The Best Buy problem
Tom Dougherty, CEO – Stealing Share
15 December 2010
It’s not about the TVs
Best Buy reported third quarter figures that fell short of what Wall Street was expecting. The electronics superstore was also downgraded by Oppenheimer from “outperform” to “perform,” lowering the stock price outlook from $53 to $39. So what is the Best Buy problem?
“This is the reason for the slower than expected sales at Best Buy. Consumers are not going to another store for a better deal, better warranty, or better customer service.”
The pat answer to the Best Buy problem is that sluggish TV and laptop sales are to blame. To a certain degree, that’s true. But I think that there is more to the equation than that. Apple is not bemoaning its sluggish laptop sales and, every time I walk into Costco, it has added more space for its stable of TVs. Same for Walmart and Sam’s.
I am not saying there hasn’t been an industry-wide weakness in TV sales. But for Best Buy to blame its problems on TVs and laptops is burying its head in sand. The Best Buy problem is far deeper than that.
What got me thinking about this was an article from Fortune, which talked about the state of affairs at Best Buy and made the argument that consumers are going online and to specialty stores. The argument is that consumers are getting better deals, better customer service, and better warranties – and that’s what driving folks to online and specialty.
To a fair degree, this is correct. But again, this is only part of the story. In part, because Best Buy has its own online retail site, meaning consumers could go there. So why aren’t they?
It lies in the answer to the question, what does Best Buy mean to consumers? In thinking about the name and logo one would naturally think of “Best Price.” This is clearly not true.
Best Buy’s holiday television ads center around the theme of expertise. However, I looked and here are the qualifications of a sales associate for Best Buy:
– 6 months of retail sales or customer service experience
– This isn’t a desk job! Lifting up to 50 lbs., standing and moving up to 100% of the time
– At least 16 years of age
– High School Diploma or Equivalent
I am no HR expert, but this does not scream out to me as “category expert.”
I put it to you that, if you asked most people, “What comes to mind when you think of Best Buy?” they would say, “Electronics” or “Nothing.”
This is the reason for the slower than expected sales at Best Buy. Consumers are not going to another store for a better deal, better warranty, or better customer service. They are going away from Best Buy because it has not given them a reason to shop at there.
There is no emotional connection with the target audience at all and, the sad thing for Best Buy, is it’s starting to feel out of date. Looking for a better deal, better warranty, better customer service, and any other reason you can think of are simply rational explanations for the lack of emotional connection.
What this demonstrates is the economic ramifications of not investing in building brand meaning. The Best Buy problem is solved by creating a brand that means something to customers before it got to the point in which Wall Street expectations are not met and the norm is a downgrading stock outlooks.
COVID-19 marketing Tom Dougherty, CEO - Stealing Share 13 July 2020 COVID-19 marketing enters a new phase: Disinfectant labeling Lost in the think pieces (including my own) of COVID-19 marketing lies something few of us considered. The effect of the...
The Zoom brand Tom Dougherty, CEO - Stealing Share 7 July 2020 The Zoom brand shouldn’t play it safe moving forward The Zoom brand is one consumer service that’s becoming synonymous with success during the global pandemic. Which is why it needs to be as...
Washington Redskins Tom Dougherty, CEO - Stealing Share 6 July 2020 Money drives Washington Redskins name change In the 1976 classic All the President’s Men, Deep Throat becomes agitated with Bob Woodward (played by Robert Redford) over his lack of...