The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
Best Buy in June re-launched its web site as the culmination of a long-held belief that a company’s channels must work together, Scott Bauhofer, senior vice president of Best Buy told the eTail 2003 East conference this week.
Best Buy Co. Inc. in June re-launched its web site as the culmination of a long-held belief that a company’s channels must work together, Scott Bauhofer, senior vice president of Best Buy told the eTail 2003 East conference this week. “The new site binds together significantly with our overall retail offerings,” he said “It links to the overall brand, it links to the stores, it links to the newspaper inserts and coupons.”
Now the web site has achieved “promotional parity” with the stores, able to offer financing, the complex product bundling and other deals available in stores. “W e have eliminated all the barriers that have separated these two channels,” Bauhofer said. “Now we can do powerful integrated brand campaigns that include paper, broadcast, web and e-mail.”
The benefits accrue across channels, he said. “When you get all these things integrated it produces significant, significant sales, online and across all channels too,” he said.
The cross-channel approach is not new, Bauhofer said. Back in 1999,when Best Buy made the decision to go online, senior management agreed that it wanted a seamless experience across channels that would help leverage the brand. “The integrated business model is common today; it was a unique view back then,” he said.
“But that was a very tough view to take because the money to develop the site came from the bottom line,” he said. While many others in the market were getting their money from Wall Street, existing retailers who wanted the operation to remain part of the corporate structure had to fund their own business, while others came in without stores “but with tons of money,” he said.
One area that Best Buy was not immune to, Bauhofer noted, was the belief that the web site was the future and that staffing it required only the sharpest, most forward looking personnel. “If there’s one take away from this, it’s never say you recruit the best and the brightest for the dot-com operation because what does that say about the people you don’t select. It created a difficult internal environment.”
Best Buy early on saw soft benefits of the web. For instance, almost from the start, 25% of Best Buy store customers visited the site before shopping in the store. Now it’s 50%. “The question is how do you value this soft benefit?” Bauhofer said. “And for us that’s still a work in progress.” However, he added: “The soft values were very important. They helped build support within the company even though we couldn’t put a dollar value on it.”
Before Best Buy could re-launch the site, it had to undertake significant systems integration issues. “Most systems were associate-facing and not customer-facing and they required an associate in the store to make them work,” he said. “Systems integration issues flew in the face of speed to market because we had to adjust to the rhythm of the retail chain’s IT systems.”
Among the outcomes of solving the systems integration issues was the ability to offer the same promotions on the web as in the store and the ability to allow pick-up at the store. “We knew we needed to invest in an entirely new web platform,” Bauhofer said. “We knew it would be expensive and time consuming. But we needed to be tightly connected to the chain.”
Now, BestBuy.com offers 600,000 SKUs, 20 times what a store can carry. It hosts 400 million visitors a year, equal to the total visitors at all stores. It also carries several hundred thousand CDs vs. 25,000 in stores. Best Buy also has installed T1 communications lines in all stores, 12 customers terminals per store and “numerous” employee terminals.
Best Buy’s prime categories, computers and music, are a $15 billion market on the web, Bauhofer noted, expected to grow to $35 billion by 2007. “We get 15% of the market share in these categories at the retail level,” he said. “If we can get the same percentage online, do the math and you’ll see that this is a large e-commerce opportunity for us. That’s what we’re looking at and why we’re so excited about it.”