0
Small Businesses and
      International Stores:
Key Growth Drivers For Best Buy

  Bear Stearns’ 12th Annual Retail,
    ...
Tom Healy
Executive Vice
President
Best Buy For Business
Safe Harbor

Cautionary Statement Pursuant to the
 Private Securities Litigation Reform Act
 of 1995
 This presentation ma...
Best Buy

                                                       • #1 consumer electronics
                               ...
Top-Line Growth


                                                               ?


                                     ...
Best Buy Model Transformation




                       Customer needs drive product     Employees essential to
Products ...
Customer Segmentation




       Small businesses     Affluent professionals      Young
                                  ...
Why Business Customers?


 Customer Centricity Goals            Best Buy For Business
• Identify and attract profitable • ...
Unique Position, Not Easily Replicated


 Competition              Best Buy
 • Fragmented             • 900+ retail stores...
Value Proposition

                          Business
                         Technology
                          Pros a...
Integrated Business Model

                           Our Customer
                                                       ...
Near-Term Priorities

1)Deploying BBFB
  to a broader geography
2)Currently 100 U.S. stores
  offer Best Buy for Business;...
Key to Long-Term Success

• Co-creation of technology solutions with
  customer and vendor partners
• Widely available tec...
Kevin Layden
President &
Chief Operating Officer
Best Buy Canada
Canada is Key to BBY’s Growth

                                                                                           ...
Best Buy Domestic & International


 Fiscal Year 2005
                              Domestic        International
 ($ in m...
Dual Brand Strategy Boosts Share

                                                  Future Shop:
                         ...
Evolution of the Dual Brand Strategy


     2001                                       2009

                             ...
Brand Differentiation

 • Future Shop brand will retain its own imagery and
   customer experience
 • Guiding principle: r...
Business Model Optimization

     Canadian Operating Income Rate
                                               5.0%



  ...
Results are Encouraging


                                              • Initial Best Buy Canada stores’
  Number ofStore...
Customer Centricity

 • Best Buy Canada selectively pulling Customer Centricity
   elements:
    – Geek Squad in Best Buy ...
Key Growth Area

                                                                                           7.0%
         ...
Your Questions
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Bear, Stearns & Co. 12th Annual Retail, Restaurants & Consumer Conference

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Transcript of " Bear, Stearns & Co. 12th Annual Retail, Restaurants & Consumer Conference"

  1. 1. Small Businesses and International Stores: Key Growth Drivers For Best Buy Bear Stearns’ 12th Annual Retail, Restaurants & Consumer Conference March 8, 2006
  2. 2. Tom Healy Executive Vice President Best Buy For Business
  3. 3. Safe Harbor Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995 This presentation may contain forward-looking statements, which are subject to risk and uncertainty. A variety of factors could cause our actual results to differ materially from the anticipated results expressed in such forward-looking statements, including, among other things, factors listed in our current report on Form 8-K filed with the SEC. That 8-K describes additional factors that could cause actual results to differ materially from those contemplated by the forward-looking statements made in this presentation.
  4. 4. Best Buy • #1 consumer electronics retailer • $30 billion annual revenue 38% • $1.5+ billion operating 30% 28% income for fiscal 2006 21% • 17% U.S. market share 18% 17% • Fortune 100 company • Selling TVs, computers, entertainment software, Annual Avg. Revenue (CAGR) EPS (CAGR) appliances Shareholder Return 5-Year 10-Year
  5. 5. Top-Line Growth ? Int’l Services Small $30 B Business New Customers Stores 2006 2011 Two drivers that will extend our business: Small Business and International
  6. 6. Best Buy Model Transformation Customer needs drive product Employees essential to Products marketed to selection and store experience customer experience the masses SEGMENT
  7. 7. Customer Segmentation Small businesses Affluent professionals Young entertainment enthusiasts Busy suburban moms Tech-savvy families
  8. 8. Why Business Customers? Customer Centricity Goals Best Buy For Business • Identify and attract profitable • Small business represents an $80 customers to existing locations billion opportunity • These customers already shop at Best Buy for personal needs • Create new and improved • Unique localized services and customer experiences expanded assortments available via multi-channels, serving unmet needs • Improve overall customer • Trained and certified professionals satisfaction and loyalty catering to the needs of small business owners
  9. 9. Unique Position, Not Easily Replicated Competition Best Buy • Fragmented • 900+ retail stores • Inconsistent service • Geek Squad agents and product • Product and service expertise assortment • Multiple brands • Narrow range of • Multi-channel business model capabilities and • Strong brand with pre- offerings existing customer relationships Changing the way small business buys IT solutions
  10. 10. Value Proposition Business Technology Pros and Business Consultants Reward Geek Squad Zone For Service My Business is Personal Business Make it Convenient Pay Me Back Expanded Community Assortment Networks
  11. 11. Integrated Business Model Our Customer .com Internet Sales Many Profiles Retail Stores Individual Needs Many Psyches Direct Sales Commercial Sales Technology Consulting
  12. 12. Near-Term Priorities 1)Deploying BBFB to a broader geography 2)Currently 100 U.S. stores offer Best Buy for Business; planning to have 220 stores by end of fiscal 2007 3)Building our training and development capacity 4)Adding nearly 600 trained business professionals 5)Building outside sales capabilities 6)Refining our offerings to more effectively meet customer needs
  13. 13. Key to Long-Term Success • Co-creation of technology solutions with customer and vendor partners • Widely available technology experts in solutions for business, offering a local relationship • Differentiated training and development capability for technology consultants and Geek Squad agents
  14. 14. Kevin Layden President & Chief Operating Officer Best Buy Canada
  15. 15. Canada is Key to BBY’s Growth 7.0% BBY Operating BBY Revenue Income Rate ? Organic Growth Int’l IT Services Small Supply $30 B Chain Business 5.3% New Customers Best Buy Stores Canada FY’05 Goal Today Goal
  16. 16. Best Buy Domestic & International Fiscal Year 2005 Domestic International ($ in millions) $24,616 $2,817 10%* Revenue $1,393 $49 3%* Operating Income Operating Income 5.7% 1.7% N.M. Rate 688 144 17%* Stores * Represents percentage of total Best Buy
  17. 17. Dual Brand Strategy Boosts Share Future Shop: $3.6B* Canadian Store Count •Acquired in November 2001 and Number of Stores Revenue •Future Shop Web site is #1 consumer electronics site in Canada 44 30 •Market share of approximately 20- 19 $2B* 22% 8 Best Buy Canada: •Opened Toronto store 8/2002 120 114 108 104 •Opened stores in all major markets, 95 including 8 bilingual stores in Montreal •Operate English and French Best Buy Web sites 2002 2003 2004 2005 2006 •Geek Squad in all stores •Market share of approximately 8-9% Future Shop Best Buy Canada * Canadian dollars
  18. 18. Evolution of the Dual Brand Strategy 2001 2009 Three-year goals Progress so far • 73% increase in store • Brand differentiation count by FY’06 • Business model • Revenue growth of optimization 80% through FY’05 • Customer centricity • Operating income rate up 150 bps • Market share nearly doubled
  19. 19. Brand Differentiation • Future Shop brand will retain its own imagery and customer experience • Guiding principle: replicate U.S. Best Buy brand in Canadian marketplace • Changes to dual brand operating structure • Brand architecture project initiated in late fiscal 2006 – Develop strategic framework to further differentiate the brands – Ensure clear differentiation on the customer experience and employee experience
  20. 20. Business Model Optimization Canadian Operating Income Rate 5.0% Gross Profit Web, Services Store 1.7% Labor Scale FY ’05 Goal
  21. 21. Results are Encouraging • Initial Best Buy Canada stores’ Number ofStore Count Canadian Stores (Toronto and Edmonton) operating profits have 44 30 dramatically improved 19 • 8 Best Buy Canada’s operating profit lags Future Shop’s: – Higher advertising expense 120 and overhead due to early 114 108 104 95 stage of launch – Maturity curve of stores • Supply chain work beginning 2002 2003 2004 2005 2006 • Leveraging enterprise to improve operating income rate Future Shop Best Buy Canada
  22. 22. Customer Centricity • Best Buy Canada selectively pulling Customer Centricity elements: – Geek Squad in Best Buy stores, 6 stand-alone units – Best Buy for Business locations • Best Buy Canada in early stages of segmentation analysis • Common tools with U.S. but different segments: – More than 30% of greater Vancouver population is of Asian descent – 90% of Montreal population speaks French • Building capacity for labs in fiscal 2008
  23. 23. Key Growth Area 7.0% BBY Operating Income Rate BBY Revenue ? Organic Growth Int’l IT Services Small Supply $30 B Chain Business 5.3% New Customers Best Buy Stores Canada Today Goal FY’05 Goal
  24. 24. Your Questions
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