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Best Buy CEO talks melding digital with physical for a winning retail strategy

Rather than falling victim to economic winds, Best Buy harnessed its resources and created a turnaround strategy that included matching Amazon on price and speed of delivery, and leveraging its physical stores to meet customer needs.

Best Buy's Hubert Joly shares his insights with Adobe's Shantanu Narayen. Photo courtesy of Adobe.

March 29, 2019 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Traditional retailers that can integrate digital merchandising with physical stores to improve the customer journey are winning.

One of the best examples is Best Buy Co. Inc., as Jeff Kagan observed in a Retail Customer Experience blog last year.

Attendees at the Adobe 2019 Summit in Las Vegas this week had a chance to learn more about the company's turnaround from CEO Hubert Joly. Shantanu Narayen, Adobe CEO, interviewed Joly during a keynote presentation.

"We don't see ourselves as a brick and mortar retailer," Joly said. "We see ourselves as a company that's obsessed about the customer that's trying to serve the customers in a way that truly solves their unique problem."

Seven years ago many people thought Best Buy would be destroyed by Amazon, a fate that befelled other electronics retailers, Joly said. But rather than falling victim, Best Buy harnessed its resources and created a turnaround strategy that has allowed it to prosper. Last month, the company reported a 3 percent increase in comparable sales for the 13-week fourth quarter ended Feb. 2, 2019, on top of 9 percent comparable sales growth last year.

The turnaround begins

In November 2012, the company introduced a comprehensive strategy involving customers, employees and vendor partners, Joly said.

"They're good online," he said of Amazon. "They're an amazing company." The first part of Best Buy's turnaround was to match Amazon's prices and provide free delivery as fast as Amazon.

"Call it a draw online," Joly said in comparing Best Buy with Amazon.

But the physical stores gave Best Buy an edge since they allow customers to have an in-store experience, and at the same time give Best Buy the ability to send advisers to peoples' homes.

"The stores end up being a wonderful asset," Joly said. A customer app allows the guest to compare features of different products while they're in the store. They can also know which products are available in which stores. Half of Best Buy's online orders are either picked up in a store or shipped from the store.

"In soccer terms, we win three to one," Joly said. "And we're able to leverage digital technology across all of these touch points."

Best Buy also invested in the customer experience. The company revamped its website, made changes in the stores and invested in is employees. By investing in its workers, it reduced employee turnover "precipitously," he said.

A new company purpose

Once these measures were completed, the company turned its attention to building the "new Blue," he said. "Our purpose is to enrich lives with the help of technology. Make a big difference in peoples' lives by addressing key human needs, whether it's entertainment, productivity, communication, food preparation, security or health."

He said the company is "innovating outside of the box." One example are its in-home advisers. Buying technology can be overwhelming for some customers, he said.

"We'll come to you for free, and we'll have a conversation in your home, and we'll try to design something that makes a big difference in your life," he said.

Another example is total tech support. Historically, tech support was attached to a single product. "For $200 per year, we'll support everything in your home and help you make it work," he said.

Another example is a focus on health and aging seniors. Best Buy acquired GreatCall, a provider of connected health and personal emergency response services to the aging population, with more than 900,000 paying subscribers. By placing devices in seniors' homes, the company monitors their daily seniors' living activities.

"We believe that helping aging seniors stay longer in their home and live an independent life does wonders for them," he said.

Best Buy also tried to be a good world citizen by reducing its carbon footprint and becoming the largest collector of funds for St. Jude's Children's Hospital. It also launched teen tech centers in collaboration with Adobe to help give disadvantaged teenagers access to technology.

"This is truly far from just selling a TV and then moving on," Joly said.

Digitization a key benefit

Digitization has been a key aspect of the company's transformation, Joly said. The use of artificial intelligence in the online search function is one example. A feature called "On My Way" enables customers to alert a store that they are going to soon arrive to pick up an item, giving employees time to bring the item to the front of the store for pickup. The store also sends the customer an email with unpacking and installation instructions.

Best Buy also uses virtual reality to aid customers in their shopping journey by showing what an item will look like in their home, Joly said.

"Digital marketing has been a huge transformation," he said. Where 70 percent of the marketing spend was for analog seven years ago, it is now 90 percent digital. The company built a customer database with 12,000 attributes. Using individual customer IDs, the company, the company is able to conduct targeted marketing to customers.

"For every promotional email, we actually send 40 million versions of that email," he said. "Optimizing how many emails you send to whom, and at what time of the day, is a challenge, he said. Not all customers want to receive the same number of emails, so it is important to determine how many emails to send each customer.

All Best Buy tech support and advisors are given information about the customer.

"If I call tech support, they'll know exactly who I am, they'll know everything I have in my home, and that makes the customer experience much more effective," he said.

"The metrics are changing," Joly said. Drawing traffic to the store and measuring conversion rates of customers to purchasers are no longer the only metrics. The store manager will now determine how many households live in their local market, how many are Best Buy customers, how many does the store have a relationship with, and is the store helping them on an ongoing basis.

A big challenge is connecting the sense of purpose and quest for meaning of the individual employees with the company's purpose, Joly said.

"Magic happens if you can connect the purpose of each individual with the purpose of the company," he said. "The purpose of a company like Best Buy is not to make money — it's an imperative to make money, you have to make money — but it's not the purpose. The purpose in our case is to enrich lives with technology."