Outsourced Services - v2

OfficeMax enlists sales help of RadioShack in new pilot

November 16, 2011

NAPERVILLE, Ill. — OfficeMax has announced that it has entered into an agreement with RadioShack whereby RadioShack employees will offer mobile products and services, including prepaid and postpaid wireless products, accessories and service plans, as well as assist in selling OfficeMax consumer electronics products and services, in approximately 15 to 20 OfficeMax stores in the San Francisco market. The pilot program will begin in January 2012.

"We are evaluating a range of strategic retail partnership arrangements that will improve store productivity and make our stores a highly attractive destination to our customers," said Ravi Saligram , president and CEO.  "We are excited to bring in RadioShack's expertise in providing wireless solutions and consultative sales expertise which will complement our enhanced technology offering in our upcoming pilot."

So - OM saves expenses in payroll, benefits and training and in return adds incremental expense in outside services?  But, more importantly will store level cultures clash?  Will supervision be challenged?  Will customer service be compromised?  We've been in this EXACT situation and we can tell you that ALL of these and more will be issues.  This is not seamless.......

Seems Like There Should Be More....

Lowe's scales back store plans

October 17, 2011 | By Gail Hoffer

MOORESVILLE, N.C. — Lowe's Monday announced that it would close several stores and discontinue a number of planned new store projects as the company looks to bounce back from a second quarter of declining earnings and flat same-store sales.

The company closed 10 locations on Oct. 16 and said it would close another 10 within the month, following an inventory sell-through.

In addition, after completing a comprehensive review of its pipeline of proposed new stores, the company announced it has discontinued a number of planned new store projects. Lowe’s said it now expects to open 10 to 15 stores per year in North America from 2012 forward, compared with a prior assumption of approximately 30 stores per year. The company said it is on track to open approximately 25 stores in 2011, as planned.

“Closing stores is never easy, given the impact on hard-working employees and local communities,” said Robert Niblock, chairman, president and CEO. “However, we have an obligation to make tough decisions when necessary to improve profitability and strengthen our financial position.

“Lowe’s remains committed to making strategic investments and focusing resources in a manner that will generate the greatest shareholder value, enhance the customer shopping experience and create sustained customer loyalty over the long term,” added Niblock.

Lowe's said that approximately 1,950 employees will be affected by these closings. The company said it will be working with local government agencies to help employees with outplacement assistance.

This will be NOT be without Great Pain...

Target's expansions into new areas have never gone smoothly.  From Texas in the 70's to the AirWays expansion in Indiana to the California stores of Fed Mart, to Florida and New York.  A combination of arrogance and underestimation have cost millions of dollars and the positions of countless associates that pay the price with their jobs.

Target puts final Canadian plans in motion

September 23, 2011 | By Gail Hoffer

MINNEAPOLIS — Target's entry into Canada is nearing completion, as the company Friday finalized its real estate transaction with Zellers Inc. with the selection of 84 additional Zellers leases, bringing the total number of leases selected, including an initial group of 105 leases selected in May, to 189. From this second group, Target has acquired the leasehold interests for 29 locations, the vast majority of which will open as Target stores beginning in 2013. The remaining leases have been or will be sold to other Canadian retailers or back to landlords.

Target's venture into Canada began in January when the company announced that it had agreed to pay C$1.825 billion to purchase from Zellers Inc., a subsidiary of the Hudson's Bay Company, the leasehold interests in up to 220 sites currently operated by Zellers Inc.

“Target is excited to take another meaningful step toward our expansion in Canada,” said Tony Fisher, president, Target Canada. “We look forward to delivering a superior shopping experience for our guests throughout Canada and building on our strong reputation as a good neighbor and partner in the communities in which we do business.”

Target said it plans  to open 125 to 135 stores in Canada, the majority of which will open in 2013, beginning with the first cycle in March and continuing with four subsequent cycles later in the year. The company said it will invest about $10 to $11 million in remodeling each location. Locations for the March 2013 store openings will be revealed in the coming months, Target said, with subsequent opening cycles to be announced throughout 2012.

When Target's Canada stores do open, they will face competition from a number of retailers including Walmart, which ended last year with 325 stores and has plans to open 40 additional stores this year, bringing its total count by year's end to roughly 333 stores. Walmart is in the midst of a U.S.-style supercenter conversion, so by the end of this year roughly half of the company's roughly 333 units will be supercenters, and by 2013 the total store count figure should be north of 350 with supercenters accounting for roughly two thirds of the total and that’s assuming expansion and conversion activity doesn’t accelerate from the current pace in anticipation of Target’s arrival.

A Very Good Thing for Retail...

Q2 results leave Pier 1 confident heading into holidays

September 15, 201

FORT WORTH, Texas — Pier 1 reported sales and earnings growth for its second quarter, leaving president and CEO, Alex Smith confident about the future of the company heading into the holiday season.
Alex Smith, president and CEO, commented, “We are very pleased with the results of our second quarter. Sales growth and merchandise margins remain strong, and we continue to demonstrate the strength and sustainability of our business. Our growth plan is firmly on track, and we have returned value to our shareholders through the completion of our $100 million share repurchase program. It is hard to predict how the economy will fare over the next several months, but we fully expect our business to be successful through the fall and holiday selling season.”

Pier 1 Imports reported that net income for its second quarter ended Aug. 27 was $16.6 million, or 14 cents per share, compared with net income of $14.4 million, or 12 cents per share, for the same period last year. Total sales for the second quarter were $339.6 million, a 9.6% increase from $309.9 million in the year-ago quarter. Comparable-store sales increased 10.8% during the second quarter compared with last year’s comparable-store sales increase of 11.2% for the same period. According to the company, the sales increase for the quarter was primarily the result of increases in store traffic and average ticket.

Planning a Wine Country Visit

Vineyard Visits Eliminates Time Spent Planning California Wine Country Trips

Vineyard Visits announced today it has launched a new California Wine Country trip planning service.

Los Angeles, CA,:  Vineyard Visits (www.vineyardvisits.com) launches personal wine country visit planning services focused on California Wine Country.

“Vineyard Visits was created to take the time and hassle out of planning a daily itinerary in wine country” stated Dave Uhlman, Owner/Planner of Vineyard Visits.

 “I am excited to help visitors maximize their time in wine country by providing them an itinerary that is built upon what they like and want to do.”

Vineyard Visits starts by talking to their clients about what they want to do. “We think it’s all about how they want to spend their time.” Dave added.  Vineyard Visits conducts initial phone or video phone Status Meetings with every client before any trip is planned so that client preferences are used to build the trip.

Vineyard Visits then delivers comprehensive visit plans from airport arrival to first winery of the day to valley departure.  Find out more at http://www.vineyardvisits.com or call 310.372.3706 for more information.

About Vineyard Visits:  Vineyard Visits is a proud provider of California Wine Country trip planning services.  For one low price Vineyard Visits will provide a 1-3 day California Wine Country itinerary.

Find Us on Facebook:  www.facebook.com/vineyardvisits  

Follow Us on Twitter: www.twitter.com 

The Rule of Three Always Applies....

 
Three of anything...  is one too many...
ODP makes the grade, OfficeMax fails in BTS sales

September 7, 2011 | By Gail Hoffer

NAPERVILLE, Ill. and BOCA RATON, Fla. — OfficeMax and Office Depot had very different things to say about their respective back-to-school sales performances during presentations at the Goldman Sachs Annual Global Retailing Conference.

OfficeMax has been experiencing slower sales as consumers continue to be price conscious. In addition, Ravi Saligram, president and CEO of OfficeMax, reported that back-to-school sales are soft and the company is experiencing weaker technology sales.

"Consequently, we are continuing to focus on providing products that are a good value, as well as managing gross margins and costs in the third quarter and second half of the year," said Saligram
.
OfficeMax said it now anticipates that total company sales for the third quarter of 2011 will be slightly lower than the third quarter of 2010, including the favorable impact of foreign currency translation. The company is maintaining its guidance for total company sales for the second half of 2011 to be slightly higher than the prior-year second half, including the favorable impact of foreign currency translation and the benefit of the additional fiscal week in the fourth quarter.

OfficeMax's presentation at the Goldman Sachs conference can be viewed at investor.officemax.com until Oct. 7 and will be posted on the "presentations" page located within the "Investors" section of the OfficeMax website.

From Highly Profitable to Up For Sale - in 5 years

Collective Brands to close 475 underperforming stores as it considers selling itself

August 25, 2011 | By Katherine Field Boccaccio

TOPEKA, Kan. — Collective Brands, parent company of Payless and Stride Rite shoe chains, announced Wednesday that it would close 475 underperforming stores over the next three years and has hired a firm to help it explore its options.

The company hired Perella Weinberg Partners and Kurt Salmon as advisors to explore strategic alternatives.
Collective Brands reported a 2Q loss of $35 million on Wednesday, compared to a profit of $21.1 million a year earlier. The loss included a one-time charge of $83.6 million based mostly on the declining value of its stores and of Stride Rite’s trade name. The company currently operates 4,844 stores, of which 4,461 are Payless stores.

Of the 475 stores targeted for closure over the next three years, more than 300 will be shuttered by the end of the year, including about 275 Payless and 75 Stride Ride children's stores. The strategy, said Collective, is to optimize the performance of its Payless and Stride Rite stores.

"While the second quarter was challenging for the company, we are taking aggressive actions to improve the business," said CEO Michael J. Massey.

When You Start To Become Yesterday's News...

Profits trend lower at Urban Outfitters

August 16, 2011 | By Staff Writer

PHILADELPHIA — Urban Outfitters, which caters to a clientele with a unique and forward-looking approach to fashion and lifestyle merchandise, missed the mark during the second quarter, reporting a 21% profit decline and a same-store sales slip of 2%.

But Can They Stay In-Stock?

Game on for sports fans at Old Navy

August 16, 2011 

 

NEW YORK — Gap’s Old Navy unit rolled out more than 1,000 sports-oriented store-within-stores Game on for sports fans at Old Navy

August 16, 2011

Tuesday, selling branded goods of more than 70 Division I schools, as well as National Football League teams.

The Super Fan Nation in-store concepts are being launched with a seven-figure marketing campaign that will include advertising at college stadiums and arenas, in-store appearances by college bands, cheerleaders and mascots, and a 10-day national television advertising campaign.

Old Navy began selling some sports merchandise in 2009, and the retailer said strong historical performance from the category made the expansion a natural fit. “The sports connection should have always been part of our DNA,” said Michelle Wlazlo, senior VP for merchandising.

The sports apparel and merchandising are exclusively designed for, and sold at, Old Navy. Clothing items will begin at $14.94, while accessories will retail from $5.50.

www.cpointe.com 

The Question - What Took So Long?

Game on: GameStop offering in-store purchase of PC titles

By ghoffer

Created 07/28/2011 - 16:36

GRAPEVINE, Texas — GameStop announced that it is now offering customers the ability to purchase digital PC games at their local store and access the titles immediately at launch. This service is available exclusively at GameStop and customers can use any form of accepted payment to make their purchase. "Deus Ex: Human Revolution" is the first of what will soon be many titles to support this new purchase method, the company reported.
“This is a great illustration of how the digital distribution model and in-store experience really complement one another,” said Steve Nix, GameStop’s general manager of digital distribution. “We have seen great success selling DLC for console titles in our stores, so expanding on that model and helping customers discover digitally distributed PC games in stores is a natural fit.”

Target in union’s sights

As discounter grows, so does labor trouble

ANNE D’INNOCENZIO Associated Press

NEW YORK

Target now has 1,700 stores, up from 1,050 a decade ago, and its challenges have grown as well.

Target is having labor pains.

Until recently, the Minneapolis discounter largely had avoided the labor disputes and public relations challenges that have plagued Wal-Mart, the world’s largest retailer. But now Target could face the same union opposition as its much bigger rival.

Target had its first union election in two decades in June amid allegations by workers of skimpy wages and reduced hours at a Valley Stream, N.Y., store. The measure ultimately failed after Target suggested to workers that the store might not survive if they vote to unionize.

But the labor dispute – and Target’s handling of it – is widely seen as a precursor to a bubbling national battle between Target and labor groups similar to the one Wal-Mart has been locked in for at least a decade.

In addition to New York, more labor disputes are expected in big cities such as San Francisco, Seattle and Minneapolis – where Target is based and remains the second-largest employer behind the Mayo Clinic.
The opposition is coming at a particularly vulnerable time for Target, which is grappling with slack sales growth as shoppers are pulling back amid the painfully slow economic recovery.

Already, the United Food and Commercial Workers International Union’s Local 1500 New York chapter, which organized the election in the Valley Stream store, intends to contest the election results and ask the government to order a new one because it says Target intimidated workers. It also plans to fight to get all 26 stores in the New York area unionized.

And the UFCW’s local 1189 in St. Paul, near Minneapolis, is using the New York election as an impetus to recharge its campaign, which failed a couple of years because it didn’t collect enough votes.
The chapter is organizing a group of people to go door-to-door to almost 2,000 Target workers in four stores. It’s also planning to reach out to UFCW’s local Chicago, San Francisco and Seattle chapters to enlist them to join the battle.

“I was inspired. Once we heard that Local 1500 had been building toward an election, we thought we better ramp it up,” said Bernie Hesse, director of special projects at UFCW’s St. Paul chapter. “We have been intrigued with what a national campaign may look like.”

Target Corp. declined to comment on its strategies to counter an escalating labor fight, but spokeswoman Molly Snyder said the company does not intimidate workers or have any “companywide efforts to restructure or reduce hours.”

“Our emphasis is on creating a workplace environment where our team members don’t want or need union representation,” Snyder said.

Change Has Already Come to Penney

Long-time JCPenney marketing chief retires

July 20, 2011 | By Katherine Field Boccaccio

PLANO, Texas  — JCPenney said Tuesday that its veteran marketing chief Mike Boylson has retired from the company. His successor will be selected by newly minted CEO Ron Johnson in what will be the former Apple executive’s first senior-level appointment at JCPenney.
Boylson was with the department store chain for more than three decades, the last eight years as chief marketing officer. He said in June he would retire from the company on July 1, according to a JCPenney spokeswoman.
Boylson was instrumental in the retailer’s launches of such brands as Liz Claiborne, MNG by Mango and American Living by Polo Ralph Lauren Corp.
In the interim, while Johnson works to fill the position, former SVP marketing planning and promotions Bill Gentner will serve in the position

Best Buy to shrink its footprint

"The old joke is that Best Buy is Amazon's showroom," said Scot Ciccarelli, a senior retail analyst with RBC Capital Markets.

Big-box retailers: Electronics retailer Best Buy to shrink its brick-and-mortar footprint - latimes.com

So Who Does This Remind You Of?

MINNEAPOLIS — Best Buy reported Tuesday that net income for the first quarter fell 12% to $136 million, or 35 cents per diluted share, hurt by increased promotions and lower demand for such items as flat-panel televisions and digital cameras.

Revenue edged up 1% to $10.9 billion on a 12% jump in online revenue. Same-store sales dipped 1.7%. However, domestic online sales rose 12%, while domestic mobile-phone comparable sales jumped 28%. Tablet computers, digital book readers, appliances and services also saw higher demand. Best Buy has shored up its profit picture by shifting toward more profitable products such as mobile phones, video games, appliances, e-readers and tablets.

Store sales down?  Store footprint being downsized? Sales being transitioned to online?  Seems like issues faced by Circuit City about 7 years ago.  Will BB navigate them successfully? Stay tuned.

Good News: Swipe-Fee Reform Amendement Squashed

WASHINGTON — The retail industry won a big victory in Washington, D.C., as the Senate defeated an amendment that proposed to delay swipe-fee reform for another 12 months.

As reported Wednesday morning by Drug Store News, Sens. Jon Tester, D-Mont., and Bob Corker, R-Tenn., offered an amendment to legislation that was designed to delay swipe-fee reform — which is set to go into effect July 21 by the Federal Reserve — and built on Tester's previously introduced Debit Interchange Fee Study Act of 2011. The Senate vote was 54-45, with one senator opting to not vote, leaving the amendment six votes shy of approval.

The retail industry, particularly the lobbying groups, lauded the decision late Wednesday.
“This is a landmark victory for American consumers that will give them the break from skyrocketing swipe fees that they have been seeking for years," National Retail Federation president and CEO Matthew Shay said. "With the economy still trying to gain momentum and consumers facing skyrocketing costs for necessities like food and fuel, this badly-needed reform will help ensure our nation’s economic recovery. It will prevent more than a billion dollars a month from being pocketed by big banks and, in turn, allow retailers to hold down prices for consumers."

The National Association of Chain Drug Stores, which represents the drug retailing industry, said the defeat of the amendment was a victory for both consumers and the retail industry, curbing costs that affect each group.
“We thank Sen. Dick Durbin,D-Ill., for his leadership in bringing this issue to the forefront of Congress, and working diligently to prevent a delay to the pro-retailer and pro-consumer swipe fee reform,” NACDS president and CEO Steve Anderson said.

How Apple Stores rewrote the rules of retailing - USATODAY.com

This is what happens when you acknowledge the importance of customer service; pursue it vigorously and live it. Or, what happens when you trivialize it.

How Apple Stores rewrote the rules of retailing - USATODAY.com

Will Customers Pay More For Good Service?

NEW YORK — Good customer service sells, according to a new study conducted by American Express.

American Express' Global Customer Service Barometer discovered that 7-out-of-10 Americans are willing to pay an average of 13% more with companies they believe provide excellent customer service, compared with 58% of Americans that echoed this sentiment in 2010. But while Americans put a heavy emphasis on good customer service, most (60%) believed that companies haven't stepped up their game to improve their focus on providing good customer service. Among them, 26% believed that companies are paying less attention to their customer service.

What's more, nearly 8-out-of-10 consumers (78%) said they will bail on a transaction or opt not to make an intended purchase because of a poor service experience. American Express also noted that 2-in-5 (42%) consumers said companies are helpful but don't do anything extra to keep their business, while 1-in-5 (22%) thought companies take their business for granted.

However, 3-in-5 Americans (59%) that have a better service experience said they would try a new brand or company.

For adult shoppers seeking a company that puts a great emphasis on customer service, 81% of respondents said that small businesses are the way to go. "Getting service right is more than just a nice-to-do; it's a must-do," American Express EVP world service Jim Bush said. "American consumers are willing to spend more with companies that provide outstanding service, and they will also tell, on average, twice as many people about bad service than they [will] about good service. Ultimately, great service can drive sales and customer loyalty."

The American Express Global Customer Service Barometer research was completed online among a random sample of 1,000 U.S. consumers ages 18 years and older.

Not Sure it's a Marketing Issue....

BOCA RATON, Fla. -- Office Depot didn’t have to look far in its search for a new agency of record, as the Boca Raton, Fla.-based office supplies and services company announced the selection of Fort Lauderdale-based Zimmerman Advertising.

“We are impressed by Zimmerman’s strong understanding of the retail sector as well as their ability to turn marketing challenges into sales results,” said Neil Austrian, Office Depot’s interim chairman and CEO. “Zimmerman lives and breathes retail. This expertise combined with web and direct marketing know-how will play an important role in helping Office Depot meet our business objectives.”

Zimmerman Advertising is the nation’s 14th largest advertising agency and part of the Omnicom Group.
“Our mission is to help Office Depot more effectively reach and impact consumers during what continues to be a challenging economy for its core target of small and medium-size businesses,” said Michael Goldberg, Zimmerman’s EVP and chief marketing officer. “Office Depot is a world-class brand and we believe there is so much potential in helping to reestablish its place in the minds of today's consumers.”

It has been a rough couple of years for Office Depot, as a weak economy took a toll of sales and profits. Last fall amid deteriorating results, the company announced the departure of Steve Odland as chairman and CEO and a search for a replacement is now in its six month, with Austrian continuing to serve in an interim capacity. Most recently, the company stumbled when the Internal Revenue Service determined some losses were improperly accounted for, which forced the company to restate financial results that turned a meager 2010 profit of $33 million into a $46 million loss.

Zimmerman thinks it can help turn around the company’s fortunes.

Creative Channel Services - Quality Training: Delivered

LOS ANGELES -- Creative Channel Services announced that it has significantly expanded its partnership with Sears Holdings Corporation by providing the CyberScholar employee-learning platform to five of the retailer's store brands that carry home appliance and consumer electronics products.  CCS has been delivering the CyberScholar solution to Sears' full-line stores and now will deliver product and sales knowledge to Kmart, Sears Home Appliance Showrooms, Sears Appliance & Hardware, and Sears Hometown stores.

CyberScholar (www.cyberscholar.com) is CCS' proprietary digital product-knowledge platform, enabling leading manufacturers to connect their brands to retail associates.  The site offers manufacturers an economical solution to deliver training to dispersed stores, while offering retailers a flexible way to educate their staff and measure employee knowledge.  More than 200,000 retail associates nationwide complete millions of individual product-information modules over the CyberScholar Network each year, increasing their product knowledge in order to elevate the customer's shopping experience and deliver sales performance.

"Creative Channel Services is pleased that Sears Holdings Corporation has expanded its relationship with us to include five of its retail formats that sell electronics and appliances," says Andy Restivo, CEO and president of CCS.  "Additional Sears employees and the Sears Hometown Stores Dealers now have access to standardized, up-to-date product information from dozens of manufacturers, which will help to increase in-store product knowledge and enhance millions of Sears' customers buying decisions."

And They Needed It.....

Sony brings a New Experience

LOS ANGELES -- Sony Electronics announced that on April 1 it will open its first newly branded Sony store in the United States at the Westfield Century City Shopping mall in Los Angeles.

According to the company, the 4,200-sq. ft. store offers customers a full interactive experience with Sony's wide range of products. To encourage this experience, the store features an open  space with products displayed on tables, Sony said. In addition, the store features movable interior walls and changeable color schemes so that it can be adapted and reconfigured to highlight specific products, services, or create fresh experiences for returning customers.

While in the store, customers can test out Sony's network services -- including Music Unlimited and Video on Demand powered by Qriocity -- on network-connected products, to playing PlayStation's GranTurismo 5 on a PS3 and a Sony 3DTV. They will be able to shoot video on a wide range of cameras, get lost in a 3D movie from Sony Pictures, and test headphones while listening to Sony Music artists.

The store also provides a place to learn about future and emerging technologies and innovations, such as the RayModeler, a futuristic 360-degree display prototype that projects a 3D image that can be seen from all angles.

While in the store, customers will have access to a trained staff that can assist with setting up all products, activation of wireless services, and technical PC and IT support, Sony reported. Also available are in-home consultation, delivery, and TV, and home audio and video installation by authorized technicians.

"Sony's goal is always to exceed customer expectations by providing an exciting, interactive and entertaining shopping experience," said Phil Molyneux, president and COO Sony Electronics. "Our new store concept gives shoppers an opportunity to interact with trained and knowledgeable staff as well as preview, test, compare and unlock the full potential of Sony's entertainment offerings."

Blockbuster to close another 186 stores

DALLAS -- A Wall Street Journal report on Monday said that, according to court filings, Blockbuster will start closing 186 more stores by the end of the month, bringing the number of its U.S. locations closed or slated for closure to 1,145, or more than a third of its total, since the video-rental chain filed for bankruptcy protection in September.

In filings Friday with the U.S. Bankruptcy Court in Manhattan, Blockbuster said it will reject the leases on 186 of its stores by March 31.

Among the markets that will be most affected are California and Texas, which each face double-digit store closings.

In February, the bankruptcy court approved procedures for the auction of Blockbuster, with an initial $290 million stalking-horse offer from a group of senior bondholders led by New York-based hedge fund Monarch Alternative Capital. The ruling staved off the threat of immediate liquidation of Blockbuster's assets.
Blockbuster will use proceeds from the sale, whether it is to the Monarch group or a higher bidder, to pay its debt to movie studios. The studios have agreed to continue shipping DVDs to Blockbuster stores.

Great News for REI

REI posts 8.1% comps growth for 2010

March 28, 2011
Retailing Today.com

SEATTLE -- REI (Recreational Equipment Inc.) announced 2010 sales of $1.66 billion, up 14% from $1.46 billion the previous year, proving that even in a down economy outdoor enthusiasts will find ways to support their passion. Net income in 2010 was $30.2 million, up 1.4% from $29.8 million in the previous year. The company’s direct sales channel, which includes online and catalog sales, grew by 22.9%. Comp-store sales grew by 8.1%, up from negative 3.5% in 2009.
“REI achieved remarkable results last year in an economy that remained uncertain, and I credit the dedication and commitment of our more than 9,500 employees who are focused on serving our members and customers. Our performance positions REI well for ongoing strategic growth and business investments,” said Ivar Chhina, REI’s CFO and EVP. “As the nation’s largest consumer cooperative, we are extremely pleased to also share our success with our members, communities and employees.”
By year-end 2010, REI operated 114 stores, including four new stores in Arizona, Connecticut, Maryland and Montana. The company also relocated two stores last year in California and Montana. Seven new stores will open in 2011, including Dublin and Santa Barbara, Calif.; Paramus, N.J.; Carle Place, Manhattan and Yonkers, N.Y.; Olympia, Wash

Best Buy to get Smaller

Best Buy Beefing Up Web, Downsizing Stores

By Alan Wolf -- TWICE, 3/24/2011

Minneapolis - Best Buy is rebalancing its channel strategy to address market share gains by online retailers, including Amazon.com.

In the process, the company is dramatically expanding its online-only assortment, where it is promising more competitive pricing, and is shrinking the footprint of some of its big-box stores as they come off lease.

It also has not ruled out the possibility of closing some of its larger locations.

In an earnings call this morning to discuss the chain's fourth-quarter results, CEO Brian Dunn stressed the importance of maintaining a brick-and-mortar presence to differentiate Best Buy from online-only competitors. Stores allow in-person consultations with sales personnel, provide a convenient pickup option for e-commerce orders, and will give the company a competitive advantage should tax policy favoring e-tail-only merchants change.

Nonetheless, he acknowledged, "We are very carefully looking at our square-footage requirements" and are "redefining the optimal big-box store size," while co-Americas president Shari Ballard pointed to "opportunity in smaller-format stores."

Meanwhile, Best Buy is reallocating space and labor in its big-box stores to three low market-share categories where it sees the greatest opportunities for growth: mobile, gaming and appliances. According to co-Americas president Mike Vitelli, mobile departments will receive more accessory SKUs, gaming areas will benefit from the rollout of trade-in and pre-order services, and majap departments will begin incorporating processes gleaned from its eight in-store Pacific Sales concept shops on the West Coast.

Room for the department expansions will come from declining categories like CDs, whose floor space is being cut by half.

In addition to improved space utilization, the changes to Best Buy's business model will also help attract new customers, the executives said.