When a major US business announces its UK launch, all eyes are on the management to see whether the hype equates to a hit. For US electricals retailer Best Buy, which embarked on a £1bn UK joint venture with Carphone Warehouse in May 2010, its debut does not appear to have played well with the British audience.
While any new retailer needs time to bed in, this highly competitive sector is a particularly unforgiving environment. On the flip-side, Best Buy is hardly new to this game - it has 950 stores in the US, where it has a 22% market share.
When Carphone Warehouse founder Charles Dunstone led a tour of a Chicago Best Buy store in 2008, he boasted: 'Look at this next to Currys or PC World - there's no comparison.'
Three years on, with a loss of £62.2m for a chain of six stores, plus an online business, Best Buy's management has admitted that it is re-evaluating its strategy. Five of the senior team have departed, including chief executive Scott Wheway and marketing director Kevin Styles, signalling further setbacks to its plan to have 80 stores in the UK by 2013. Rumours are now circulating that Best Buy could be eyeing Dixons Retail as a bid target.
Is there a place for this US retailer in the UK? We asked Robin Chan, head of online marketing at online retailer Diamondmanufacturers.co.uk, who held the same role at Comet, and Adrian Thomas, director of retail at integrated agency Billington Cartmell.
Best Buy UK losses 2010-11
2010 - £21m
2011 - £62.2m
Source: Carphone Warehouse
ROBIN CHAN HEAD OF ONLINE MARKETING, DIAMONDMANUFACTURERS.CO.UK
To understand the Best Buy brand, you must understand the typical electronics consumer. The most fundamental requirement they are looking for is advice about the product.
Oddly, it is not always about price, even in these harsh economic times. For example, if you are buying a washing machine, free installation is attractive if you live in a top-floor flat.
Over the years, big, out-of-town electrical retailers have been stigmatised for lack of product knowledge and pushy sales staff, which Currys and Comet have focused on correcting. So press reports that Best Buy would bring a shopping experience to rival John Lewis was an interesting brand statement.
For one thing, its stores are in retail parks, unlike John Lewis and more like Comet and Currys. Its website focuses on deals, rather than service or product knowledge, again like Currys and Comet. So is Best Buy's focus on best price rather than best service? It surely can't compete on price with Amazon.
Best Buy is struggling to differentiate itself in the UK market place. Where is the added value for the consumer?
- To be more like John Lewis, open some stores in cities. Have fewer stores and establish flagships in key cities with low unemployment and time-poor, affluent people. From there, progressively branch out.
- Provide retail theatre. Create a level of excitement like gaming expo E3.
- Reward affiliates to support and develop the brand in terms of product knowledge and retail service.
- Promote with strong PR and marketing to help differentiate the brand from its rivals.
ADRIAN THOMAS DIRECTOR OF RETAIL, BILLINGTON CARTMELL
[BX] The team behind Best Buy UK knows a thing or two about retail, especially the importance of delivering a positive customer experience, built on the core principles of exceptional service and value for money. In the US, the brand is a pioneer of innovation, particularly around mobile. So what's going wrong in the UK?
Perhaps not as much as the headlines suggest. Admittedly, a loss of £62.2m isn't great, but it's barely a year since the first store opened to rapturous applause, and a great store experience comes at a price. The true test will be whether Best Buy can weather the storm and ride on the back of a major sporting year in 2012.
One major concern, however, is the extent of the range and whether there is really a need for a 'customer-service centric' proposition across all consumer electricals. I see the benefit of providing expertise for 'connected world' items such as mobiles, tablets, PCs and gaming, but I'm not convinced that consumers need guidance on buying washing machines or kettles.
My most recent big-box purchase - a Zanussi washing machine - was from Next. Not an obvious choice, but having read a few blogs and checked out John Lewis and Argos, I hit Google. The best price and delivery service available was from a fashion retailer.
- Focus the range on categories where customers seek guidance.
- Optimise the living daylights out of the digital space.
- Embrace cutting-edge US innovation, particularly within mobile.
- Revisit the launch strategy and look to continuously surprise and delight. Best Buy really needs to get itself talked about.