Best Buy is the largest consumer electronics retailer in the United States, with 2009 sales of nearly $45 billion. The company competes aggressively on price with such rivals as Costco Wholesale, Sam’s Club, Walmart, and Target, but it is also known by consumers for its first-rate customer service. Best Buy customers have commented that the retailer’s sales staff is exceptionally knowledgeable about the company’s products and can direct them to the exact location of difficult-to-find items. Best Buy customers also appreciate that demonstration models of PC monitors, MP3 players, and other electronics are fully powered and ready for in-store use. Best Buy’s Geek Squad tech support and installation services are additional customer service features that are valued by many customers. How would you characterize Best Buy’s competitive strategy? Should it be classified as a low-cost provider strategy? A differentiation strategy? A best-cost strategy? Explain your answer.
Getting straight to the point, the strategy Best Buy employs is differentiation and not low-cost or best cost. As looking through their website and the products they offer in sell and comparing the same product with other similar rated websites like Amazon, and Walmart the pricing they have is not close but rather more than that in those comparative stores. However, Best Buy provides a price match guarantee such that they’ll provide you a refund on what you paid or provide a discount if you claim that you’ve another product at a similar store at a lower price. But not everyone goes this route of claiming for it so they can still get away charging a bit higher than their competitors.
Best Buy has also customized their website targeted towards people from a different country where they serve. Those being Canada, Mexico, and the United States. However, this is not true for Walmart and others as they have a single website and not targeted towards different customer segments. This gives Best Buy an edge when it comes to demographic targeting. They can customize the products as per the country first and then catered to the customer past history and visits.
The staff is another thing which is extraordinary as their staffs are not just a sales agent but an expert in the service they’re selling. They know where the particular item is in the self and also more about the product in detail. Those staff will also set those products at your home and provide any troubleshooting if required. That gives the customer a peace of mind as the ones selling is expert on the area, and know exactly what they’re doing. Started in 2002, they have got a total of over 200,000 of such staffs to service the customer and install both hardware and software to the customers across the stores they service from (Best Buy, 2018).
Walmart is rated 44 in the United States and 174 in the global ranking as per the web traffic as of September 26, 2018 (Alexa, 2018). While Best Buy falls a bit behind at 73 in the United States and 273 in the global ranking as per the same ranking (Alexa, 2018). Even while falling behind on the web traffic, they’ve still managed to amass more reviews on the store based on the way they operate calling the customer to call to action to provide reviews after the confirmation of the order. Seeing the sheer volume of reviews, it inclines customer to make a purchase from Best Buy compared to other stores.
Best Buy also has an additional service which no other store provides which is one-hour store pick-up service. If you make any purchase online, you can just go to the store and pick in it as early as within an hour time (Best Buy, 2018). Also, they do provide a free-shipping for orders over $35 (Best Buy, 2018). Also, those free-delivery can be scheduled so that it will arrive exactly on the date, time and venue that you state.
All those suggest that Best Buy being able to differentiate themselves from the mass and also suggest that they use differentiation strategy and not have a low-cost or best-cost strategy.
Alexa Walmart Ranking. (2018). Retrieved from https://www.alexa.com/siteinfo/walmart.com
Alexa Best Buy Ranking. (2018). Retrieved from https://www.alexa.com/siteinfo/bestbuy.com
Best Buy Geek Squad. (2018). Retrieved from https://www.bestbuy.com/site/services/geek-squad/pcmcat138100050018.c?id=pcmcat138100050018
Best Buy Fast Store Pickup. (2018). Retrieved from https://www.bestbuy.com/site/customer-service/fast-store-pickup/pcmcat218900050012.c?id=pcmcat218900050012
Best Buy Free Shipping. (2018). Retrieved from https://www.bestbuy.com/site/help-topics/free-shipping/pcmcat276800050002.c?id=pcmcat276800050002
To understand more on how Best Buy conducts its business I visited the website and selected Apple Airpods white in color and compared it with the same product in Walmart website. I found the following
|Best Buy||Walmart||Cost Co|
|Reviews - 21,421||Reviews- 187||Reviews - 1,579|
|$159.99||$144.98||Need to sign in to find price. There are a lot of members only item.|
|Option of price match guarantee- If others selling for lower price, they will match the price aside from schemes.||No such deal||No such deal|
|Free shipping - get it within 5 days||2 day free shipping - reach in 3 days||$4.99 for shipping, 3-5 days delivery|
|Card members get 5% off||No such deal||No such deal|
|Customer questions 256, 1254 answers - Knowledgeable, Informative, and genuine answers about the product. Sharing personal experience while answering questions. This helps others to also understand about the product.||No customer questions or answers found.||No customer questions or answers found.|
I personally reviewing the three websites for the same product found different things. I saw that Best Buy was open about its product and also clearly stated that they would match the price of competitors if found to be lower than theirs aside from special offers and schemes. They have over twenty one thousand reviews as compared to 187 and 1579 in Walmart and Cost co. This may not be sufficient to decide on the favorability but still this is substantial visits and review and has to be considered even though it is only for a product.
Next I checked Samsung note 9. Cost Co does not have it while Best Buy is selling it for $799.99 and Walmart for $ 999.99. Similarly Cost Co did not have Sony 55” Oled TV. Best Buy had it price under $2499.99 while Walmart had it for $ 2,498. Again there were 276 review on Best Buy while Walmart did not have any customer reviews. This for me showed not only more visitation but more interaction and preference with Best Buy over others. There were also 43 questions and 93 answers found in Best Buy information general confusions and queries that customers may have on the product.
In addition Best Buy has stores have function appliance and machineries where customers can come and observe and even analyze the products. Many companies such as Apple, Sony etc. have set up these hub inside Best Buy so customers can come and review their appliances. Another even more interesting thing about Best Buy is their Geek Squad who are a team of experts that go from home to home to help understand the problem of not working camera, TV, washing machine and solve it right at the home. (KELLEHER, 2016)
Another strategy used by Best Buy is the matching the price. This new innovative strategy eliminates and counters low price strategy by competitors which is pretty ingenious. Outlets all over the US are used to deliver good within hours and not days which is another differential strategy.
These are all differential strategy. They are not selling products for cheap but rather competitively but are using various strategies to improve customer experience, compete with competitors, reduce delivery time and even provide home maintenance services. Differential strategies create and offer value to customers that others are not and these usually address problems of customers providing value proposition (Gamble, Peteraf, & Thompson Jr, 2015). Best Buy has set itself apart with their differential strategy providing value to customers by choosing them over others. Cost Co with their membership I think is limiting themselves and Walmart does not have value proposition in terms of differentiating themselves from other similar companies.
Gamble, J. E., Peteraf, M. A., & Thompson Jr, A. A. (2015). Essentials of Strategic Management The quest for competitive management. NewYork: McGraw-Hill Education.
KELLEHER, K. (2016, July 19). How the Geek Squad Could Be Best Buy’s Secret Weapon. TIME .
Best Buy is the leading provider of electronic goods, product and service or it is tech device and service provider. It has approximate 125000 employees in North America and the annual revenue is approximately $40 billion (WRITER, 2017). Hubert Joly is Chairman and CEO of best buy and he joined best buy in 2012. Best Buy will help customers pursue their passion and enrich their lives with the help of technology. The main goal of Best buy is to address the customer needs in entertainment, communication, productivity, security and health and fashion. They have not only product selling strategy, they have different products and they provides better service after selling the product so that make their customer happy. Mr. Joly believed that, Bust Buy has dual purpose one making the profit and next social responsibility. For social responsibility every years they provide technology training and career path to one million youth in US. The main purpose of training is to generate skillful human resource in US. They have different other strategy
Customer focused strategy/ Customer satisfaction strategy
Market share gains
Revenue growth and improve margin
Store Atmosphere and Placement
In customer focus strategy, first they segment of broad customer base into a handful of specific target. They categorize their target customer into a different group like Tech Geek, Busy Mom, Gadget Enthusiast, and Price Conscious Dad. Based on this they provide the best offer to them.
Best Buys Competitive Strategies
Competitive strategy creates the base in which a business competes in the marketplace. Their reputation is good in market and they are able to fulfil customer needs and attract them and enhance market position by increasing the market share so that it reduces competitive pressure (Shelman, 2017). They have different unique service after selling the product and they have strong customer relation segment. For example, In Tech Geek segment, they should have knowledgeable sales person to deal with Tech Geek. Similarly, in Best Buy Mom segment they provide personal shopping assistants to help Mom for caring her kids. For Budget Conscious dad they provide financial assistants so that they are motivating and convincing to buy a goods. These are the major competitive strategy of Best Buys Company.
Best Buys Differentiation Strategy
The differentiation strategy of Best Buy is an integrated set of actions taken to produce goods and services (at an acceptable cost) that customer perceive as being different in ways that are important to them. Under this strategy Best Buy tries to offer the products which are distinct in the perception of customer. They are best service Provider Company, their product performance is very good and unique product features. They have knowledgeable staffs so that customer can get the complete knowledge about the product and they easily train them for "how to run the electronic goods properly.” The differentiation may be based on product parameters, service back up, promotion and images. The product is differentiated through unique product performance features, and services, adopting new technologies or providing detailed information about the product (Hitt & Ireland, 2011).
Gibson, E. (2014). Best practices at Best Buy: a turnaround strategy. JOURNAL OF BUSINESS STRATEGY VOLUME 24, ISSUE 6.
Hitt, M., & Ireland, R. (2011). Strategic Management . USA: South Western Cengage Learning.
Shelman, J. (2017). Best Buy 2020 overview. Blog, https://corporate.bestbuy.com/best-buy-investor-day-details-best-buy-2020-building-the-new-blue-growth-strategy/ .
WRITER, S. (2017). Best Buy Investor Day Details ‘Best Buy 2020: Building The New Blue’ Growth Strategy. Best Buy Blog.
Best Buy, the largest consumer electronics retailer in the United States that operates in Canada and Mexico as well offers wide range of products like computing and mobile phones, smart home technology, entertainment products, sporting goods, gaming hardware and software and home appliances to its customers. In addition to these products, it also provides services relating to consultation, designing, delivery, installation, set-up, protection plan, and repairing along with required technical support. Best Buy uses physical stores, mobile applications, call centers and websites like Best Buy, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theatre, Pacific Kitchen and Home, bestbuy.ca and bestbuy.com.mx to ensure easy access of customers towards its products and services (Bloomberg).
Some of the rival companies of Best Buy as given in the discussion question itself are Costco Wholesale (American multinational corporation that operates a chain of membership only warehouse), Walmart (American multinational retail corporation that operates a chain of hypermarkets, discount department stores and grocery stores), Sam’s Club (American chain of membership only retail warehouse clubs owned and operated by Walmart Inc.) and Target (second largest department store retailer in the United States). In order to offset these competitors and sustain in the market, it is necessary for Best Buy to gain competitive advantage over them by developing durable preferences for its products and services among a large number of buyers. For this, formulating and implementing the right strategy is of great essence.
In order to compete with Amazon and other e-commerce sites and prevent the customers from buying the products online from somewhere else after testing them on Best Buy stores, it came up with price matching guarantee. As per this, Best Buy compares the price of the products selected by the customers with key online and local competitors and if others are offering it at lower price than that of Best Buy, it will offer them at the lowest price available in the market excluding special offers and discounts offered by those stores after properly validating the price (Best Buy ).
This proves that Best Buy competes aggressively on price, but the customers know it for its first-rate customer service. Through the growth strategy named "Best Buy 2020: The New Blue Moon”, the company aims to expand what it sells, evolve how it sells and solve the customers’ issues in most effective and efficient way possible. Unlike other e-commerce sites, it focuses on maintaining retailer-customer relationship and help the customers achieve great new things through technology (Badlotto). Best Buy is trying to differentiate its products from existing competitors in following ways:
1.Its partnership with brands like Apple and Microsoft to build in-store boutiques where the products are displayed in ready to use state and the customers can check the products at the real time (Cheng, 2018).
2.It trains the staffs to make them product experts so that they can provide customers with the required information about the product they want to know about and encourage them to build relationships with the customers (Shapiro, 2016).
3.It has a 24/7 support tab where the customers can get answers to their queries or ask for information about any product or service easily.
4.It conducts research to know about its customers so that it can customize the products and services based on the customers’ requirement (Gulati, 2010).
5.Its army of specially trained tech experts, known as Best Buy’s Geek Squad provide installation as well as other tech related support to the customers at their home.
If we look carefully at the strategies being adopted by Best Buy, we can figure out that it is offering its products at relatively lower costs and offering substantial differentiation as well. So, in my opinion, the strategy of Best Buy can be classified as best-cost strategy. As the definition of best-cost provider strategy explains, it is about giving more value to the customers for money by emphasizing both on low cost and upscale difference (Misner, n.d.). Best Buy falls in this criteria as it is focusing on continuously improving the customer experience and offering the products at lower cost by incorporating technology. Thus, the strategy of Best Buy can be categorized as best-cost strategy.
Badlotto, J. (n.d.). Best Buy’s Putting their Best Strategy Forward. Retrieved from Market Track: The Power of Market Intelligence: https://markettrack.com/blog/best-buy-best-strategy.html
Best Buy . (n.d.). Best Buy Price Match Guarantee: We won’t be Beat on Price. Retrieved from https://www.bestbuy.com/site/help-topics/best-buy-price-match-guarantee/pcmcat297300050000.c?id=pcmcat297300050000
Bloomberg. (n.d.). Company Overview of Best Buy Co., Inc. Retrieved from Specialty Report: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=255397
Cheng, A. (2018, August 28). Why Best Buy Remains Relevant In The Age of Amazon. Retrieved from Forbes: https://www.forbes.com/sites/andriacheng/2018/08/28/why-best-buy-is-relevant-in-the-age-of-amazon/#336dc3091462
Gulati, R. (2010, April 12). Inside Best Buy’s Customer-Centric Strategy. Harvard Business Review . Retrieved from https://hbr.org/2010/04/inside-best-buys-customer-cent
Misner, I. (n.d.). The Five Key Competitive Strategies . Retrieved from http://ivanmisner.com/the-five-key-competitive-strategies/
Shapiro, R. (2016, July 22). Best Buy’s Competitive Strategy to Beat Amazon: Educate Consumers. Retrieved from Business 2 Community: https://www.business2community.com/trends-news/best-buys-competitive-strategy-beat-amazon-educate-consumers-01600643