Big box retailers are facing pressure from two directions, Walmart’s low prices and Amazon’s e-commerce driven convenience. These retailers are in the process of reinventing themselves by embracing omni-channel commerce, which aims to deliver a seamless consumer shopping experience through all available channels — i.e., mobile devices, personal computers, bricks-and-mortar stores, catalogs, and so forth.
A few weeks ago I wrote about how Home Depot is approaching this challenge. I recently came across a Wired article on how Best Buy is trying to reinvent itself for this new era of retailing. As with Home Depot, Best Buy will need to support the new strategy with enhanced logistics capabilities. What follows are a few of the points I found interesting in the article.
Logistics is already a differentiator for Best Buy. A customer can order a product online and Best Buy can deliver it to a nearby store for the customer to pick up that day. Best Buy already has a warehousing infrastructure in place to support its 1,400 stores across the nation. But it is unclear how long this advantage will last because Amazon is launching same day delivery pilots in selected metropolitan areas.
Big Box retailers can potentially differentiate themselves by providing enhanced customer service, especially for complicated products like consumer electronics, in the form of knowledgeable salespeople. But this is difficult for Big Box retailers to achieve because they carry such a broad array of products. A goal is to become more like an Apple store. Because Apple stores carry a limited number of SKUs, it is much easier for Apple salespeople to answer shoppers’ questions.
Best Buy is responding to this by launching a “showrooming” pilot project in 50 stores. As described in the article, “When a customer comes in to test out a few high-end cameras, a sales rep with a tablet can meet them to compare specs on the various models.” Specially trained sales staff – people trained in a particular product category – can then provide the kind of hands-on service that customers can’t find online. Best Buy wants to avoid situations where customers go to its stores to get an in-person feel for a product, but then go online to buy it for a lower price. To combat this, the company has made matching competitors’ prices a top priority. And if a shopper wants a product that isn’t in stock at a store, the salesperson can help him place an order through BestBuy.com.
The customer then has the choice of delivery methods. They can elect for either same day in-store pickup or home delivery. Almost half of Best Buy’s current online customers choose in-store pickup. This has a couple of advantages. First, many customers do not want expensive electronics sitting on their front porch where they might get stolen. And second, it gives customers a chance to practice using the product at the store where a salesperson can guide them.
And of course, if a customer elects to pick up a purchase at a store, there is always the chance for additional sales – extra memory cards, batteries, or even a product unrelated to his initial purchase.
As I think about Best Buy’s challenge, it is partly premised on the company’s ability to compete on price. The costs associated with supporting a network of stores might put the company at a disadvantage. One dodge here is to cut agreements with manufacturers where a particular SKU is only available at Best Buy. So if customers try to comparison shop, they can’t find that product anywhere else. Walmart does a bit of this.
The other thing that strikes me is that high touch, in-store service will be key to Best Buy’s success. Incenting customers to pick up online purchases at its stores eases the logistics burden and provides customers with one-on-one training that many will highly value.
Steve – As you know, one of the banes of modern retail, in particulary on-line retail, is the issue of returns. It is an issue for both the retailer and for the customer.
Having a process that eases the return can be a benefit to both parties. I advocate the abiility to return online purchases at a physical store — difficult if you are Amazon.
Best Buy could leverage thier in-store high touch approach to better ensure that the customer will be satisfied in advance of the purchase, and thereby possibly reduce return rates. Focus on selling the right product vs. having the customer order and then return and re-order – again and again.
They also need to come up with a way to compensate the in-store sales team when the customer chooses to order online. Easy perhaps if they order from bestbuy.com, not so easy if they order elsewhere. That would require some sort of industry action from the supplier.
Supply Chain Visions