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When it all comes down to it, doesn’t everyone know that 20 percent of your customers make up the lions share of profits? The act of advertising competitive pricing and loss leaders to bring in buyers is now becoming a soul selling event at Best Buy. Vertical positioning is not a new trend but identifying the loss leader and competitive price buyer as the devil is. Brad Anderson’s identification of a price conscious consumer as the devil and a buyer that pays full retail for a product as an angel has set a tone and a path that, in my opinion, will be a very painful lesson for Best Buy in future years. Best Buy’s Concept II stores were founded on the principle that the stores SKU’s (Store Keeping Units) were the “Devil” and “Angel”, not the buyer. Focusing on having the products that people actually purchased and having them in an “in stock” position. Natural price point variations and scaling along with feature scaling. Plan-o-grams were set up to naturally upsell the consumer even without employee interaction. Good, Better, Best signage was also used to enhance the natural upsell experience. Even showing competitors pricing alongside their own pricing as well as the date the price was shopped was a way to enhance the desire to purchase. Employees were trained well on the products being introduced during a coming time period as well as products that were the natural focus for seasonal business. This was the mentality that crushed the commissioned salesperson, mega-retailer Circuit City in markets that Circuit City was the dominant force. Everybody loved the concept of non-commissioned salespeople. The buyers loved it because they perceived they were getting an unbiased opinion and little or no pressure to make a buying decision. The retailers loved it because it sliced out a very hefty expense off their bottom line, the commission. The investors loved it because the retailer became more competitive in pricing and more profitable. But then, as with every other unique way of doing business, the idea became the standard of many retailers and service business types. The playing field began to level out and Best Buy needed to become more aggressive with personal sales marketing. Pushing extended service plans like they were something that had to be purchased and that the product could potentially blow up the day after the manufacturers warranty ran out. The salesperson, formally thought of as “the person with the answer”, moved more and more toward that commission based feel with each new day at Best Buy. Does this mean that the “non-commissioned salesperson” environment is not as affective as was originally thought of when Best Buy created their Concept II stores? The focus of Concept II was on the team. Departments within a Best Buy store were pitted against other departments within the same store and the same departments in other stores with bragging rights and a basis of friendly competition. The teams rallied around departmental walkthroughs, shrink percentages, retail dollars of merchandise sold and it was up to the buyers in the corporate office to maintain profitability and stock levels that promoted a solid profit base. Contact with customers was encouraged in a healthy “Home Depot” kind of way. No pressure, just helpful interaction and a blissful buying decision environment for the consumer. Slowly but surely we have seen this unique idea become a more “commissioned salesperson” feel without the employee actually being a commissioned salesperson. At least that is what we are meant to believe! Best Buy has been and continues to be the bar setter within the consumer electronics and appliance retailer industry and they have raised that bar over and over throughout their 38 years of doing business. From their first store (Sound of Music) to the over 780 stores they have now in the U.S. and Canada, Best Buy is the mega-retailer and dominant force. They are in the exclusive category that The Federated Group had prior to being eaten up by Circuit City and that Circuit City had prior to being body slammed by Best Buy. The Federated Group and their stance that Circuit City was not going to harm them left them on a sizzling plate for the corporate gurus at Circuit City to dine on. Of course, after eating so much, Circuit City forgot that there is balance in eating well of the competition and exercising. They became too slow for the nimble and strong Best Buy. So they got lifted up and slammed to the ground each time that the two got into the same ring. The Federated Group lost touch with its buyers, and then Circuit City did the same thing and now Best Buy. Even within the ranks of the Best Buy elite there has been question about this move. Mike Keskey, one of the main reasons for Best Buy’s success to date questioned Mr. Anderson’s logic of this move. Of course Mr. Keskey bowed to the will of the greater good after convincing meetings. But just the fact that one of the true leaders of Best Buy had a moment of clarity gives hope that the demons can potentially be exorcised from the potential long term ramifications of the “Angel” and “Devil” mentality in the upper ranks of Best Buy. copyrighted materials - Do Not Duplicate without expressed written permission from B2
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