The Z score of Best Buy is approximately 4.0. The Z score is a bankruptcy indicator of modern industrial corporations. Although Best Buy is currently in the safe zone, a Z score lower than 1.81 will cause it to be in the distress zone.
The skeptics have been the heralding the demise of brick and mortar stores due to trend in showrooming where customers come into physical stores to look at products they later intended to buy for less online. Rather than be discouraged by showrooming, Best Buy has already embraced the challenge of showrooming by beginning to price-match lower prices from all local competitors and major online retailers and making other structural changes to compete for the future.
In this strategic briefing, I will share a mashup of how I see this transformation unfolding. These thoughts are synergistic with Best Buy’s Renew Blue transformation agenda.
Best Buy’s SWOT
To create a working frame of reference, below is a sketch of the strengths, weaknesses, opportunities and threats confronting Best Buy.
Best Buy has an opportunity to incrementally refine its turnaround strategy by viewing the world with an outside-in focus through the lens of a customer in its journey towards resilience as well as increase its profit velocity.
A marketbuster is a move, sastisfying one or more of the following criteria, taken by the firm that changes the game to deliver markedly superior performance.
- A 2% change (gain or loss) in market position (typically volume share) of an incumbent as a result of its move or the moves of another player.
- Annual growth in sales of shipments of 10% or more over at least two years from a new entry by an innovator.
- Annual sales or shipment growth 5% greater than the growth of the underlying market by an incumbent.
Retail Therapy and Service Innovation
To serve a customer is human. Surveys indicate that more than 50% of Americans shop to boost their moods and an increasing number of shoppers believe that retail therapy can boost their moods. Getting a compelling deal makes shoppers feel best when indulging in retail therapy. Under these circumstances, isn’t a sales associate in a retail store uniquely positioned to serve as a retail therapist rather than be an iconic “one click buy button” on an e-tailer’s website?
In 1986, Paul David wrote that “innovation has become a cherished child, doted upon by all concerned with maintaining competitiveness…whereas diffusion has fallen into the woeful role of Cindrella, a drudge like creature who tends to be overlooked when the summons arrive to attend the Technology Policy Ball.”
Best Buy brick-and-mortar retail stores are uniquely positioned as the last mile to the revenue-paying customer to manage the Venturesome Consumption of Technology Innovations (VCTI).
VCTI is a multi-vendor ecosystem where Best Buy has an opportunity to serve as as an orchestra conductor. Best Buy has already forged strategic alliances with Microsoft and Samsung (others to follow). These alliances have to be carefully nurtured in order for the VCTI ecosystem to be successful. By relentlessly focusing on VCTI, Best Buy can create value by driving the widest wedge between a customer’s willingness to pay and the supplier’s willingness to supply as well as enable the customers, both the technology enthusiasts and the laggards, cross the chasm.
The conventional wisdom among pure play online retailers is that the world is flat. In the omnichannel world, which includes Browse Online, Purchase in Store (BOPS), the online and offline channels are in the early stages of blurring. In the retail store, the sales associate has an opportunity to wear the hat as a “retail therapist” — this service innovation is not a one size fits all model (it is more of an art than a science). Furthermore, inside the retail store, the world is non-flat (spiky) despite the prevalence of technology to monitor the inventory and do a price compare. The game changer in this non-flat, omnichannel world is to therapeutically assist the customer in (1) navigating the shopping experience using a combination of logic and emotion and (2) providing a laboratory for accelerated technology adoption. A greater attention on retail therapy will minimize the CAGE distance between Best Buy and the customer as sketched in the figure below.
Creating Differential Value
When a Best Buy associate pitches a product, (s)he should tailor the message with motivational fit. The buyer may either have an opportunity-focused (technology enthusiast) or have a prevention-focused mindset.
If the buyer is eager, optimistic and ready to take chances, the pitch should be gain framing so that the buyer feels that the expensive product is truly valuable for consumption — i.e., an eagerness strategy.
On the other hand, if the prospect is being careful and prefers being accurate with the selection and wants to avoid making mistakes, then the pitch should be loss framing so that the buyer is confident that the product is “right” and feels that (s)he should not miss out on getting energized from the product (and stay behind the innovation curve).
It is very important for the sales associate to use the appropriate motivational language to appeal to different communities. For example, in the world of “busy moms,” a FTWOH mom (full-time work outside mom) who believes in CIO (cry it out) has a very different mindset than a SAHM (stay-at-home mom) who practices AP (attachment parenting). Talking to a mom about her technology needs as opposed to the technology needs of moms in general can be really powerful. In similar vein, the needs of tech fanatics, home theatre connoisseurs, family men and small-business customers should also be addressed so that the pitch can be delivered with appropriate motivational fit.
Managing the VCTI ecosystem is a relentless campaign for Best Buy. The ultimate goal of a sales associate in a Best Buy retail store is the co-creation and realization of a moment of truth with the buyer in order to enhance the experienced value of a product because of motivational fit.
Artistic Retail Therapy enables people to connect with others for advice about purchase; in other words social shopping using the recommendations of a curator. Humanizing ecommerce, similar to an approach pioneered by Rakuten (a Japanese company), creates a more personal shopping experience in a “showroom” setting.
Re-examining the Consumption Chain
The Yellow Brick Road towards Resilience
Imagine a world where the blurring of the brand becomes as invisible as a figure of speech such as “best buy” (lowercase). This would be really cool.
Heidi Grant Halvorson and E. Tory Higgins. Focus: Use Different Ways of Seeing the World to Power Success and Influence. Hudson Street Press, 2013.
Documented by Last Mile Resource