Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Amid the storm clouds, sales are up at BestBuy.com, showing the value of running with new ideas and sweating the details.
The fourth quarter holiday shopping season is make or break time for retailers, and for Best Buy Co. Inc. the 2008 holiday season brought an extra dose of good cheer-for the company’s e-commerce operations. While comp store sales fell 6.6% for the fiscal month ended Jan. 3, 2009, online sales surged 34% over the year-earlier period.
But the good news for the retailer’s web business didn’t stop with the rise in online sales. Throughout November and December, typically the busiest and most difficult time to keep customers happy, customer satisfaction scores rose 24% over the prior year’s holiday season, while the number of customer complaints declined.
How did Best Buy do it? With a large dose of retailing fundamentals mixed in with a steady stream of new-age ideas aimed at better connecting with web-savvy consumers, John Thompson, senior vice president and general manager of BestBuy.com, said in a recent interview with Internet Retailer at the company’s headquarters outside of Minneapolis in Richfield, Minn.
Stand out on the web
“The retailers who win will be the ones that offer a point of differentiation and can stand out on the Internet,” he says. “A few years ago, the proof point for our brand was in the store with our Blue Shirt sales staff. Today it’s out there on the web. People are touching our brand first on the Internet.”
The hefty lift in online holiday sales came from two sources, Thompson says: improvements in the basic operation of the web site and innovations that drove additional traffic and sales.
First, the fundamentals. Just before the 2008 holiday shopping season began, Best Buy completed a multi-year project with Sterling Commerce to upgrade its inventory management system, enabling shoppers to place online orders later in the season for delivery in time for Christmas.
And thanks to other upgrades and routine maintenance of BestBuy.com’s web server infrastructure and risk management system for handling online payments, it was able to virtually eliminate site outages while maintaining fast order processing during peak periods.
“Having no site outages made a huge difference,” says Lisa Smith, vice president of customer care. The surprising reward, she adds, was a 15% drop in the number of customer complaint calls and e-mails into Best Buy’s contact centers on the always-hectic Friday after Thanksgiving compared to the same day a year earlier.
In addition, Best Buy improved online search and navigation on BestBuy.com. “We cleaned up the product detail pages,” Thompson says.
Also fundamental to Best Buy’s overall strategy, however, is the passion it instills in both its employees and its technology partners to develop new and effective ways to connect with consumers online as well as in new web-enabled ways in the company’s more than 900 U.S. stores, Thompson says. The retailer even retains an anthropologist and routinely works with groups of consumers, both in their homes and at Best Buy facilities, to study how consumers are changing their shopping behavior.
Culture of ideas
Best Buy has learned from school kids new terms they use in product searches, leading to pages on BestBuy.com better optimized for Internet search engines. It also has learned how to recognize certain behaviors in online shoppers, such as interest in complex products, that make them good candidates for buying services from the company’s technical services team on GeekSquad.com.
Best Buy is personalizing that site, enabling customers to choose particular agents after viewing their profiles, including their specialty areas and their ratings from other customers.
The brand-building environment at Best Buy, which has more than $40 billion in total annual revenue, is rooted inside the four color-coordinated glassy buildings that make up the retailer’s corporate campus, where a mall connecting the buildings features everything from a day care center, an exercise room and a retail gift shop, to numerous meeting rooms, lounges and plenty of opportunities to perk up with Caribou coffee. With employees constantly moving about, it’s an environment designed to foster ideas and teamwork.
Indeed, employees are encouraged to initiate improvements. In a move to leverage the power of the Internet to engage consumers, Best Buy has dedicated 10 customer service agents to contribute to Twitter pages and constantly monitor blogs for mentions of the retailer’s brand.
In one incident this year, the host of Noobie.com, a popular consumer electronics blog, lambasted Best Buy for breaking his young son’s heart on Valentine’s Day by failing to deliver a stuffed penguin as promised with a DVD of the children’s film Madagascar. After discovering that post, a Best Buy customer service agent contacted the blogger and offered to help. The agent located two of the penguins and sent them free of charge.
The blogger, Patric Welch, related the story of the lost and found penguins on Noobie.com, and how the Best Buy customer service agent saved the day. As a result, Smith says, Best Buy gained a valuable endorsement on a blog frequented by consumers who may be looking for information on the kinds of products Best Buy sells.
Welch’s Feb. 24 blog posting attracted more than a dozen positive comments within a week from Noobie.com visitors, including one who said he hadn’t cared for shopping in Best Buy stores but now had a more friendly and positive image of the retailer.
Holistic Spanish policy
Best Buy is also reaching out to consumers across cultures. In the fall of 2007, it launched Espanol.BestBuy.com, the Spanish-language version of BestBuy.com. “We’re the only big box retailer with an e-commerce site fully translated into Spanish,” says Christine Webster Moore, who oversees the site as vice president of business initiatives.
Moreover, she says, Best Buy has a holistic customer service strategy to engage Spanish-speaking consumers across stores and contact centers as well as online. It also has worked with site content translation company MotionPoint so that new product information from suppliers is translated thoroughly into Spanish before it appears on the web. In about 370 Best Buy stores frequented by Spanish-speaking customers, the retailer has installed Spanish signs promoting the e-commerce site.
The effort has paid off in customer loyalty, Moore says. Individual customers spend more time and money on the Spanish site than on the English-language version, she says.