Best Buy's 3 Priorities to Renew Blue
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Best Buy is entering the next phase of its so far sucessful Renew Blue strategy and CEO Hubert Joly has outlined the strategy's three priorities for fiscal 2017.
During fiscal 2016, the consumer electronics retailer grew Domestic online revenue 13% to over $4 billion and continued to improve employee engagement scores and decreased employee turnover. The company also delivered $150 million against its $400 million Renew Blue Phase 2 cost reduction and gross profit optimization programs and in one year returned $1.5 billion in cash to shareholders including $1 billion in share repurchases, which was originally planned to be completed over three years.
"This performance is the direct result of the execution of our Renew Blue strategy and the hard work, dedication and customer focus on the part of all of our associates," commented Hubert Joly, Chairman and CEO.
"Our purpose, from the customer's standpoint, is to build a company that does a unique job of helping customers learn about and enjoy the latest technologies. As we begin this next phase, in fiscal 2017 we will execute against the following priorities."
Renew Blue's Three Priorities for Fiscal 2017
1. Build on Best Buy's strong industry position and multichannel capabilities to drive the existing business.
More specifically, Best Buy will implement a number of initiatives across merchandising, marketing, digital, stores, services and supply chain. "For example," explained Joly, "in home theater, we will build on the superior customer experience we've created in partnership with our key vendors and leverage the strength of our market-leading share in 4K and large-screen televisions."
Best Buy also seeks to capitalize on the customer experience investments in mobile phones that it implemented late last year, with an expectation to drive increased conversion as well as reduced wait time for customers.
"Our strategy is to be an advocate for every phone order by offering the best deal on plans and devices, impartial advice and clarity and efficiency in what can be a complex process," commented Joly.
"In the very short term we believe high smartphone penetration combined with low consumer demand for current product offerings is depressing the category. Over the course of the year, we believe that more compelling phone launches can fuel renewed growth in the category."
The company will also increase its assortment in connected home emerging categories including security, lighting and video monitoring, as well as expand its in-store presentation and leverage its leading position in routers and networking equipment, which form the backbone of the connected home.
The company also plans to add five Magnolia Design Center stores within a store, bringing the total to 84 by year-end. In appliances, it plans to add 27 Pacific Kitchen & Home stores within a store, bringing the total to 203 at year-end. The company also expects to see incremental growth from its enhanced delivery and installation offerings and will continue to invest in its Canadian stores and online channel.
In e-commerce, Best Buys plans to build out new digital capabilities, prioritizing the customer shopping experience on phone and tablet devices. Examples of recent advances include the recent launch of BlueAssist which allows customers to simply shake their device to get live help with products and orders through chat, call and email. Another example is the recently launched Geek Squad app.
2. Drive cost reduction and efficiencies.
"Reducing cost is essential for us to be able to fund our investment, build our resilience to product cycles and increase our profitability over time," noted Joly. Best Buy expects to achieve this by simplifying its business processes. For example, the company has a project focused on reducing the amount of open box appliances it takes into stores by addressing root cause issues.
"This project has the potential to not only improve the customer experience, but also to drive material savings through lower markdowns, lower transportation cost and better use of labor in our stores and distribution centers," noted Joly.
3. Advance key initiatives to drive future growth and differentiation.
The advent of the Internet of Things is providing a new technology way that is making Best Buy's operating model increasingly relevant to customers.
"We are investing to be the leading technology expert, who makes it easy to learn about and confidently enjoy the best tech," said Joly.
Best Buy sees ongoing growth opportunities around key product categories, as well as from increasing share of wallet with existing customers and acquiring new customers who are passionate about technology and need help with it.
Capturing these opportunities will require that Best Buy develops and brings to market curated, solution driven merchandise to solve key customer problems; ensures the company has an inspirational and educational sales approach across all sales channels that helps customers understand the value that technology can create for them; helps customers unleash what's possible from their technologies; and provides customers with ongoing post purchase support.