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In an eCommerce age in which every brick-and-mortar enterprise is expected to roll over and die, Best Buy is adapting to the changing market. Under the guidance of CEO Hubert Joly, Best Buy is engineering an impressive turnaround, the New York Times reports.
According to the Times, Best Buy’s revenue has exceeded analysts’ expectations in six of the last seven quarters. The company’s stock has climbed more than 50 percent over the last 12 months.
Joly took the reins at Best Buy in 2012, as Amazon was capturing an increasing share of the retail market, and the iconic brick-and-mortar chain was struggling to keep up. The practice of “showrooming,” which involves customers testing and trying a product in a physical store, then buying it at a lower price online, was increasingly cutting into Best Buy’s sales.
So, the Times says, Joly instituted a price-matching guarantee so that customers who came in to check out a given product could feel comfortable buying it in-store.
“Until I match Amazon’s prices, the customers are ours to lose,” Mr. Joly said.
In order to slash prices, of course, one must cut costs. In fact, as the Times says, cutting costs is integral to the recovery of almost any struggling business. But, rather than induce a huge, public wave of layoffs, which would have crippled morale amongst employees and given shareholders the impression that the company was on thin ice, Joly quietly let go of extraneous employees at the middle management level. Rather than closing a massive number of stores, he waited for leases to run out at unprofitable locations.
Joly eliminated 400 Geek Squad positions that involved assisting customers remotely, via phone or internet chat. Rather than firing the employees who filled those positions, though, he offered them reassignment within the company.
“Taking people out is the last resort,” said Joly in 2015, according to the Times. “Because you need to capture the hearts and minds of the employees.”
One measure he took to recapture those hearts and minds was to reinstate an employee discount, the Times says.
Joly knows that Best Buy’s employees—and their ability to provide human interaction at the point of sale—give the company a competitive advantage over Amazon. Best Buy representatives serve as approachable, flesh-and-blood intermediaries between customers and the often-intimidating world of consumer electronics.
In an effort to double down on customer service, Joly retrained employees to improve their knowledge of cutting-edge devices like smart home appliances and virtual reality headsets. He expanded the Geek Squad overall, reassigning many of the aforementioned remote employees to roles in which they provide in-home consultations to customers, recommending products and installation techniques.
Best Buy tested the in-home program in select locales last year; now, it is going nationwide.
The company has also revamped its eCommerce operations, making shipping more efficient. Before Joly stepped in as CEO, Best Buy shipped all items ordered online from centralized warehouses. Joly gave stores themselves the means to ship products. Effectually, Best Buy stores are now also miniature shipping warehouses.
When a customer orders a product online, it is shipped from whichever location will provide the fastest delivery, whether that location is a nearby store or a traditional warehouse.
In an effort to turn the “showrooming” phenomenon to his advantage, Joly reimagined the manner in which items were displayed in his stores. He gave iconic electronics manufacturers like Apple, Microsoft and even Amazon their own kiosks in Best Buy stores. High-demand items are prominently displayed, and customers are excited about browsing the store.
Many factors beyond the company’s control have further spurred its revival. With competitors including Circuit City, Radio Shack, and HH Gregg having gone bankrupt or closing their doors, Best Buy is among the only brick-and-mortar electronics retailers left, the Times notes.
Many people remain reluctant to make big-ticket purchases online, so Best Buy’s highest-priced products are still in demand.
The company depends on manufacturers to continue to make products that create a buzz amongst customers. As Joly implied on the August earnings call, that dependence means Best Buy’s performance will ebb and flow with the popularity of new gadgets.
“They’re at the mercy of the product cycles,” said Stephen Baker, a tech industry analyst at NPD Group, per the Times. “If people stop buying PCs or they don’t care about big-screen TVs anymore, they have a challenge.”
Featured image via Flickr/Mike Mozart