How to restore/increase business profitability and provide services and products that are really in demand.
Step 1: Accept that the old model of big box high ticket low margin merchandise sales that lead to up-sold high-margin add-ons, cables, and warranty plans is dead and no longer working. Your shrinking market (the rich, the tech-illiterate, and the naive)
Exhibit A: Customers can get the same high ticket Audio/Video products online cheaper (Amazon, newegg, slickdeals, etc.)
Exhibit B: Customers can get comparable high-margin cables and add-ons for 1000% cheaper online (monoprice)
Exhibit C: More online information and ready access has rendered the need for basic product knowledgeable sales staff useless (cnet, hometheater, dpreviews, etc.)
Exhibit D: Improved Product longevity and tech gimmick refresh has rendered warranty plans a waste of money. You're product buy back plan is a slightly better option if we choose to make the same expensive mistake we did the first time.
Exhibit E: CD and DVD/BluRay sales are dying. Disk media takes up space, less portable, and lots of content is crap not worth paying $15-40 for. Streaming and download are cheaper, portable, and available from your couch. The only exception to this are console games (see Exhibit C, Recommendation C)
Exhibit F: Geek Squad services are decreasing. Computer hardware is becoming cheaper, more disposable and less important as data moves onto the cloud.
Step 2:Embrace a new model that your customers are already abusing you for and others that should be clearly obvious.
Exhibit A: Showroom club membership. The lure of a customer into a store is no longer a guaranty they will buy something. Meanwhile BestBuy stocks slow moving expensive inventory that people armed with a CNET review come in to try, note the current retail market price, take a snapshot with their phone, make a decision about which Audio/Video equipment is better, and then go online to buy the same brand/model cheaper.
Recommendation A: If BestBuy closed, where would people go to try out something they might want to buy? Magnolia was a decent concept. Expand not by opening more big-box stores but by leveraging current retail space for club showroom memberships where pre-paid members would get full access to the latest array of Audio/Video/computer show pieces to test and try out.
Recommendation B: open smaller boutique BestBuy show-room and shipping only locations where club members can come in and try products. Let your showroom club memberships subsidize your limited boutique in-stock inventory.
Recommendation C: Allow showroom club members to have items purchased from BestBuy or other online merchants to be shipped to a BestBuy boutique showroom or participating store where the boutique studio can have the Audio/Video items set up in a custom environment based on the member's home theater dimensions/layout so the member can try them out and decide if he wants to keep it. If unsatisfied, the member can return the item for a refund and purchase another. Alternatively offer competitive pricing if the member chooses to purchase a comparable item from BestBuy online instead.
Recommendation D: Offer A/V classes on how to properly set up your home theater, what to look for in speakers, receivers, HD TV's and projectors, seating, wall paint, and other items the boutique showroom can be used for to provide an enhanced service to showroom club members and get them exposed and familiar with BestBuy "recommended" products.
Exhibit B: Wedding Registry - as another user already mentioned. More women are becoming tech-dependent and savvy. More couples are registering at multiple merchants offering more variety to their wedding guests. This should be obvious. The 10% off coupon alone on all remaining unpurchased registry items is enough alone to clear some inventory.
Recommendation A: Offer wedding, sweet 16, and Quincinera registries to take advantage of the youth and growing Hispanic population.
Exhibit C: Secondary Game market - as another user also mentioned. The Gaming industry is HOT and no longer only for kids. Many Gamers do have to have the game as soon as it comes out. However, with shifts in the pricing models of console companies and online package add-ons, as well as online rentals, more are delaying purchase in lieu of cheaper prices.
Recommendation A: Enter the used Games market and compete with GameStop. The arbitrage for used games is huge. Buy/trade in low and sell for 75% or 50% off the original price. Turn a low margin product into a high margin product.
Recommendation B: More adults are into gaming as they are the grown up kids from the original gaming generation. However, not all have the time to buy and play the latest games so they delay purchase or seek to rent.
Recommendation C: Negotiate with Microsoft and Sony to allow online Map-packs to be sold in stores. While it is convenient to download them straight to my xbox, I hate that I have to first buy MS points which never match up to the cost of the item and then browse through the horrific menu looking for the download and hope to have a fast enough connection to download and install the pack. I also hate how I have to have a credit card stored and can't just pay cash making my account vulnerable if xbox or Sony gets hacked...again.
Exhibit D: Lens rentals and increase your photography portfolio. Another user mentioned increasing your brand name lenses for photography equipment. Seeing as Ritz and some other photography places have shut their doors, Best Buy is a prime location for serving the growing prosumer photography and professional market. Just about every mid-20's bachelor I know has gotten into photography (not only as a way to meet pretty women) and every new mother I know has also gotten into photography and videography.
Recommendation A: Expand your photography line to include more lenses and adaptors for popular brands. Note: Olympus is going bankrupt, stock compatible lenses or of stable brands.
Recommendation B: Rent lenses. Again, take advantage of the try before you buy market. The difference here is you can't
try it out just by looking at it. A good trial requires taking it out for a day or two, hooking it up to your camera, and taking various indoor/outdoor day/night shots with your camera at different settings. Most of us in the DC/VA area have to drive into DC or at least 20 miles to the nearest lens rental area. What if BestBuy offered such a service. Hey now there's a good way to get us in the door and have us paying for something for a change.
Recommendation C: The Home Depot DIY effect. Offer beginning/intermediate/advanced photography courses at your stores. Surely there are some photography enthusiasts among your employees or just pool from your local social sources such as facebook and local singles sites. It's a great way to generate a virtuous cycle of new customers that increase their buying/renting interest that can also become a social forum for people to meet, make new friends, and even date. Best Buy could become the coffee shop of the 20-teens.
Exhibit E: Get a real online store. Your online store has an identity crisis. Is it an online catalog or an online store? Why should I go to bestbuy.com when I can get the same thing Tax free and free shipping everywhere else. The reviews are usually the only thing of value. Again, people are going to your site just to do research but not actually buy anything. The tax free option may be difficult to overcome but your inventory should be 10-20% cheaper online than in store. Find out if there are ways to resell and to sell items online without paying taxes in states that don't have a sales tax as well as to states that do.
Recommendation A: NewEgg approach: offer black-Friday style discounts on specific items each day. Whether they are overstocked items or items you are able to pass on deeper savings. We may not need an extra 8 GB thumb drive right now, but if you offer one up cheaper than any one else, I might be tempted to buy it from you now instead of someone else down the road.
Recommendation B: Train your customer. This daily deal discount works on the converse side as well. As with NewEgg.com, which sends daily eBlast deals via email, after viewing these a few times you start to see items that frequently re-appear. If I know that various quality brand subwoofers that are regularly listed at discount on these emails appear, I may put off purchasing from another online store or big box store because I know it'll show up eventually.
Recommendation C: Quarterly BlackFriday -Give a little to get a lot. Occasionally take an item that is really in demand and surprise-hit your Showroom club members with a "guerrilla discount" or "discount ambush" (I'm trademarking those if available). Without notice, send out an email at 1AM PST/3AM CST/4AM EST (possibly randomize the release times) listing a limited time/limited quantity offer of 50-60% off for 24 hours on a specific high demand item. Something like a Definitive Technology SuperCube I Subwoofer (reg $999) for $499 (100 available - limit 1 per customer). Call of Duty Black Ops 2 (reg $59.99) for $30 (500 available limit 1 per customer). Sure you'll take an initial hit but like a lottery, you'll make up for it in showroom club memberships once publicity gets out.
Recommendation D: The double-dip. If legal, as a follow up to Recommendation C above, allow unlimited purchases of a limited offering high demand product at 25-30% discount and allow your showroom club members to resell the item on your online store for about the same commission or Amazon or ebay might impose for resellers with free shipping to stores and boutique showrooms. This adds further value to the Showroom club membership, allows BestBuy to recoup some margin on the sales, and gets more people into it's boutique and showrooms to pick up their new items and anything else they might have happened to forget to buy.
The last and most important reason why anyone still actually would buy something from BestBuy as opposed to online is the simple necessity of "I need it right now and I can't wait for shipping". Boutique and in-store inventory should always be low but only swell during times when this might occur for a particular product. Hint: new TV's the day before and day of the SuperBowl or other major televised events. Another option would be to offer more of those airport kiosks near red-box kiosks to capitalize on the after-hours "oh-crap" my disk broke, controller broke, ipod broke, battery died moments.
I have other ideas but this is all I have time for right now.