Best Buy Q4 Earnings

Maybe more important than the earning summary (click here to read the earnings transcript) is the way the first two pages of the document read.

Could you, the Business Executive, write two pages that clearly articulate why your business was successful in 2009 and then map out with passion and ease where you are taking your business in 2010?

Point of View: Best Buy

In my Multichannel Forensics and Online Marketing Simulation projects, I repeatedly find that anytime a customer has an actual interaction with a human being at a brand, long-term customer value increases.

Best Buy is an example of a company that is working on making human connections easier in the online world.

For instance, their Best Buy Connect program helps illustrate how their "Twelpforce" assists customers who are having problems. For instance, @cookbookguy tweets the twelpforce with the comment "audio issues w/Samsung HTZ320&Toshiba46 plus INSIG bluray". Just one hour later, @agent1834 replies "What kind of audio issues? Syncing? Skipping? No audio at all?"

Now, granted, I have no idea if this exchange resolve the issue or not. Still, 24,285 folks are following the Twelpforce, and that's probably about 24,000 more folks than are following your contact center staff, right? And from time to time, problems are solved.

It isn't like Best Buy offers unique products ... you can pretty much buy Best Buy merchandise anywhere you want. So, this strategy creates a "point of view", a reason for Best Buy to exist in a sea of sameness. And it looks like Best Buy Connect is managed via Twitter and via Google's Appspot cloud computing platform --- hint, that means you get to go outside of your IT team to execute a marketing and customer service strategy --- that's a big deal!

Again, in all of my Multichannel Forensics and Online Marketing Simulation projects, I repeatedly find that when customers interact with an actual, live human being, long-term customer value increases. Best Buy is taking one approach to connect with customers. Certainly, there are lessons here that apply to your business --- especially for catalogers who staff a call center that is absolutely brimming with talent, talent that could certainly rival that of the "twelpforce".

Nordstrom And Best Buy: Average Comp Store Sales Since 1992

Given that we'll hear about comp store sales on Thursday, it might be instructive to take a look back.

In this case, I averaged annual comp store sales for Nordstrom and Best Buy, from 1992 - 2008 (estimated). Two very different business models, averaged together, yield illustrative trends.

The chart doesn't do a good job of illustrating lousy business back in 1991 - 1992, as Best Buy comps were smokin' during those years.

I recall the sluggish sales that plagued business in 1997 - 1998, starting in the second half of 1997. I was at Eddie Bauer in 1998, my first year as a Circulation Director. I pulled a lot of money out of that circulation plan, week after week after week. That led to major circulation cuts in 1999.

It's easy to see the internet bubble of 1999 - 2000, and the struggles of 2001 - 2002 (our last recession).

The bubble of 2004 - 2006 becomes apparent in the chart. Starting in Q4-2007, business began to suffer, and we'll observe really bad October comps when announced on Thursday.

Since 1991, Best Buy averaged a 7.9% comp store sales increase. That's some major productivity, folks!

Since 1992, Nordstrom averaged a 1.9% comp store sales increase. That's a rate that is below inflation. Take out the bubble years of 2004 - 2006, and the average CAGR is 0.75%.

Ignore all that gloom and doom. This is where we innovate, where our hard work bears fruit in 2010 and 2011. There is absolutely nothing you're going to be able to do to crack open wallets enough to make a substantial difference during the remainder of 2008. Focus on innovation that drives business over the next few years.

Circuit City: Did Multichannel Best Practices Make A Difference?

Circuit City will close 155 stores. Here's how folks on Digg feel about the news.

Circuit City is loved by multichannel experts, pioneering buy-online-pickup-in-store programs that allegedly fuel the "clicks and bricks" advantage for retailers. Check out this presentation from March 2008, promoting "How Web Savvy Customers Are Radically Transforming Retail". In the presentation, Circuit City is lauded for a smart integrated channel strategy.

On the Circuit City homepage today, you'll find free shipping or twenty-four minute in-store pickup. And the brand offers the same price across channels, a strategy the experts love.

Circuit City is doing so many of the things that the experts tell us we must do --- this leader tells us that Circuit City generates an additional $154 from each of these wonderful cross-channel customers. And yet, comp store sales are awful. Online, however, traffic is comparable between Best Buy (via Quantcast) and Circuit City (via Quantcast).

So how is it that all of these brilliant strategies, promoted by so many smart people, result in a brand that generates half the sales per square foot of Best Buy, leading to a decision to close 155 stores? Heck, from 2004 until recently, Circuit City was led by a former Best Buy VP of Customer Segments, and the brand struggled long before deciding to can the 3,400 highest paid employees in 2007.

How does a brand fail when it essentially sells the same merchandise as a key competitor, and executes the multichannel strategies demanded by industry leaders while competitors do not execute similar strategies? Either the strategies don't work, or the strategies have little relevance compared with in-store execution and customer service and store location. Either way, why invest all this effort if it doesn't translate into measurable sales per square foot increases, online conversion improvement, or comp store sales increases?

Now somebody might say "Yabut Circuit City comps would be really bad without these strategies". And that person might be right.

But isn't it time to question what we're being sold? Isn't it prudent to question established best practices? Might it make sense to question the motives of the folks telling us what multichannel best practices are?

Multichannel Forensics studies suggest that multichannel marketing strategies are less important than customer migration patterns across channels. If channel migration patterns result in the customer landing in a channel (retail) that does not resonate with the customer, then the entire multichannel ecosystem (and corresponding strategies) break down. We just don't think about the entire ecosystem often enough, we don't think about the consequences of a hole in one part of the ecosystem.


This isn't about me, however, and it isn't ultimately about Circuit City --- it is about you.

What do you think about the multichannel strategies we're taught to execute? Do they matter? Have they been proven to increase comp store sales, online conversion rates, sales per square foot, or spend/profit per customer? Would you execute multichannel strategies, or would you pare them back in favor of brilliant merchandising and execution and expense management and customer service?

What would you do to re-invigorate Circuit City business performance?

Best Buy CMO Barry Judge Hosts A Blog

Enjoy interacting with Best Buy CMO Barry Judge on his blog. I recall being in all day meetings with him in Minneapolis back in 2000 when I was at Avenue A and he was the online executive at Best Buy ... he's a character!

Best Buy and B&H Multichannel Marketing

At ACCM, I heard a half dozen speakers drill the multichannel marketing script into the permeable heads of honorable conference attendees.

So today I am looking to purchase a camcorder. B&H sends me a catalog, a nice multichannel piece. So nice that it drives me to Best Buy to physically look at the camcorder. There, I find another camcorder I like. I notice that the price of this item appears expensive.

I go home, look at the Best Buy website, and see that the price is consistent between stores and online. Multichannel advocates rejoice! But the camcorder is still expensive. A price comparison reveals that the item is 20% cheaper at B&H, and 25% cheaper at Amazon.com.

The item will be purchased at Amazon.com.

Industry leadership continues to harp on the fact that multichannel marketing works. And today, it did work. A catalog from one brand led to a store visit at another brand, which led to an online search for the cheapest price, leading me to buy the camcorder from an online pureplay. Demand siphons out of the multichannel value chain, into an online pureplay. The multichannel marketers pay the freight for retail square footage and paper-based marketing, but lose the sale to a low-cost online pureplay that does not execute traditional advertising strategies.

An entire industry is missing the point of multichannel marketing. Pretty catalogs, integrated e-mail campaigns, and cross-channel inventory alignment is nice.

But multichannel marketing is pure pap, feckless when confronted by convenience, fast shipping, and cheap prices.

And worst of all, the multichannel industry fuels this trend by advertising the items that ultimately are purchased at pureplays that don't employ traditional advertising.

Woo-hoo!


Aside: A Best Buy employee told a customer that he wanted to take her television outside to her car because it was too hot inside the building. She asked the employee why they couldn't turn on air conditioning. He said they couldn't because climate control was manned from Minneapolis. If that story is true, then Best Buy management is really knocking down some silos, huh folks?!!

Ann Curry And The Today Show Feature The Cute Kids Cancelling Catalogs

If you were at work this morning when The Today Show featured a piece on how to cancel catalogs, please watch the segment here.

Ann Curry sat at a computer monitor, and opted-out of Red Envelope, Pottery Barn and Mrs. Fields catalogs.

Kudos to Catalog Choice and those cute kids for getting attention via grass roots efforts. This goes to show you how individuals and small teams can make a difference. How things get done in this world is rapidly changing ... Catalog Choice provides a great example of how to market a useful service via social media, illustrating how mainstream media does the work for you when social media is executed properly.

Catalog Choice reports that they've had an onslaught of traffic today. Ted Wells reports that 500 visitors an hour are checking out his blog.

The Today Show, via their website at MSNBC, is challenging all schools to do what the cute kids accomplished. Here is a link to the Today Show Challenge.

Of course, there's some level of irony involved in having NBC and The Today Show take shots at companies like Red Envelope, Pottery Barn, and Mrs. Fields.

When I ran Ann Curry's video on the MSNBC site, I was subjected to unsolicited advertising from Best Buy, I could not fast-forward over the ad, MSNBC forced me to watch it. I might have wanted to opt-out of that advertising opportunity, however, I could not.

Here's a sampling of the national companies that pay the salaries of employees of The Today Show via unsolicited commercials I did not have a choice to opt-out of while watching the program in real-time this morning:

• Honda, Smuckers, Hyundai, Pillsbury, Olay, Air Wick, Dannon, Clorox, Turbo Tax, Slim Fast, Pampers, Cheerios, Kashi, Olive Garden, Progresso, Oreo, Bank of America, Head and Shoulders, Nestle, Lysol, Visine, Capital One.
  

Obviously, I cannot speak to any details on the practices of these companies ... I am simply hopeful that all of these companies don't over-harvest trees or mis-use fossil fuels to produce the products, services and packaging that paid the salaries of the folks bringing us The Today Show, the show that promoted Catalog Choice.

Give Me Someone To Believe In

Last week, Dell agreed to sell computers in Wal-Mart stores, even though management repeatedly assured us that they are a direct-to-consumer brand.

The punditocracy tells us we need to emulate Circuit City and their "Buy Online, Pickup In Store" multichannel program. Yet, Circuit City is fighting to stay in business, as sales sag. Weren't we told that multichannel customers were the best customers? If Circuit City provides a great multichannel experience, then why in the heck aren't they swimming in a pool of profit produced by a ton of multichannel customers, the most valuable of all customers?

Of course, Circuit City competes with the successful Best Buy chain of electronics stores. The punditocracy tells us we should emulate Best Buy's "Customer Centric" approach to store design. On the surface, that would seem like a good idea, because they're killing Circuit City. And yet, Best Buy is accused of allegedly implementing a "bait and switch" program, whereby customers saw one price online, then were shown a higher price in an in-store online version of the website. If this is true, how "Customer Centric" is that? And if the lawsuit is proven to not be valid, the small number of customers who received a higher price did not receive a "Customer Centric" experience, did they?

Dell, Circuit City and Best Buy are "brands" that have a veritable plethora of hard working, earnest employees, all trying to do what is best for their customers and shareholders.

Each week, the punditocracy tells us who we should emulate, and why. All too often, their logic is flawed. We shouldn't copy Dell and their direct-to-consumer model. We shouldn't copy Circuit City and their "Buy Online, Pickup In Stores" program. We shouldn't copy Best Buy and their "Customer Centric" approach.

Instead, believe in yourself, and do what is best for your "brand". Give me someone to believe in --- YOU!!!

Your Input Needed: Circuit City

Recall that Circuit City elected to eliminate higher-paying positions on the sales floor of their stores.

In a transcript of their fourth quarter earnings results, management states that "There is no data in the company’s analysis that the service level has dropped due to the absence of the top paid employees."

Here's where I'd appreciate your input.

• Do you believe that a company can provide the same service levels without the store employees who were compensated the most (increased compensation would imply more talent or more experience)?

• If you were Circuit City management, what would you do to compete against Best Buy and web-based electronics retailers? What would you do from a merchandising, pricing, service, in-store presentation, or strategic standpoint?

Your Expectations For A Brand

Friend of MineThatData Chris Baggott tells of his displeasure with Best Buy and their rewards program.

At Hee-Haw Marketing, Paul has an ongoing issue with the sloppiness of a Kohl's store.

John Moore at Brand Autopsy concludes that if Gap went out of business, it would be ok with him.

What is your tolerance level for a brand, before it slips into the 'criticism zone'? When are you willing to forgive a brand, and how many mistakes are required before you throw a brand under the bus?

Best Buy Verses Circuit City

Best Buy and Circuit City are both leading multichannel retailers. Each chain features hundreds of stores with the latest electronics and entertainment. Each chain features websites with above-average functionality. Both chains lead the multichannel industry with buy-online, pickup-in-store functionality, thereby cancelling out any possible multichannel advantage. Both chains feature a similar merchandise assortment. Both chains have similar pricing on common items.

So why do you, the loyal reader and avid multichannel consumer, choose one of these retailers over the other? When everything between the chains is essentially the same, what causes you to pick one over the other?

If Best Buy verses Circuit City were an election, I'd give the nod to Best Buy, by a 51-49 margin. I don't dislike Circuit City. I just ever-so-slightly prefer the layout of a Best Buy store, I prefer the lighting, I prefer the signage.

In a world where everything is essentially the same, the experience becomes so vitally important, because it is the only thing that differentiates one business from another.

What do you think? Which chain do you prefer, and what is your reason for your preference? Is there anything that Best Buy or Circuit City does that places one ahead of the other in your mind?