Best Buy Doomed to Lose Online, Despite Flashy New Hire

Starbucks CIO Gillett has a great resume – just not for e-commerce

   

Best Buy Co (NYSE:BBY) has known for a long time that online sales are ruining its model of bricks-and-mortar electronics sales. Revenue was flat from fiscal 2010 to fiscal 2011 as the company has failed to connect with consumers. BBY stock is down 20% in the last 12 months, and is off about 50% from its 2010 peak.

Partially in response to these troubles, the company created a new position to head up its global e-commerce business and lead Best Buy’s digital strategy and marketing efforts. A company release also said the new exec will look for ways to “make technology a bigger part of the customer experience while enhancing operations and processes,” whatever that means.

The problem isn’t that Best Buy is dedicating manpower to online sales and marketing. The problem is that the person it hired — Stephen Gillett, a former Starbucks (NASDAQ:SBUX) chief information officer — doesn’t seem ideal for the job. Furthermore, the move may be too little and too late for a company that has long been squeezed by Amazon (NASDAQ:AMZN) and other rivals when it comes to the best electronics deals.

To be clear, Gillett has a heck of a resume. He was named to Fortune’s “Executive Dream Team” as one of only two CIOs among the 25 executives recognized. He did some great things at Starbucks, including launching free Wi-Fi at all its U.S. outlets to boost customer traffic. He also helped broker a deal with Yahoo! (NASDAQ:YHOO) to provide an exclusive in-store media network providing local news, restaurant reviews and more for SBUX patrons.

But that resume is decidedly lacking when it comes to e-commerce. Do we really think Best Buy is going to become a hangout or a community hub? It’s a pipe dream to think that people will linger and gather in Best Buy to play video games or watch TV. The stores look and feel like warehouses, for Pete’s sake.

When it comes to electronics, the bottom line is the bottom line. Most consumers these days diligently research products online and then are equally rigorous in their search for the best deal. Many folks are fine paying for an overpriced latte and then surfing the Web or chatting with friends at SBUX. It’s naïve to think anyone will pay a premium on a plasma TV for a similar experience.

Best Buy has admitted as much itself with a new pricing strategy. It launched its “Perfect Match Promise” in March that offers 30-day free phone support to help consumer get gadgets up and running, along with the option to return products within the first 30 days and also 30 days of price-matching without a stocking fees.

Obviously, Best Buy is fed up with losing business to cyber-competitors and is willing to do whatever it can to match even the lowest online price — and throw in some peace of mind and tech support to boot.

But again, we’re back to the bottom line.

The plan also presents an interesting dilemma. If consumers find a cheaper price elsewhere, what incentive do they have to take that price to Best Buy instead of just closing the sale at the other merchant? A price-match guarantee only saves a sale if the customer bothers to ask you for the match.

Best Buy indeed has problems with branding and e-commerce, and it certainly needs to address them to see sustainable growth.

But despite Mr. Gillett’s resume, it remains unclear whether he’s the right person to accomplish Best Buy’s e-commerce goals — or not

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.


Article printed from InvestorPlace Media, http://investorplace.com/2012/03/best-buy-doomed-to-lose-online-despite-flashy-new-hire/.

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