Article

Are Geeks out of place in Target's CE departments?

Early indications suggest that Target might expand the trial partnership to more locations.

April 2, 2013

The following is an excerpt from a recent conversation on RetailWire, reproduced here with kind permission.

Target's deal with RadioShack didn't work out, but early indications are that its test with members of Best Buy's Geek Squad started last year in Denver is working out well enough for both companies to extend the trial to the Kansas City market.

On Target's fourth quarter earnings call, company chairman, chief executive and president Gregg Steinhafel said the retailer had received "positive feedback from our guests" in Denver and rolled out the service to 20 stores in Kansas City beginning on Feb.17. If the next phase goes well, it is assumed, Target and Best Buy will further expand the service.

In aRetailWirepoll in August of last year, 67 percent of respondents said Geek Squads were more of a benefit to Target than Best Buy. Only 16 percent thought Best Buy was getting the better of the deal and 10 percent thought both parties would benefit equally.

While Best Buy has struggled in recent years, the consumer electronics chain posted better than expected results for the fourth quarter with comp store sales up roughly one percent. Online sales were up 11 percent during the period. Best Buy president and CEO Hubert Joly did not mention the Target test during the company's earnings call.

RetailWire BrainTrust comments:

I don't think the experiment will go chain wide. I think Target is learning what it takes to sell technology then will do it themselves.

The Geek Squad has been in Office Depot, Fedex Kinkos, and now Target. It may work for the host retailer, but I think it is a losing proposition for Best Buy/Geek Squad. If that is a core competency and a reason for customers to shop your store, why are you giving it to other retailers? - Robert DiPietro, VP Product Services, Affinion Group

I can easily see this partnership being expanded to other stores. It provides a level of service and tech credibility for Target that will help it become more competitive with Walmart in the CE space. And it takes a key asset of Best Buy to a well-trafficked discounter when its own big-box stores are undershopped.

To take the idea one giant step further, why not "Best Buy at Target" as an umbrella for the CE department? - Dick Seesel, Principal, Retailing In Focus LLC

Value-added services like the Geek Squad are one of the few areas in the CE world that gives the 4-waller a rare competitive edge over the online world. Expect this to expand. Given the growing complexity and reach of these devices, adding services to help the end user understand how to get the most out of them (a la Genius Bar) is a no-brainer. - Bill Emerson, President, Emerson Advisors 

I have been scratching my head about the partnership for precisely the reason the article mentions—that I can kind of see what's in it for Target, but I have a heck of a time seeing what's in it for Best Buy. The only thing that I can come up with is that Geek Squad may be run somewhat independently (it is a services business, rather than straight retail, and from what I know of the group, they have a very strong culture that is not really a Best Buy culture). Maybe someone in that division figured out this was a good way to create leverage that enables Geek Squad to stay strong, even if it doesn't necessarily accrue benefit to Best Buy stores. - Nikki Baird, Managing Partner, RSR Research