The brakes have been put on US electricals retailer Best Buy’s planned rapid expansion into the UK market after a tough first year on this side of the Atlantic, but it is now hatching plans to accelerate its services across digital platforms before the year is out.
Part of the Best Buy Europe joint venture between the US firm and UK mobile specialist Carphone Warehouse (CPW), Best Buy UK’s major growth plans now lie in the potential of its multichannel retail offering rather than bricks and mortar stores, of which approximately 200 were planned when the company arrived in Britain in 2010, one year behind schedule.
With just ten stores open in the UK to date and only one more in the pipeline for the rest of 2011 it is easy to criticise the retailer for stalling its wider entry into a new market, but UK Managing Director (MD) Steve Jensen does not think the change of strategy should be used as a stick with which to beat the business.
“I think you have to have the guts to say ‘that was our ambition but now things have changed in a post Lehmann Brothers collapse environment’,” he told Retail Gazette.
“It would be madness to drive on and open 100 stores.
“We are much better off learning from what we have done so far, figuring out the next steps and understanding what is at our disposal.”
So what has the retailer achieved since arriving in the UK with its first ‘big box’ store in Thurrock last summer? In its first full-year trading statement published last month Best Buy UK reported losses of £62.2 million, representing a larger than expected deficit as a consequence of consumers’ unwillingness to splash out on big ticket items and the improvement in grocery companies’ non-food offerings.
On a more positive note the company has drawn attention to an apparent ignorance to customer service within some parts of the UK retail industry, arguably pushing other businesses into providing a more hands-on approach to selling.
Armed with its shopfloor-based Blue Shirts and the specialist tech advisers Geek Squad, which now also appear in CPW and Wireless World outlets across the country, Best Buy UK considers itself to be a leader in offering its shoppers the best level of service and implements changes based on real-time feedback.
“You don’t get good service by accident, you get it by being diligent,” Jensen remarked.
“Customer service isn’t a plan it’s a culture and we believe we have that here at Best Buy.”
It sounds simple but it is likely to become increasingly difficult to use good customer service as a differentiator as companies pull out all the stops to attract shoppers through their doors in such a competitive market.
A recent Retail Eyes and Retail Gazette survey of retail professionals in the UK found that, since the end of the recession in January 2010, electricals firms have put more focus on customer service than any other sector of the industry, but Jensen says he is surprised that British consumers did not expect high levels of service in the first place.
Best Buy’s rivals in the electricals sector have struggled for business in the last 18 months, with Dixons Retail’s annual profits down year-on-year and up-for-sale Comet losing £9 million in the 12 months to April 30th, and how much of this is down to the level of service provided by these firms is open to debate.
Of the three major players in the market, however, the evolving Dixons is arguably the most confident about its market position in the near future, having taken advantage of Best Buy’s delayed entry into the UK by transforming the shape of its business and launching its own tech advice service KnowHow to replace the widely criticised TechGuys support network it had in place before.
If Comet’s parent company Kesa finds a buyer for its struggling UK business the market hierarchy could quickly change again, but it is still very unclear what will become of this once profitable business – and Jensen for one does not see the value in taking it on, despite recent speculation to the contrary.
“In an environment where the customer wants multichannel why would you want to take on so many bricks and mortar stores?” he argued.
Jensen thinks Kesa has realised this and this is why it is considering reducing the size of its property portfolio as well as opening smaller outlets, and it appears Best Buy UK has taken note of its rivals’ various strategies and decided that online development must now be the key focus.
The two most recent trading statements from Roger Taylor, CEO of CPW, have indicated that the group is evaluating the next steps of its “multi-format/multichannel consumer electronics strategy” for its big box Best Buy stores in the UK, and Jensen says that more details on this subject will be made before Christmas this year.
The partnership with CPW, which has more than 800 stores nationwide, means Best Buy already has hundreds of suitable collection points if it were to introduce click & collect services, and Jensen says this is one of many plans being considered at present and a natural step towards increasing Best Buy’s brand presence on the high street.
“We need to work on some things, add to what we are doing with Bestbuy.co.uk and we’ll have a strong offering,” the MD explained
“We’ve already identified 12 to 20 channels that you can move on to quickly, and we might also be able to leverage certain things with CPW Founder Charles Dunstone’s recently established Mobile Money Network.
“I am also really passionate about m-commerce solutions; it’s about meeting customers where they are.”
Before m-commerce solutions can be unveiled a mobile website must first be launched, and that is scheduled to occur later this summer.
It still remains unclear how many stores Best Buy will ultimately open on British soil, but what is certain is that multichannel expansion and providing high levels of customer service, rather than store building, remain the priorities for 2011 and probably beyond.