Best Buy Co. CEO Hubert Joly began his response to a question earlier this week about Amazon.com by saying “we’re obsessed” with the Best Buy customer.
In a group setting like Best Buy’s investor day, it was impossible to ask the obvious follow-up — how much Joly has learned from watching Amazon’s Jeff Bezos, another self-described, obsessed-with-the-customer CEO.
Bezos just this year reminded investors that Amazon’s obsession with the customer is one way he keeps it “day one” at Amazon, meaning to keep the same sense of urgency about creating new ways of serving customers as Amazon had at the beginning.
It seems hard to use obsessiveness as a business measure, but it’s clear this trait at Best Buy is not just talk. A better experience for the customers who buy from Best Buy seems to explain not only why Best Buy is alive in 2017 but why the company seems poised to keep growing.
The company looked to be just more Amazon roadkill five years ago when Joly got there. As he joked again this week, Best Buy then only had two problems, but both were life-threatening, as same-store sales were declining and the operating margin was contracting.
The management team soon announced a turnaround plan called Renew Blue. Top of the list was improving the customer experience.
Keeping the customers coming back seems pretty fundamental, but in traditional retailing it’s easy to get distracted by the store — how it looks, what’s on display and so on. Merchandising at its best is customer-focused, and Best Buy Co. founder Richard M. Schulze proved to be a masterful merchant. He changed the presentation of goods in the store as consumer preferences changed and more or less invented the big-box electronics store.
More than a dozen years ago, though, Richfield-based Best Buy started rolling out a new strategy it called customer centricity. Best Buy was on top of its game, yet Best Buy’s management team realized a big box filled with stuff wasn’t all that appealing to a lot of people.
So Best Buy set up different parts of its stores to appeal to specific customer groups and did smart things like placing cables and other accessories right next to the TVs, so the customer could easily put together a system in one shopping trip.
Yet this new approach really only worked for a short time. It’s difficult to isolate one single factor, but when this customer-centric strategy was adopted, Seattle-based Amazon was still mostly an online bookseller. And then it got a lot bigger.
Removing online hurdles
The threat from Amazon seems to always get characterized as tough-to-beat prices, but even at the same price, buying on Amazon had simply become a better experience for a lot of customers.
Amazon had invested a lot to make its website easy to use, and it kept working to make shipping faster and cheaper. And almost from the beginning Amazon deployed an innovation that analysts almost always call the real difference maker, a checkout process called 1-click.
Amazon had removed so much of the friction that spoils the fun when shopping online. In the time it takes a Minnesotan to warm up the car for a mid-December run to Best Buy, a decisive buyer on Amazon could have finished their whole holiday shopping list.
One of the first things Best Buy did in its turnaround was offer to match prices. If it couldn’t be found cheaper anywhere else, that meant Best Buy could win if it could deliver a better customer experience.
How Best Buy has gone about that filled much of a four-hour meeting for investors this week. In one telling anecdote, Joly described a customer in a California Best Buy store shopping for headphones.
The Best Buy Blue Shirt had one question for her: “What are you going to use them for?”
In the Best Buy of a few years ago, a staffer might have just led the customer to a shelf of headphones. Had they even talked, it would have been about headphone technical features.
This conversation reflected how Best Buy now sells, what Best Buy executive Shari Ballard described this week as “the ability to actually understand the experience that a customer is trying to have.” Best Buy has tried to do the same thing for customers who want to shop online, through steps like refining the search capability on BestBuy.com.
A winning combination
The bigger point is that Best Buy really can give a better experience than any of its competitors, including Amazon, although the company pointedly reminded investors it’s not in a zero-sum game with Amazon. As Ballard described, Best Buy customers seem to use both online and store visits to get what they need.
The customers go online if they feel pretty certain about what they want. If they are unsure what’s available or how much it should cost to accomplish what they want, they go to a store.
There’s a lot of uncertainty in shopping for some tech products, Joly said, and “when we listen to our customers, the vast majority of customers need help.” That’s why it’s common to see mom, dad and an 18-year-old crowding around the laptop computers in August as kids get ready to leave for college. A store with a helpful Blue Shirt turns out to be a pretty good place for all of them to learn what the best option is.
It was refreshing to hear Ballard talk about all the work that still lies ahead, too. Now, she said, a customer who wants to change the credit card charged for a subscription service has to call the company. “OK, we know that’s ridiculous,” she said.
Anticipating that investors would want to know how far the company has progressed, Ballard continued, “I would say we’re probably 25 percent to 30 percent of the way there. And that’s not false humility, it’s just that’s where we are.”
Best Buy has been in business for more than half a century, and it’s been five years since Joly put a turnaround in motion. Yet the company seems to be acting with a lot of urgency. Almost like it’s day one.