Posts Tagged 'Best Buy'

How omnichannel makes inventory management tougher

RetailWire panelists recently had plenty to say about the supply-chain challenges triggered by stores’ push into omnichannel programs. Here’s my brief comment:

One cause of volatility is the growth of “ship from store” fulfillment of e-commerce orders (rather than shipping from a dedicated distribution center). This makes it harder to track sales and inventories at the individual location level, and makes replenishment more unpredictable. If e-commerce order fulfillment is totally randomized from one brick-and-mortar location to another (depending on who has the goods in stock and the costs of shipping), the customer looking for something on an actual store visit is more likely to be disappointed.

And here’s an additional comment on the same topic, specific to Target’s challenges:

Given Target’s spotty history of in-stock rates in its brick and mortar stores, there is a risk involved in depending too heavily on “ship from store.” As the Braintrust discussed a week ago, using stores as mini-distribution centers makes it tougher to assess actual demand in a given location accurately — in turn making replenishment more unpredictable. So if the “flow center” concept helps Target address this problem…good idea and worth rolling out to other regions.

And, finally, a comment about how Best Buy is successfully addressing the same issues:

Demand planning has become more complicated with the onset of omnichannel initiatives like “Buy online – pickup in store” and “Ship from store.” It makes forecasting by location more difficult if physical stores are also being used as mini-warehouses. Retailers run the risk of alienating customers who have made the effort to shop at a physical store, if they can’t find what they want in stock.

Best Buy has long been a leader in helping customers use the website to identify in-stock levels at their nearest store. But the company obviously decided that this wasn’t enough, and only a boost in stock levels would drive more sales. Retailers often get rewarded by Wall Street for driving down their comp-store inventories, but perhaps Best Buy’s results will point in a smarter direction.

Can Circuit City make a comeback?

Whoever bought the Circuit City brand after the store’s demise a few years ago plans to revive it — both as an e-commerce site and as a re-engineered brick-and-mortar store. The question in front of RetailWire panelists: Does the world need a revived Circuit City? (Or, as their headline put it, “Can Circuit City come back from the dead?”) Here’s my skeptical point of view:

This reminds me of the Linens-N-Things saga, in which the brand survives as an e-commerce site but its physical stores are long gone. There simply wasn’t the need for two similar big box concepts, so Bed Bath & Beyond turned out to be the survivor. (But BBBY stock price has fallen sharply in the past five years, like many retailers, as it faces increased competition from Amazon and others.)

It’s hard to see what value Circuit City brings to the table at this point — except as a web-only play. Does a small-footprint “experiential” store offer something different from Best Buy or Apple? (Especially now that Best Buy is removing CD’s from its physical stores, it’s easy to see that they will roll out more engaging and productive uses of that space.) The Circuit City brand was already “damaged goods” because of bad decisions they made to reduce customer service and in-store expertise.

Who gains when HHGregg loses?

Among several other stores closings announced in 2017, the regional electronics and appliance chain HHGregg may have flown under the radar. It did come to the attention of RetailWire panelists like me:

Best Buy will benefit, naturally, in those markets where HHGregg had a store footprint and market share. There are significant clusters of stores around Chicago, in the mid-Atlantic and mid-South (including Atlanta) and in Florida. But don’t expect it to compare to the demise of Circuit City — not only because HHGregg isn’t a national competitor but also because of the changing retail landscape.

Another retailer that might gain share is JCPenney, as it pushes into the major appliance business. Keep an eye on the big home improvement chains, too; this is one business that hasn’t been dominated by Amazon (yet).

Sports Authority: What do its problems mean for retail?

Sports Authority recently announced a chapter 11 filing as well as its plans to close or sell many of its locations. RetailWire panelists had a chance recently to dicuss what these developments mean for the broader world of retailing:

There are two issues at play here: Yes, there is an overall recognition by brick-and-mortar retailers that they have too much square footage as their own “omnichannel” business cannibalizes their physical stores. It’s an issue for all kinds of retailers, from Walmart to Kohl’s to Macy’s.

But Sports Authority’s struggles are symptomatic of the problems plaguing “niche” big box stores for several years. There has been a survivor (Best Buy, Bed Bath & Beyond, Barnes & Noble) and a failure (Circuit City, Linens & Things, Borders) in just about every niche you can think of — and even the “winners” are struggling with too much square footage.

Underlying the consolidation in the sports apparel and equipment industry? First, the impact of Amazon and other online competitors on just about every retail segment. Second, the push into activewear by every department store and apparel specialist you can name.

Best Buy outposts within Macy’s: A win-win

From a recent RetailWire discussion, here’s my point of view about Macy’s partnership with Best Buy on holiday pop-up shops this fall:

There’s a parallel to the Sunglass Hut and Finish Line shops inside Macy’s today. It gives Macy’s the halo effect of a brand name that is closely associated with a niche business like electronics or athletic shoes.

The benefit to Best Buy? Expand its “small footprint” locations beyond the Best Buy Mobile concept, into a department store that already has healthy traffic and a compatible customer base.

What makes a top retail CEO?

RetailWire panelists recently discussed a ranking of America’s top CEO’s, and in particular the members of the list who run retail companies. While several panelists commented on these executives’ vision and entrepreneurship, I found something else that many of them share:

One common thread is the number of CEO’s who are “homegrown.” They are either family members (Wegman, Butt, Nordstrom) or founders (Schultz) or longtime employees themselves (Jelinek, Cook, Iger). These are people who have been immersed in each company’s culture, have a sense of “ownership” and in some cases have their names on the door.

This isn’t to suggest that companies always should look inward for their senior management, and there are other names on the list who earned their stripes elsewhere. (Although Mickey Drexler’s reputation is under a cloud right now.) And “great” — as rated by one’s employees — may not always translate into great results from shareholders’ perspective. But it’s a telling argument for the importance of company culture in the overall success of a retail business.

Radio Shack: Tailwinds may not bring a comeback

There is some traction in the consumer electronics business, but RetailWire panelists seem to agree that it may be too late to help Radio Shack. Here’s my recent comment:

Best Buy’s announcement of an upswing in its sales suggests that the consumer electronics business is not dead after all, and the big box store might also be showing a pulse. It becomes more difficult for a company like Radio Shack — saddled with an image that it tries to embrace one day and mock the next — to compete against the brick-and-mortar or e-commerce giants in its segment.

It’s probably too late in Radio Shack’s history to consider a complete rebranding — including a new name — but it’s worth remembering that Best Buy originated many years ago as a Twin Cities-based audiophile store called “Sound of Music” and decided to walk away from its original brand identity.

Best Buy: The turnaround is still a work in progress

Today’s panel discussion at RetailWire centers on Best Buy. The question is whether the company’s turnaround (as engineered by its CEO Hubert Joly) can be declared an outright success. I think there is still plenty of work to be done:

It was premature to declare Best Buy DOA a couple of years ago, but it’s equally premature to declare the turnaround a success. Mr. Joly has done several smart things during his tenure that I have noted before on RetailWire (reallocating space away from CD’s, DVD’s and software…adding branded shops…putting more focus on service and omnichannel initiatives).

However, the holiday 2013 and Q1 2014 results still reflect declines in the company’s comp-store sales and gross margin. Good expense management seems to be driving earnings higher, which is a positive step toward sustainability. But Best Buy has a long way to go to recapture its consumer magic. Let’s hold off on the “transformation” talk until this happens.

2014: Year of the omnichannel “tipping point”?

While the CEO of Starbucks has less to worry about than the heads of more traditional retailers, he made the point recently that the industry in general needs to figure out multiple platforms for selling to consumers — and figure it out fast. Here’s my brief comment on RetailWire:

Howard Schultz is absolutely right about the shift, and he has a right to be concerned about the strength of his mall-based locations although his business is less vulnerable than a conventional retailer selling general merchandise.

Part of the “omnichannel” challenge is for retail executives to figure out how to leverage their tangible assets (storefronts and inventory) more effectively, given consumers’ migration to e-commerce. For some stores (Macy’s, for example), their forward-looking strategies are delivering results. For others (such as Best Buy) it’s a continuing struggle despite their efforts to execute the fundamentals better.

Best Buy: On the comeback trail…or not?

Here’s an appropriate followup to my last post (about the “premature burial” of big box stores). There is a lot of attention paid to the turnaround efforts at Best Buy, and justifiably so. Here’s a recent comment from RetailWire:

Best Buy was declared dead far too early, considering its size and its niche. And Hubert Joly’s hiring — at first met with skepticism — turned out to be a smart way to refocus the business on customer satisfaction.

I give credit to Mr. Joly and team for focusing on the fundamentals at Best Buy: First, embrace the challenge of “showrooming” by converting store traffic into transactions. Second, recapture at least some of Best Buy’s reputation for customer service, which slipped after the demise of Circuit City. Finally, find some new merchandising strategies (Samsung and Microsoft “shops,” for example) to use the center of the store more productively.

Best Buy still faces plenty of challenges, including robust competition from Walmart and Amazon among others, some unproductive sites and the cyclical nature of consumer electronics demand. But there is no doubt that the company has taken some important steps forward.

POSTSCRIPT: Since I published the comment above, Best Buy reported very disappointing holiday sales and their stock priced has fallen from the upper $30’s to the mid-$20’s as of January 24th. Obviously they are not out of the woods yet. I still think Mr. Joly’s initiatives are the right ones, but it’s hard to drive demand in consumer electronics without an influx of new products.