April 06, 2009

Internet Retailer - BestBuy.com sales are up, showing the value of running with new ideas


Amid the storm clouds, BestBuy.com sales are up, showing the value of running with new ideas and sweating the details

By Paul Demery

The fourth quarter holiday shopping season is make or break time for retailers, and for Best Buy Co. Inc. the 2008 holiday season brought an extra dose of good cheer—for the company’s e-commerce operations. While comp store sales fell 6.6% for the fiscal month ended Jan. 3, 2009, online sales surged 34% over the year-earlier period.

But the good news for the retailer’s web business didn’t stop with the rise in online sales. Throughout November and December, typically the busiest and most difficult time to keep customers happy, customer satisfaction scores rose 24% over the prior year’s holiday season, while the number of customer complaints declined.

How did Best Buy do it? With a large dose of retailing fundamentals mixed in with a steady stream of new-age ideas aimed at better connecting with web-savvy consumers, John Thompson, senior vice president and general manager of BestBuy.com, said in a recent interview with Internet Retailer at the company’s headquarters outside of Minneapolis in Richfield, Minn.

Stand out on the web

“The retailers who win will be the ones that offer a point of differentiation and can stand out on the Internet,” he says. “A few years ago, the proof point for our brand was in the store with our Blue Shirt sales staff. Today it’s out there on the web. People are touching our brand first on the Internet.”
The hefty lift in online holiday sales came from two sources, Thompson says: improvements in the basic operation of the web site and innovations that drove additional traffic and sales.

First, the fundamentals. Just before the 2008 holiday shopping season began, Best Buy completed a multi-year project with Sterling Commerce to upgrade its inventory management system, enabling shoppers to place online orders later in the season for delivery in time for Christmas.
And thanks to other upgrades and routine maintenance of BestBuy.com’s web server infrastructure and risk management system for handling online payments, it was able to virtually eliminate site outages while maintaining fast order processing during peak periods.

Surprising reward

“Having no site outages made a huge difference,” says Lisa Smith, vice president of customer care. The surprising reward, she adds, was a 15% drop in the number of customer complaint calls and e-mails into Best Buy’s contact centers on the always-hectic Friday after Thanksgiving compared to the same day a year earlier.

In addition, Best Buy improved online search and navigation on BestBuy.com. “We cleaned up the product detail pages,” Thompson says.
Also fundamental to Best Buy’s overall strategy, however, is the passion it instills in both its employees and its technology partners to develop new and effective ways to connect with consumers online as well as in new web-enabled ways in the company’s more than 900 U.S. stores, Thompson says. The retailer even retains an anthropologist and routinely works with groups of consumers, both in their homes and at Best Buy facilities, to study how consumers are changing their shopping behavior.

Culture of ideas

Best Buy has learned from school kids new terms they use in product searches, leading to pages on BestBuy.com better optimized for Internet search engines. It also has learned how to recognize certain behaviors in online shoppers, such as interest in complex products, that make them good candidates for buying services from the company’s technical services team on GeekSquad.com.

Best Buy is personalizing that site, enabling customers to choose particular agents after viewing their profiles, including their specialty areas and their ratings from other customers.

The brand-building environment at Best Buy, which has more than $40 billion in total annual revenue, is rooted inside the four color-coordinated glassy buildings that make up the retailer’s corporate campus, where a mall connecting the buildings features everything from a day care center, an exercise room and a retail gift shop, to numerous meeting rooms, lounges and plenty of opportunities to perk up with Caribou coffee. With employees constantly moving about, it’s an environment designed to foster ideas and teamwork.

Indeed, employees are encouraged to initiate improvements. In a move to leverage the power of the Internet to engage consumers, Best Buy has dedicated 10 customer service agents to contribute to Twitter pages and constantly monitor blogs for mentions of the retailer’s brand.

In one incident this year, the host of Noobie.com, a popular consumer electronics blog, lambasted Best Buy for breaking his young son’s heart on Valentine’s Day by failing to deliver a stuffed penguin as promised with a DVD of the children’s film Madagascar. After discovering that post, a Best Buy customer service agent contacted the blogger and offered to help. The agent located two of the penguins and sent them free of charge.

The blogger, Patric Welch, related the story of the lost and found penguins on Noobie.com, and how the Best Buy customer service agent saved the day. As a result, Smith says, Best Buy gained a valuable endorsement on a blog frequented by consumers who may be looking for information on the kinds of products Best Buy sells.

Welch’s Feb. 24 blog posting attracted more than a dozen positive comments within a week from Noobie.com visitors, including one who said he hadn’t cared for shopping in Best Buy stores but now had a more friendly and positive image of the retailer.

Holistic Spanish policy

Best Buy is also reaching out to consumers across cultures. In the fall of 2007, it launched Espanol.BestBuy.com, the Spanish-language version of BestBuy.com. “We’re the only big box retailer with an e-commerce site fully translated into Spanish,” says Christine Webster Moore, who oversees the site as vice president of business initiatives.

Moreover, she says, Best Buy has a holistic customer service strategy to engage Spanish-speaking consumers across stores and contact centers as well as online. It also has worked with site content translation company MotionPoint so that new product information from suppliers is translated thoroughly into Spanish before it appears on the web. In about 370 Best Buy stores frequented by Spanish-speaking customers, the retailer has installed Spanish signs promoting the e-commerce site.

The effort has paid off in customer loyalty, Moore says. Individual customers spend more time and money on the Spanish site than on the English-language version, she says.

For all its success, observers say there are areas where Best Buy needs improvement. Paula Rosenblum, managing director of research and advisory firm Retail Systems Research LLC, says Best Buy could do a better job of cross-channel merchandising and marketing.

“Best Buy has gotten way too complicated in its pricing structure, which can make it hard to shop both online and in stores,” she says. “There are ‘Store Only’ specials advertised on BestBuy.com, for example, that are hard to find in the store.”

With multiple points of access for customers, multichannel retailing can be messy but will continue to evolve at Best Buy, a spokeswoman says.

An upgraded e-commerce platform should help. Best Buy has been operating for several years on a highly customized version of Art Technology Group Inc.‘s ATG Commerce Suite, and is upgrading to the latest version this year. Among the major advantages, says ATG product manager Kelly O’Neil, Best Buy merchandisers will be able to quickly create new merchandise displays and pricing without having to go through the retailer’s I.T. department.

The latest platform also supports stronger integration with contact centers, so that agents can help shoppers while looking at the same e-commerce page a customer is on, O’Neil adds.

Shari Ballard, the executive vice president who oversees all of Best Buy’s U.S. retail operations, has challenged each channel to display merchandise in ways that fit how consumers shop. “We need to make sure we don’t get locked into a box in how we present products,” Thompson says.

That could include targeted areas of the web site, for example. “In vacation season, we may let customers shop for cameras, batteries and other products in a vacation section,” Thompson adds.

New connections

Best Buy also is trying out other new ideas. With 35% of online shoppers using Best Buy’s in-store pickup service, the retailer is testing curb-side pickup so customers don’t have to leave their cars. It’s also experimenting with mobile commerce at m.BestBuy.com, and it will be developing ties between sales of digital music players and its 2008 acquisition of online music retailer Napster Inc.

As the company heads into the second half of 2009, with president and chief operating officer Brian Dunn—who started with Best Buy as a store associate in 1985—slated to succeed Brad Anderson as CEO in June, observers can expect the retailer to continue its longstanding policy of generating new ideas from within. Dunn is particularly focused on what he calls the connected world of retailing.

One of the innovations Thompson is particularly enthusiastic about is in that arena of new ways to connect with consumers. It’s called Best Buy Remix, and it allows outside web developers to reach into Best Buy’s product catalog for data they can present on their own web sites. In technical terms, Best Buy is exposing its application programming interfaces to these external developers in hopes they will develop new ways to let consumers interact with BestBuy.com’s product information and images.

One example is a project with web development firm Ribbit that connects the BestBuy.com product catalog to a third-party web site, ConsumersPrice.com, where shoppers can request alerts when particular Best Buy products become available at a certain price.

“This is getting to new and fundamental ways we’ll do business within the next few years,” Thompson says. It’s part of Best Buy adapting to what Thompson refers to as the semantic web, a more flexible Internet where shoppers will access the product information they want without having to jump among multiple pages.

If that information shows up on web pages that are not part of BestBuy.com, that’s not a problem for the retailer. To continue bringing cheer through e-commerce, Best Buy executives know they will have to follow their customers. “We have to be relevant to customers wherever they choose to touch our brand,” Thompson says.


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