also now of course, if anybody shows up with a camera crew in any workplace in the country, the workers know why they're there.  But perhaps it will inspire some CEO's to do that without a tv crew.

[The Gorn]

The concept behind the Undercover Boss tv show is good in that it pulls these CEO's out of their mahogany offices and into overalls to see what the bottom-level is like at their companies.  Unfortunately it seems that after the first couple of shows, the only way they could motivate companies to participate was to let them use the show for aggrandizement. 

Supposedly the mayor of Cincinnati did the show and supposedly the performances by real employees were authentic.

In the worst case, a "Kitchen Nightmares" level expose' of a business would destroy shareholder value. "Undercover Boss" is just a nice fiction.

[The Gorn]

http://news.cnet.com/8301-1001_3-57406388-92/best-buy-feels-amazon-squeeze-to-close-50-big-box-stores/

[Carrie Cobol]

Pretty funny.  They sell a bunch of products in November then realize they can't ship them in time for Christmas and just cancel the orders... And blame fourth quarter earnings on amazon.

[The Gorn]

I've been trying to figure out exactly why I dislike Best Buy so much. They have never really gypped me on anything that I've chosen to buy there. Which, because they have usually been the higher priced option, has not been a lot of stuff other than basic accessories.

I think it's that "Pavlov's Dog" reaction to technology products that their stores try to elicit. Just because it's tech and they have a lot of it, you're supposed to be impressed, and their salesmen sort of act the same way. And the ones I've been to have an impersonal, "selfish" vibe.

Also, BB launched their "Geek Squad" at the same time that I was trying to make a go of a computer service business. It was purely galling finding out that *they* could command $200 for a home service call that was essentially wiping and formatting a PC - while I was stuck with lousy stupid customers who would act like $50 was an act of "violation", even when I tried to save my crappy customers' data.

Several years ago my wife and I took a trip to the Bay Area, and I just had to go check out a Fry's Electronics store. I was blown away with their range of merchandise (everything from PC stuff to electronics hobbyist things like oscilloscopes) but I didn't get the same impression that they were trying to shove tech down my throat.

It would be really cool if a store like Fry's was located in key markets around the country, sort of like how Ikea is located in just a few markets. I would gladly trade a Fry's that was 150 mi. away for the two or three stupid Best Buys that are in my backyard.