Last week Best Buy announced that it is closing 50 stores including its original store in Edina, Minnesota, and laying off 400 employees. The company plans to open 100 or so smaller, mobile stores which will cost less to stock and staff. “These changes will also help lower our overall cost structure,” noted Brian Dunn, Best Buy CEO. “We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices, which will help drive revenue. And, over time, we expect some of the savings will fall to the bottom line.”
He doesn’t get it.
While this strategy may sound good to investors, it does not address Best Buy’s problem, which is a lack of customer focus. Further comments from Best Buy management regarding this move point to the Internet as the problem. They claim that competition from the Internet is too stiff. Best Buy can’t match the prices of Amazon. In fact, they say that customers have been coming into Best Buy to check out items and then purchasing the items online.
Really? Are they joking? They got customers into their stores to check out an item, and the customers didn’t buy from them? Something is wrong. When you get the first opportunity to sell an item to a customer and you don’t do it, that is your fault. When you put out excuses and let this continue until your company is in financial difficulty, you need to look in the mirror and take responsibility.
Or pay attention to your customers. In January Best Buy was listed as the sixth most hated company. While this feeling about Best Buy has been building, it was exacerbated during the holiday season last year. Customers ordered items at Best Buy’s Web site around Thanksgiving, and Best Buy could not fulfill the orders. Customers were not informed of this until close to Christmas at which time they could not find the items elsewhere. Best Buy released a statement that read: “Due to overwhelming demand of hot product offerings on BestBuy.com during the November and December time period, we have encountered a situation that has affected redemption of some of our customers’ online orders.”
Best Buy broke the cardinal rule of business: the customer comes first. At Christmas, a critical time of year with a purchasing deadline, Best Buy failed to tell customers as soon as possible when the company had run out of items. Those customers were understandably outraged. At Christmas gatherings, those customers likely shared their anger with others.
However, Best Buy did not take responsibility. You can see that by the statement. Management “encountered a situation.” which they failed to address. Therefore, customers could not “redeem” their online orders. Since when do you redeem any order? The use of that term makes the order sounds like a bonus or an extra. Orders are filled, not redeemed.
This lack of customer focus and non-recognition of its problem does not bode well for Best Buy. The company can address cost cutting measures until they have no costs to cut, but that action won’t save them. Best Buy needs to drive revenue. To drive revenue, a business needs to listen to its customers and give them what they want. The fact that customers walk into Best Buy, check out an item, and order it online is telling. That means Best Buy is offering nothing to differentiate the customer experience. The customer has no reason to do business with Best Buy.
Best Buy is not recognizing its strength and its online competition’s weakness and using it to cultivate its customers. Instead, Best Buy management is blaming the Internet.
Whenever you are tempted to blame your competition for a lack of revenue, go look in the mirror. That is where the real problem lies.
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