Tuesday, April 10, 2012

Best Buy CEO Resigns. If You Sell a Commodity, You Face a Future Like His

Kevin Donlin on Fox News

Click my goofy-looking face to watch my interview on Fox 9 News.

Best Buy CEO Brian Dunn resigned today, and the future of his company is cloudy.

Best Buy can survive, but they have to morph into a stronger combination of online and retail stores, selling products and services. They're in a very tough industry with a lot of problems. But they’re also a very rich company, with a lot of assets.

One of those assets could turn out to be the key to their future: it’s the Geek Squad. The Geek Squad is the world's largest tech-support operation, and by most accounts, it produces a very big part of Best Buy profits.

The founder of the Geek Squad, Robert Stephens, always maintained that he acquired Best Buy 10 years ago, and not the other way around. And he might have been right.

He also recognized something very important: Service cannot be commoditized. You cannot price shop on service the way you can price shop on TVs and washing machines.

If Best Buy can find a way to deliver more services, whether it’s to consumers, or businesses, or both, that could go a long way toward turning them around.

Besides Wal-Mart offline and Amazon online, Best Buy has to worry about Apple.

There are Apple products, like the iPad, which is threatening to replace laptops, DVD players, and TVs for a lot of people and that really hurts Best Buy, which sells all those devices.

On top of that, visiting an Apple Store is a wonderful experience, while visiting a Best Buy store is ... not.

If Best Buy wants more shoppers buying more products and services in their retail stores, they need create a shopping experience that's more memorable -- for all the right reasons.

And that’s going to be a big challenge for Best Buy.

Bottom line: If you want more revenues, more profits, and less competition, you want to de-commoditize the products you sell and create an experience for your clients.

Update: Check out this July 5 story in The Wall Street Journal to see how Best Buy is trying to deliver the high-profit shopping experience of Apple, which I suggested above.

Do Best Buy executives read my blog? Hell no. But a good idea is a good idea.

Will it work? Time will tell ...

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