From 2005 to 2012, we saw a major shake out of the Consumer Electronics retail business. CompUSA, Circuit City, and Radio Shack all went bankrupt and the lone remaining player was Best Buy who, by 2012, was really struggling. All of these retailers were hurt significantly by the emergence of online shopping for consumer electronics products via outlets such as Amazon.com. While Best Buy continued to operate during that period, picking up a lot of customers from their peers as they bankrupt, it has not been easy. The stock price of Best Buy during that period went from $36 in 2005 to a low of $13 in 2012.
Starting in 2012, some big changes were made at Best Buy, led by a new CEO and a new and very measurement-oriented CFO. First, aggressive cost cutting goals and measures were set up.. The private jets were the first to go, along with the trips the CEO had been taking to the World Economic Forum in Davos. Best Buy scrapped its NASCAR sponsorship, eliminated its Super Bowl ads, and reduced employment levels by 30%. Progress was measured on a quarterly basis and all of this generated over $1 billion in annual cost reductions.
Realizing they had to compete with the online players, in 2013 they not only began emphasizing their availability of products online, they measured aggressively the time it took for a customer to receive a product. Not satisfied with their Delivery Times, they began to ship products from individual Best Buy Stores and by early 2014 all of Best Buy stores were also distribution centers, causing delivery times to improve dramatically. Currently Best Buy is delivering 67% of its packages in 2 days or less.
Probably the biggest impact of all in improving Best Buy’s business has been their initiation of a system to measure individual store-level employees and their productivity in selling Best Buy products. With sales measurement data available for each member of the staff instantaneously, it becomes very clear who the strong sales personnel are and importantly, which of the sales people need extra training or tips on how to open up a conversation with a customer without scaring them off. This measurement system has enabled Best Buy to increase sales per store-level employee by tens of thousands of dollars a year.
The results have been impressive. Best Buy earnings have beaten Wall Street’s expectations for eleven quarters in a row and since December, 2012 its stock has roughly tripled.
Strong leaders know that clear goals and responsive measures work. Via these basic tools, Best Buy has made an amazing recovery.