Big box retailer Best Buy offers an example of endurance at a time when many brick-and-mortars in the distressed US retail sector are struggling.
One US retailer after another has succumbed to the twin forces of online competition and shifting consumer preferences in recent years. By August, well over 6,000 stores had closed so far in 2017, according to a list compiled by Business Insider. And yet, Best Buy has pulled off an impressive turnaround. In six of the past seven quarters, its revenue figures have beaten Wall Street expectations. In the past year, the company’s stock price has soared more than 50%.
Chief Executive Hubert Joly found a very different scenario when he took the helm in 2012. The previous CEO had been forced to resign amidst scandal. The company was entering a downward spiral: Its systems were outdated, many stores were losing money, and key products were becoming obsolete. The trend of “showrooming” was plaguing the industry, and hitting home. Joly said that Best Buy’s turnaround was years in the making, and involved reshaping the business piece by piece. With careful attention to detail and intrepid follow-through, he mounted a comeback which, five years later, is bearing fruit.
To address the showrooming problem and convince customers to complete purchases in-store, Joly introduced price-matching. “Until I match Amazon’s prices, the customers are ours to lose,” Joly said. The scheme costs Best Buy money, but helps keep customers in stores and away from competitors, so Best Buy has the opportunity to deliver added value and earn customer loyalty.
Joly deduced that to compete with tech-centric Amazon, Best Buy would need to focus on what humans do that robots cannot: personally connect with customers. Joly met with store employees to address grievances, and made changes aimed at improving morale. The company also started training them to help customers with high-tech electronics. “The associates in our stores are much more engaged now, much more proficient,” Joly said. Best Buy also fosters customer loyalty with free in-home consultations. The store environment has changed, thanks to deals with firms like Samsung, Apple, Microsoft, and even Amazon, which feature their products in branded areas. The company has “really come through the valley by making investments around the customer experience,” said retail analyst Peter Keith of Piper Jaffray.
A business turnaround plan always involves cost-cutting, but under Joly, these have been subtle and gradual. There were no big, public layoffs, for example. “Taking people out is the last resort,” Joly said. “Because you need to capture the hearts and minds of the employees.”
Best Buy’s resilience should serve it well moving forward. Over the long term, the New York Times explains, “it will need to do more than cut costs and match prices.” Walmart is turning into a major competitor, and Amazon is expanding into brick-and-mortar retail, and edging into Best Buy’s home installation and services market. Joly intends to avoid complacency. “Once you’ve had a near-death experience,” he said, “arrogance, if you had it in your bones, has disappeared forever.”