The company known as Best Buy Co., Inc. is synonymous with retail big box electronics throughout North America. With stores in the United States, Canada, Puerto Rico, and affiliated business entities in China and Europe, Best Buy has become a household name in electronics throughout the world.
In fact, it is considered the largest specialty retailer of consumer electronics in the United States. How they got to the position of #1 in America has a lot to do with how they began. This includes a small chain of Hi-Fi equipment and electronics stores in Minnesota that grew into the biggest name in consumer electronics retail.
The Daily Telegraph writes about how Best Buy begins as the high-fidelity stereo store called the Sound of Music store. The first store opens in August 1966 by Richard M. Schulze in Saint Paul, Minnesota. Schulze uses his second mortgage and personal savings to get his new business venture off the ground.
Growth is rapid! Fast forward three years later, and Sound of Music is a publicly held company and listed on NASDAQ (the second largest stock exchange in the world). By 1978 there are nine stores throughout Minnesota.
The small chain ironically earns their 'Best Buy' name due to a disaster. In 1981, a tornado hits Roseville, and their store. It shears off the roof and destroys the showroom floor yet leaving the storeroom relatively intact. CEO Schulze holds a tornado sale afterward, clearing out the excess and damaged stock by selling it all at the store's parking lot. In advertising the tornado sale, he promises the 'best buys' on his stock.
More sells more in four days than in a regular month! Which inspires their high-volume, low-price business model and leads them to coin the Best Buy store label in 1983.
Their streak of solid business successes comes in the 1980s. A Best Buy Superstore debuts in Burnsville, Minnesota; the prototype of the big box store that makes the company famous. In 1987, they appear on the New York Stock Exchange. By removing commission sales, improving lighting and space, and overall creating a more relaxing environment, the whole customer experience improves. More so, thanks to the customer friendly, low-pressure environment, supplier's worries are at ease, and Best Buy makes even more profit.
Then the 90s begin and sees even more success, with their first $1 billion in annual revenue in 1992. It is the start of the company’s boom, which carries on for the next two decades.
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The new millennium presents the biggest boom in the company's history.
Best Buy expands into other industries, forming Redline Entertainment as an independent music label and sports video distribution company. Afterwards, they gain rivals in North America, such as Musicland Stores Corporation, owner of Sam Goody, Suncoast Motion Picture Company, Media Play, and OnCue. Canada is next when they purchase Future Shop Ltd.; a move that later brings Best Buy into the great white north.
They also aggressively expand into the international market. First, they break into the Asian electronics market by establishing its first stores in China and gaining Jiangsu Five Star Appliance. Puerto Rico sees its first Best Buy store in 2008. Geek Squad then forms; a successful technical support business. The Geek Squad brand name establishes Geek Squad precincts in a majority of its Best Buy electronics stores.
Europe even acquires stores. First, they buy The Carphone Warehouse, then set up its first stores in the United Kingdom. Soon, branch into on-demand movie streaming services, musical instruments, mall cell phone shops, music downloading services and more.
Forbes names the 'Big Blue Box,' as the company is sometimes called, as the Top Company of 2004, and makes the list of Fortune's Most Admired Companies in 2006. The company becomes so powerful that it even dictates which technologies succeed. Their adoption of the Blu-ray DVD format is one of the deciding factors in the Blu-ray/HD DVD format wars.
Struggles for Best Buy
But the 2010s are a downturn for the electronics retail giant. A necessary change in leadership happens, following a changing consumer trend. In particular, the shift from brick-and-mortar stores to online retailers such as Amazon and Furniture7. This forces Best Buy to merge and streamline their business empire.
With the transformation strategy, they scale back their stores in the United States, and merge their operations in China to drop China stores and keeping Jiangsu Five Star. Operations in Canada even merge, and the company gets rid of half their Future Shop stores and re-branding the rest as Best Buy. Their Best Buy Mobile stores close. They also pull out of Europe.
It was during this time that their retail strategy changes completely. Because they are now leaner and more efficient, the time comes for the stores to implement what Amazon could not; offer a full customer experience.
The online store revamps to offer real-time inventory and in-store pickup and delivery. This counters the speed of Amazon delivery with their own network of stores able to provide convenient pickup and delivery to nearby customers. The New York Times goes into detail of how the company further counters Amazon.com and their entrance into the electronics retail market, by introducing their price match guarantee.
At this time, they re-invent the layout of their stores. Throughout the country's history, this proves successful. Rather than a typical retail electronics store layout, the company rolls out the 'Store-Within-A-Store' concept. Individual vendors can establish their own space on the sales floor with their own products, displays, and signage. Brands like Microsoft, Apple, Samsung, and Google establish their own space.
And to further help the customer, their employee training improves, so their sales associates hold more product knowledge than ever before. Support services even expand by encouraging technical support and advice in-store.
Changes are Afoot
Best Buy turns their business around. Instead of becoming a 'Showroom' for people to check out before they buy from Amazon.com, they become a 'showcase and ship' store. After all, why bother to order at Amazon when the customers can do the same there at the store? It is the reversal of dynamics that changes the business model.
The last one standing in the world of brick-and-mortar electronics retail stores, outlasting their rivals such as Radio Shack and Circuit City. Best Buy has grown from humble beginnings in Minnesota to the once-biggest name in consumer electronics, generating revenues of up to $42 billion by 2018. And even though they have had close calls and a near-death experience at the hand of online retail, they bounce back to once again becoming a household name in the American electronics landscape.
Best Buy approaches this second chance with a modest, yet optimistic attitude. Now that other retailers like Wal-Mart and Amazon are developing similar models of their strategy, Best Buy is not resting on their fame. Instead, they have a plan and the confidence to see it through into the future.