Abstract

Best Buy, the largest electronic retailer in US as of 2013, was founded as an audio specialty company Sound of Music in 1966 by Richard Schulze and Gary Smoliak. In 1983, the company’s name was changed to ‘Best Buy’. It was the first electronics retailer to establish a superstore. Best Buy began its e-commerce retail business by launching bestbuy.com in 2000. Due to rapidly changing technology, the interest of customers in purchasing huge TVs, PCs, and CDs had started to wane and interest in high-end gadgets like mobiles, tablets, etc was on the rise. To make matters worse, the US was hit by recession and customers were looking for low prices, which online retailers were able to provide. It was at this time that Brian Dunn became the CEO of Best Buy. He came out with a strategy called ‘connected world’, where the stores were remodeled and the latest electronic gadgets were displayed at the stores. These stores had knowledgeable sales staff to assist the customers. The initiative had a positive impact on the company. But in the next few quarters, sales and comparable sales started to decline and Best Buy began facing competition from retailers like Wal-Mart and H H Greg. It became a victim of “showrooming”, where customers visited the stores to see the products, compared the prices online, and bought from whichever retailer was offering the lowest price. In early 2011, Best Buy’s market share dropped to 22%. Customers also complained that Big Buy stores were dull and clinical, and that a lot of space was left unutilized in the huge stores. The company revamped its online offerings, but was unable to fulfill the orders placed for the holiday season in 2011 due to the unavailability of products. Dunn then came out with a plan to revamp the stores. But before the plan could be implemented, his personal conduct came under the scanner and he was forced to leave the company. The board selected Hubert Joly, a turnaround specialist, to extricate Best Buy from its troubles. Joly joined Best Buy in September 2012 and spent the first two months understanding the operations of the company and learning what was going wrong. Then in November, he came out with a strategy to arrest the decline in COMPS and stop the erosion of profit margins by cutting costs and emphasizing online sales. The five-pronged plan called ‘Renew Blue’ included — reinvigorating and rejuvenating customer experience, attracting and growing transformational leaders, working with vendors to innovate and drive value, increasing return on invested capital, and impacting the world positively and making it a better place. He came out with several initiatives to implement ‘Renew Blue’. Though some of the analysts felt that Best Buy was moving in the right direction under Joly’s leadership, others were not so sure about the company’s ability to regain its lost glory.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Impact of recession on electronics retail
• The changing dynamics of retail industry in the US
• The perils of delay in business upgrades
• Growing importance of online retailers
• Pros and cons of technology in retail business

Keywords

Best Buy Inc, Electronics retailer, US, Comparative store sales (COMPS), Brian Dunn, Hubert Joly, Richard Schulze, Bestbuy.com, E-commerce, Renew blue, Five-pronged strategy, Connected stores, Restructuring plan, Customer service