Best Buy plays up a new strength: Home appliances
By Star Tribune
Published: Friday, March 15, 2013, 6:30 p.m.
When Best Buy Co. Inc. CEO Hubert Joly visited stores during his first week on the job in September, he quickly noticed something was amiss. Why, he asked, did some locations relegate some appliances to the back of the store when they should be more up front and center?
After all, Joly correctly noted, appliances both large (refrigerators, cooking ranges, washing machines) and small (blenders, toaster ovens) have been hot items recently, one of the few growth categories that Best Buy has only begun to tap.
The company apparently got the message. Encouraged by nine consecutive quarters of same-store sales increases in appliances, Best Buy is poised to expand aggressively into this category. The Richfield, Minn.-based consumer electronics retailer plans this year to open 18 to 25 of its high-end Pacific Kitchen stores, a store-within-a-store concept. Best Buy also plans to shift more of its existing retail floor space away from CDs and DVDs toward higher-growth areas like smartphones, tablets and appliances.
At a time when Best Buy has struggled to grow same-store sales, appliances have performed very well. Since the fourth quarter of 2011, Best Buy has averaged a quarterly same-store sales gain of 10.3 percent.
As the housing market continues to recover, Best Buy's push into appliances is a “superb strategic move,” said Burt Flickinger, managing director of the Strategic Resources retail consulting firm in New York. “It's a good opportunity to target new home buyers or consumers who want to remodel their homes.”
Selling large products like stoves and dryers also will help Best Buy pull away from Amazon, since people are reluctant to purchase such big-ticket items online, Flickinger said.
It might strike people as odd that Best Buy should wade into appliances. Consumers normally associate the brand with televisions, computers, and sound systems, not dishwashers and vacuum cleaners. Even Best Buy didn't really fashion itself as an appliance retailer.
In fiscal 2012, appliances made up only 6.3 percent of the company's $50 billion in revenue. Officials declined to give a target for revenue growth this year.
“This was a business that we weren't really serious about,” said Liz Haesler, vice president of appliances. “We were not on top of the latest and greatest trends.”
As a whole, the category is not bursting with growth. Last November, year-to-date shipments of major appliances fell 2.1 percent compared with the same period in 2011, according to the Association of Home Appliance Manufacturers.
But then Best Buy took note of how traditional retailers like Sears and Home Depot built successful appliance businesses.
Sears, in fact, spun off its appliance operations last fall into a separate publicly traded company called Sears Hometown and Outlet Stores Inc. in a deal worth $446 million.
Best Buy discovered that, with a little effort, it too could grab its share of appliance sales.
“It was truly a reinvention,” Haesler said. “When you have not gotten any growth, people are not that excited about your business. We really took a step back and looked at our assortment and our true strengths.”
One of those strengths is technology. Best Buy has always prided itself on selling and explaining the latest electronics. As it so happened, appliances have enjoyed a burst of innovation that has turned boring “white boxes” into oversized, tricked-out Internet devices. For example, Best Buy carries state-of-the-art refrigerators, washing machines and dishwashers from LG and Samsung that consumers can control with their smartphone. These appliances can use water and electricity as needed, communicate with one another, and track grocery needs.
Such “smart appliances” still represent a relatively small market, but Pike Research estimates that smart appliance sales will hit $35 billion in 2020, up from $2 billion today.
Appliances play a key role in Best Buy's next-generation “Connected Stores.” The smaller-format stores feature Pacific Kitchen & Home, a mid- to high-end appliance retailer Best Buy acquired in 2006. The chain is known for its skilled sales staff and expensive brands like Viking, Wolf and Miele.
Some experts think that a beefed-up appliance section will help Best Buy reach a customer base that has so far proven elusive to the retailer: women.
“Women buy appliances,” said Lynn Switanowski, founding partner of Creative Business Consulting Group in Boston. “It's a good strategy to build loyalty among women and then expand (that appeal) to other products” in the store.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Credit card companies offer free credit scores
- Flabeg wins court battle
- Mercedes offers luxury for the rest of us
- Pennsylvania, other states considering bids to host Boeing 777X production
- Startup aims to replace chicken, egg
- Investors put squeeze on prospective homeowners’ American dreams
- Crown Castle to grow, adding Mylan building
- Madoff cut dead client’s payout by creating fake loss, jury told
- Madoff fraud still stings ex-clients 5 years later