Best Buy: The News That's Fit to Print
Submitted by advisor on Tue, 12/08/2009 - 12:56pm.
As discussed in the Forum section, Best Buy is moving forward Q1 2010 with a pilot of the store-within-the-store concept, building "Pacific Sales" luxury appliance outlets within (2) Best Buy stores in Dublin, CA and West LA, CA. This is confirmed.
Best Buy acquired the luxury appliance dealer chain in December 2005. At that time we noted that Pacific Sales had 14 stores. Four years later it has 34.
It is clear that Best Buy has identified the luxury segment for investment and consolidation.
The store-within-the-store concept is a response to Best Buy's branding problem, creating a false wall separating the luxury goods from the peat and coal fired appliances normally sold by Best Buy. Certainly a more persuasive strategy than Sear's Brand Central. The concept has the further advantage of making luxury sales viable in less fruitful locales which could not support a free standing outlet.
With the wholesale retrenchment of luxury sales by the middle class, the slowing pace of new technology introductions, the nationalization of distribution by manufacturers and the launch of viable luxury offerings from GE, Whirlpool, and likely LG we have to face the obvious:
- Best Buy will likely go national with this strategy
- Best Buy will likely do well, perhaps very well.
We imagine that they will start by serving markets too small to support a large free standing luxury appliance outlet, and then slowly creep on tip toes into the urban/suburban areas once the concept and the brand is fully positioned.
Which manufacturers might sign on? It has been suggested that Miele and Thermador have. Makes sense if true. Fisher & Paykel, Dacor (if they can get over their Pac Sales problems, and DCS could all be positioned well for the concept. Viking and Sub-Zero are unlikely to be taking part at this time
What is the risk to the industry? Considering the current weakness, it could be a risk existential in nature, the last straw for small independent dealers which are not members of warehousing-type buying groups or marketing consortiums. Changes could push another cull in the independent distribution network, and further reduction of North American brands.
Could this be an overly pessimistic forecast? Could be, it is just that in the US, consolidation is always the last play in the game.
Complete independence is not likely a path with a big future.
In 2005 we said this about Best Buy carrying luxury appliances.
Professionalism, Now More Than Ever !!!
Best Buy being of reasonable consideration for success with this ... but then SEARS & Home Depot thought the same thing ... I believe it is so very important, now more than ever, that private dealers find a way to profess and deliver on their professionalism !!!
Sure, there is a certain percentage of the population who will always go to the private dealer, but how much volume has the private dealer lost to "Big Box" stores each of the last three (3) years - I'll bet it's an increasing percentage !!!
Simply having a nice show floor and products you believe people want will no longer cut it ... you will need to be knowledgeable, articulate, and willing to sell the customer what the customer NEEDS ... not what makes you, or the dealer, the most !!! That's a major step in building repeat clients who make recommendations and referrals back to you !!!
It is time to win those potential customers back thru your door ... those "happy homeowners" who you lost ... you now need to get them to come to you FIRST before automatically going "Big Box" and that means making an investment in your continued business ... 
If you disagree with me, fine ...that's your prerogative ... but just remember what I said while you're standing in the unemployment line !!!
Professionalism Plus
Bob, I couldn't agree more. Whether we like it or not, consumers will go to mass merchants for comparison purposes if for no other reason. Mass merchants are conveniently loccated. They have a reputation for low prices. They have liberal return policies. By comparison, professionalism is where the dealer needs to shine. I don't want a kid in a blue shirt who knows a lot about computers to give me advice on appliances and the guy that is in the appliance dept full time doesn't have the time (or the ability) to give the customer the level of service that you can. The trick is to make sure the consumer doesn't get their advice from you and then take their business to the big box. To do that you'll need to remain loyal to the manufacturers who have refused to sell mass merchants. If your customer wants a Sub Zero or a Viking in their kitchen they can't buy it from Best Buy. Sell with professionalism but support the brands that support you.
I've Said it Before ...
... and it stands saying again ...
The Big Box stores cannot give the support a local dealer can ... here's the best scenario to convey:
Customer comes home Friday night and his Refrigerator is dead and waiting burial ... he goes to a Big Box Store and buys something for delivery on Saturday ... the delivery happens and the delivery men leave ...Now we all know it takes 4-5 hours before you know if that "box" is good ... so, what if it's not ??? Is the Big Box Store going to replace it on Sunday ??? Hell no !!! They going to tell you to call Factory Service ... and you'll be lucky to see someone by Tuesday ... so, no Refrigerator until then, wasted food, and aggravation !!!
If that happens to a unit purchased thru a private dealer, that dealer can either replace it or give them a lender ... That's the difference !!!
One more thing ... good luck finding the same "sales associate" who wrote you up in that Big Box Store !!!
It's things like this that need to imprinted on customers coming to your store before going to the Big Boxes ... if you don't do it, you deserve to lose the sale !!!
While I agree with both Bob
While I agree with both Bob and Cohiba the consumer does not want to make their purchases From some kid in a Blue shirt. But the Manufactures have to support the dealers they have. It is no secret sales are slow, but when Manufactures start to go outside the normal methods, Of how they distribute the brand, we pay for it. I have lost sales to the Blue Shirt. Customers Will go to your store let you do the sales presentation, educate them and then go to the big box Store to make their purchase, so they can get free delivery, installation, and a return policy That is second to none. What the small independent dealer does not see, is the big box store Has agreements with the very same manufactures you sell to take these products back with No questions asked. Times are tough but it does not help when the high end core brands look At ways to sell their brand that under cuts the dealers they already have. Just last week I heard About an Ace Hardware store selling Miele Appliances. I thought it was a joke until some one Sent me a picture. And this is in a Urban City that has nine Miele dealers all ready. I mention This as in the original post you say of a suggestion of Miele at Best Buy, which I know is not Ace Hardware. After all Ace is the place!
uhhh no
I been enjoying this site for a long time now and I need to clear something up. The idea that the major manufactures have agreements with "big box" store to take back everything no questions asked are not true. I know for a fact ( my user name may give me away) that is not the case. When we take back something that the manufacter wants to fix we DO NOT get credit for the unit. We will have the unit repaired and sell off the floor @ a discount. It's what "we" call making a customer for life, not that I always agree with it.