Inside Best Buy’s Unexpected Comeback

If you flashback to around five years ago, you’d likely be reading headlines about how Best Buy was as good as dead. Yes, the big box retailer that made its name in price matching its competitors was effectively getting run out of business by Amazon, the same online giant that helped take down Circuit City and Radio Shack, among others. Yes, Best Buy, which sold everything from compact discs to washing machines to cellular phones, was seemingly no longer relevant in the marketplace, despite affordable prices, an assortment of all-things electronics and good customer service.

Now, in 2018, Best Buy is thriving – but its current success didn’t come without a price. So how did Best Buy go from being on the brink of collapse to a profitable big box electronics machine? It wasn’t easy, and it came with some difficult decisions.

Here’s a look at Best Buy’s comeback.

How Best Buy Evolved to Stay Relevant
It wasn’t all easy swimming for Best Buy to turn things around. No, management had to make a lot of difficult decisions.

In August 2012, Best Buy profits shrunk by about 90 percent in just one quarter. Senior management officials resigned. Its stock plummeted. During this same period, Best Buy was dead set on its customers continuing to enter its stores to make purchases, which became a pipe dream with the rise of online ordering via Amazon. Bold changes had to be made. It started by hiring an outside CEO in Hubert Joly. It closed hundreds of underperforming mobile stores. It moved to heavily invest in its website. And it’s upping the ante when it comes to in-person service.

Today, Best Buy is doing more than just surviving. It has revamped its in-store inventory and moved lesser selling items to “buy-online, pickup in-store” status. It offers free home delivery on online orders of more than $35, a policy that’s similar for non-Prime users on Amazon. And it’s further embracing a “try it before you buy it” business model that welcomes consumers to check out the products they’re interested in before making a purchasing decision. This is especially important, the company believes, for “once a decade products” like television sets. Best Buy has reported a recent 10 percent growth in online sales, it has seen six straight quarters of growth and its stock has increased by more than 30 percent just this last year.

Best Buy has also recently purchased GreatCall, which owns Jitterbug phones. It’s even struck a deal with its online rival Amazon to exclusively sell a line of TVs. (On a side note, Best Buy’s comeback has also drawn the praise of Amazon boss Jeff Bezos, which is no small feat.)

But Best Buy is far from content. Its next goal is to be a complete electronic consultant.

From Geek Squad to Electronic Consultant
Best Buy has continued to attract consumers online and in-store. Next, it wants to build relationships with consumers in their homes.

You’ve likely heard of the Geek Squad, Best Buy’s in-home product support division. Best Buy wants to build on that and turn its service professionals into full-blown electronic consultants. If you need help installing a new Internet modem and Wi-Fi mesh system, Best Buy wants to be the one you call for help. If you need a flat-screen TV mounted in your living room wall, Best Buy wants you to call it. Yes, Best Buy wants to be anything and everything for all-things in-home electronics. It’s even gone so far to as to introduce an on-demand support system for $199 per year.

Can Anything Slow Best Buy?
Despite Best Buy’s turnaround, there are still some looming concerns. Wall Street analysts cite things like higher gasoline prices sapping disposable income, the lack of innovation in electronics and long-lasting nature of today’s TVs, and more as factors that could stunt possible growth. But with the economy as good as it is now and unemployment at historic lows, it’s worth betting on Best Buy in the future. And if for some reason the company does struggle again in the near or long-term, we’re betting that Best Buy has the leadership in place and innovative style of thinking to turn it around.

Ethan Warrick
Editor
Wealth Authority


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