Best Buy CEO Calls Geek Squad ‘Underutilized Asset’
Best Buy announced plans to introduce more services via Geek Squad to meet the needs of today’s customers.
“The Geek Squad is one of Best Buy’s biggest competitive advantages, and yet, at the same time, it is an underutilized asset,” he noted. “Our goal for the Geek Squad is to deliver an amazing and lasting customer experience while providing a key revenue and profit growth engine for the company.”
Joly says the plans for the Geek Squad over the next 24 months are to:
- Continue to reduce legacy cost structure to help fund price competitiveness
- Improve service delivery and the service experience provided to customers
- Refine existing service offerings like extended warranty services
- Improve the merchandising of Geek Squad services
- Build new offerings that meet the needs of customers in the context of today’s technology environment
For the quarter as a whole, Best Buy’s domestic revenue was $12.3 billion, a 1.8 percent decline year over year, including a 1.2 percent decline in comparable store sales. Comparable online sales rose 25.8 percent to $1.57 billion. International revenue was $2.17 billion. Overall domestic profit rate was 20 percent, down from 22.3 percent last year.
$400M in Losses from Replacements, Damages
Regarding other aspects of Best Buy’s services, Joly says the company will continue to cut costs. It has already eliminated $765 million in annualized costs and is now targeting $1 billion in North America, primarily focusing on supply chain and logistics, as well as procurement. But the main area of focus will be reducing replacements and damaged goods. Joly says Best Buy, the No. 1 company on the CE Pro 100 loses $400 million per year in returns, replacements and damages, or about 10 percent of its revenue. Last year in its CE Pro 100 filing, Best Buy reportedly earned an estimated $50.7 million in installation revenue, primarily via Geek Squad.
“We feel confident that we can meaningfully reduce these losses,” he noted. Joly added that creating a “ship-from-store” system whereby products ship directly from individual stores has been very successful.
According to published reports, Best Buy announced layoffs of 2,500 store managers this week using a new “field and store operating model.”
“To do this, we’re making significant changes to the field and store structure,” he said. “We are organizing retail around the stores and making the stores fully accountable for their performance under the leadership of the store general managers. We’re designing the structure above stores to support the general managers and their teams by providing both strategies that are readily executable and the tools and support necessary to execute them, and we are organizing around key markets with the goal of having a winning strategy for each of these markets. And finally, we are ensuring that any investment we make is customer facing and adds value while minimizing indirect spend.”