Best Buy Eyes Pacific Sales Appliance as Nationwide Concept
Having reached into high-end CE with the Magnolia Home Theater format, Best Buy is angling for similar growth in upscale appliances via its Pacific Sales Kitchen & Bath Centers, Senior Finance Vp Ryan Robinson told investors at the Tues. Bear Stearns Retail, Restaurants & Consumers conference in N.Y.C.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Pacific Sales is expected to add only 5 stores in S. Cal. this year, expanding to 19. But some of its means of selling Sub Zero, Viking and other high-end appliance lines will work their way into Best Buy stores in the same way that Magnolia carved out a niche, Robinson said. Magnolia has 20 standalone stores, plus store-in-a-store formats at 325 Best Buy outlets. Robinson didn’t give a timetable for expanding Pacific Sales or say whether Best Buy might buy other high- end chains to speed national growth. Best Buy purchased Magnolia in 2001 and paid last year paid $425 million for Pacific.
The high-end major appliance market is “very fragmented,” with 1-2 dealers dominating in many parts of the U.S., said Robinson. Regional major appliance chains emerged as Sears’ share of the premium appliance market shrank to the low 30% range from the high 30%, Senior Vp Michael Vitelli said. “We're going to grow this business over time nationwide,” he said: “But over time we'll also add capabilities that we can bring back to” Best Buy stores.
Best Buy also is working to grow its presence in China and expand on its “Best Buy For Business” concept, which has found its way into 265 U.S. stores, Robinson said.
In China, Best Buy this year will add 2-3 new stores in the Shanghai market under its own banner, building on the 86,000-sq.-ft. outlet it opened there Dec. 28. It also will add 20-23 Five Star Electronics outlets (CED Feb 22 p4). Best Buy relies mainly on local workers in China, tailoring its merchandise mix to local markets with an emphasis on Chinese suppliers, Robinson said. Regional distributors supply Chinese CE retailers with sales staff as well as inventory, but Best Buy will work to change that model, Robinson said. Best Buy has added the Geek Squad to its Shanghai store, he said: “We would like them change that experience with us. Industry practices have built up there over a decade and will be slow to change.”
Last year Best Buy acquired 131-store Five Star to get its “good” management and a retail culture similar to Best Buy’s, Robinson said. While Five Star’s gross margins are lower than Best Buy’s, it has lower costs, he said.
Besides continuing to expand in Canada, where it operates stores under its own and Future Shop banners, Best Buy plans eventually to move into other international markets, Robinson said. Best Buy will be a global retailer “over the coming years” but right now is “in the early days,” said Robinson, not disclosing timing for entering new international markets.
Best Buy also will focus on its “Best Buy for Business” concept in the U.S., whose product mix is tailored to small businesses, Robinson said. The format features 400 Microsoft-certified technicians, telemarketing and sales consultants. Initially focused on small business, the format could expand to govt. and education, Robinson said. As part of “Best Buy for Business,” the chain introduced ConnectedLife.com at CES in Jan. (CED Jan 11 p5). ConnectedLife, a Best Buy home automation installation program, is built on Hewlett-Packard’s Digital Entertainment Center and Exceptional Innovation’s Lifeware control software. Best Buy began testing the program last year and so far has serviced 160 Sacramento market homes.
Best Buy has floated formats aimed at female customers, but “we haven’t served that market very well,” Robinson admitted. A “Jill” concept in 25-50 stores targeting suburban soccer moms added personal shopping assistants, but was “much harder to implement,” Vice Chmn. Brad Anderson has said (CED May 3 p3).