The Customer Centric Transformation Bob Willett CEO, Best Buy International & CIO Thursday, February 14 th , 2008

WHAT – are the strategic issues facing Best Buy? WHAT – is Best Buy’s strategic response? WHAT – capabilities are being deployed to enable the strategy? The Transformation Agenda:

About Best Buy Founded in 1966; based in Minneapolis, Minnesota An innovative , $36 billion, Fortune 100 growth company North America’s #1 retailer Consumer electronics Personal computers Entertainment software Appliances 1298 stores in US, Canada, China and Europe mobile

Founded in 1966; based in Minneapolis, Minnesota

An innovative , $36 billion, Fortune 100 growth company

North America’s #1 retailer

Consumer electronics

Personal computers

Entertainment software

Appliances

1298 stores in US, Canada, China and Europe

Our Revenue Growth by Fiscal Year ’ 95 ’96 ’97 ’98 ’99 ‘00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ‘08 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $ Billions $12.5 $15.2 $17.7 $20.9 $24.5 $10 $8.3 $7.8 $7.2 $5 $27.4 $30.8 $35.0 $36 $40.0 ?

Driving real growth has become more challenging and complex for today’s retailers More Complex More Competitive More Sophisticated Multiple Channels and Formats New Categories, especially Non-Food and Services Higher Service Levels Demanded Increased Globalization Intense Price Competition Increased Promotions Expanded Own Label or Exclusive Offerings More Robust Loyalty Programs Enhanced Customer Insight/Segmentation Uptake of Analytics and Technology Alliances with Suppliers or Other Retailers Localized Assortment

Multiple Channels and Formats

New Categories, especially Non-Food and Services

Higher Service Levels Demanded

Increased Globalization

Intense Price Competition

Increased Promotions

Expanded Own Label or Exclusive Offerings

More Robust Loyalty Programs

Enhanced Customer Insight/Segmentation

Uptake of Analytics and Technology

Alliances with Suppliers or Other Retailers

Localized Assortment

WHAT – are the strategic issues facing Best Buy? WHAT – is Best Buy’s strategic response? WHAT – capabilities are being deployed to enable the strategy? The Transformation Agenda:

We are seeking to differentiate through co-creation, services and solutions Product and Exclusive Brand Format / Channel Geographic Reach Accelerated by Galaxy- MKII US Canada Europe Global Extension Channel Extension Mass Products Private Label (Insignia, Rocketfish) New channels .com Core Format New formats e.g. Five Star BBYMobile Call Centers Magnolia Future Shop Range Extension China, Mexico Turkey Solutions Services Most Retailers BBY Target Walmart Tesco * * * Services Exclusive Brands Geek Squad

Two major pillars: Customer Centricity and Efficient Enterprise Customer Centricity Efficient Enterprise Customer EVA % Customer Deciles Customer Profitability Distribution 100% - 100% Supply Chain Information Technology Enablers Enablers 18.8 16.8 8.6 SG&A costs % of sales

The Co-Creation Experience I n s t a l l R e p a i r R e s e a r c h Contact Store Pickup H o m e S h i p m e n t H o m e D e l i v e r y Order Management O n l i n e S i t e s C a l l C e n t e r s K i o s k s S t o r e s S e r v i c e C o m m e r c e Experience S h o p F u l f i l l S c h e d u l e S i g n U p L e a r n Customer S u b s c r i p t i o n s Mass Targeted Personalized Co-Creation > Interaction > Seamless Multi- Contact Experience > Community & Social Networks Co-Create the Purchase

Mass

Targeted

Personalized

Co-Creation

Our Vision & Strategy provides customers with a seamless experience across multiple brands, channels, geographies and solutions in real time Multi Contact-Channel Federated BBY Multi-Channel SOA Layer International Multi Brand Federated BBY Multi-Channel SOA Layer BBY Corporate US, Canada, China BBY Global Enterprise Merchandizing Supply-Chain Logistics Marketing Advertising Services BBY Customer

Customer Centricity – “Secret Sauce” Invite Employee Ideas Honor Unique Customers Provide End-to-End Solutions

Why does Best Buy need a BOB? Individualize Leverage Products & Services Customer Segments Channels/ Stores Infrastructure

Segmentation based on: Store size Store volume Best Buy 2001 Today: Customer Centricity Tailored Assortments By Cluster or Segment Segmentation based on Customer demographics (e.g., Barry, Jill, Buzz, etc.) Solution will be built to build assortments based on customer centricity (e.g., Barry, Jill, Buzz, etc.) and/or store clustering Clustering based on Item level demand patterns for targeted categories Initial goal is to target the core stores so as to maximize benefits impact Today: Focus on the Core The Tailored Market Assortments initiative will further focus Best Buy’s emphasis on meeting the needs of customers

Segmentation based on:

Store size

Store volume

Our Brand is the Translation of this strategy. It Signifies the Amalgam of Customer & Employee Centricity and What We Aim to Achieve We promise to: Blow you away with the latest & greatest Trusted Perspective for Inspired Living We promise to: Never leaving you hanging We promise to: Deliver An Experience That Inspires You We promise to: Make Sure You Know ALL That We Know We promise to: Make a difference

We want to provide our customer facing employees with the tools to better serve our customers… “ I shared ideas on eliminating store waste and inefficiency, and now I have more time to spend serving customers.” “ Our deliveries are now unloaded in 20 minutes, instead of 2 hours.” “ These shelf-ready deliveries have increased our productivity.” “ My store assortments are better tailored to the customers frequenting my store.” “ I’ve helped 15 customers this week put together the same digital photography solution. I can create a bundle and save my customers and associates valuable time.” “ I’m spending more time helping meet customers needs, rather than searching for out-of stock inventory.” “ This new space management tool helps me identify underperforming areas of the store.” “ This new merchandising system really helps me identify where an item is located.”

“ I shared ideas on eliminating store waste and inefficiency, and now I have more time to spend serving customers.”

“ Our deliveries are now unloaded in 20 minutes, instead of 2 hours.”

“ These shelf-ready deliveries have increased our productivity.”

“ My store assortments are better tailored to the customers frequenting my store.”

“ I’ve helped 15 customers this week put together the same digital photography solution. I can create a bundle and save my customers and associates valuable time.”

“ I’m spending more time helping meet customers needs, rather than searching for out-of stock inventory.”

“ This new space management tool helps me identify underperforming areas of the store.”

“ This new merchandising system really helps me identify where an item is located.”

In closing… How do we stay relevant to our customers and avoid extinction? We must be prepared to: Focus on the customer Leverage new technologies Collaborate with one another Staying as we are is not an option !

How do we stay relevant to our customers and avoid extinction?

We must be prepared to:

Focus on the customer

Leverage new

technologies

Collaborate with one

another

Staying as we are is not an option !