One of the leading retailers in the US, Best Buy (NYSE: BBY) was incorporated in 1966 in Minnesota. The retail company performed well during the pandemic despite a new set of challenges that required quick adjustments to its operating model. However, the physical retailer changed its operating model from largely physical to largely digital in really no time. It was like an overnight transformation for the brand and was made possible because of its continuous investments in technology over the previous many years.
Best Buy had 1159 stores operational in the US at the end of 2020. The company has a limited international presence.
Best Buy mainly deals in computing products, cellphones, and consumer electronics and appliances. Its leading source of income are computing products and cellphones. Apart from them, the company also deals in a nice range of private label products. In 2020, it decided to exit the Mexican market and Canada is now its only remaining overseas market.
While its physical footprint in the US is much smaller than leading players like Walmart and Costco, the company is still in a strong position and growing its digital footprint. Its digital revenue (sales from online channels) grew sharply in the US in 2020 and the company’s traffic on online channels has kept growing in 2021.
The pandemic has highlighted the critical role of digital technology for retail players. However, it has also affected consumer behavior and brought a major change that is going to last. Based on the recent trends, the post-pandemic world will not be the same as the pre-pandemic world. Best Buy had readied itself for these challenges. Its preparedness during the pandemic proved its resilience. The future is full of challenges and winning in an intensely competitive retail environment will require the company to focus more on its product, price, and promotions strategy. Apart from that, it must also reconsider its placement or distribution strategy to maintain its competitiveness against the leading players in the US retail industry.
In this post, we will carry out an analysis of Best Buy’s marketing mix. We will analyze the seven Ps as in the services marketing mix. Best Buy also provides a nice range of services even if it is not a services company. However, things have changed a lot with digital technology blurring the line between products and services companies. Retail brands are increasingly focusing on adopting an e-commerce model to find faster growth. The Seven Ps analysis will also cover the role of people, processes, and physical evidence in the marketing mix of Best Buy.
|Company Name||Best Buy Inc. (NYSE: BBY)|
|Industry||Retail (Computing, consumer electronics and appliances)|
|Revenues (fiscal 2021)||$47,262 million|
|Net Income (fiscal 2021)||$1,798 million|
|Total Stores (end 2020)||1,159|
|US Stores (end 2020)||991|
|ROI (Non GAAP)||19.1%|
Best Buy does not deal in an extensive product range like most other leading retail players in the US including Walmart, Costco, and Target. Its main focus is computing, cell phones, and consumer electronics. These account for the largest part of the company’s sales and net revenues. Its product mix mainly includes the products made by five industry-leading brands – Apple, HP, SONY, Samsung, and LG. These brands together accounted for around 57% of the total merchandise that the company bought in 2020. Insignia is a leading private label brand owned by Best Buy. Insignia offers a nice range of televisions, home appliances, tablets and computer accessories, cameras and camera accessories, cell phone accessories, and video game accessories. The company also sells a limited range of entertainment products including music, movies, and gaming hardware, and accessories.
The company is present mainly in the United States. It had 1,159 stores operational in 2020, of which 991 were operational in the US market. The company has also been operating in the Canada and Mexico markets. However, it decided to exit the Mexican market during the pandemic and will have completed the last steps in 2021.
Now, Canada is the only remaining overseas market of Best Buy. The company is focused mainly on the US market where its physical footprint is smaller than the leading retailers like Walmart and Costco.
The company has established its stores in prime locations to attract higher traffic. It offers its customers an omnichannel shopping experience. Apart from online sales and home delivery, it also provides pickup from store services.
Best Buy has grown its focus on the digital channels and customer experience with the pandemic. Its e-commerce revenues grew 144% in fiscal 2021 compared to the previous fiscal.
Affordability is a key component of the pricing mix of Best Buy Inc, but its prices are not the most competitive of all the retailers in the United States. That is something Walmart has achieved and when it comes to matching Walmart’s cost efficiency and lower prices, Best Buy still has a long way to go. By focusing on a few primary categories and adding some of its private-label brands, the company has managed to attract a large customer base. Consumers may come across a large range of affordable laptops and cell phones at Best Buy.
Best Buy also tries to offer its customers a price advantage, but the focus on maintaining lower prices is not as aggressive as Walmart. Availability of products across some key categories, quality, and customer experience is the company’s main focus. Moreover, the company would need to develop stronger cost efficiencies to offer highly competitive prices.
The retail industry in the US is marked with intense competition. There are a large number of market-leading and international players operating in the United States market, including Amazon, Walmart, Costco, Target, and others. Due to the intense competition, the focus on marketing is also higher. The US-based retail companies invest in branding and run regular marketing campaigns using digital channels for promotions and customer engagement.
Best Buy has been utilizing a mix of digital and traditional channels for marketing and promotions. However, the pandemic has brought the main focus on digital channels. As footfall at the physical locations decreased, the focus of the company on digital channels for sales and marketing has also grown. It is using its websites and apps for sales and marketing. The company also uses social media networks including Facebook, Twitter, and YouTube for promotions and customer engagement. Its Twitter account witnesses higher activity than other social media accounts. Twitter has grown in popularity among retail brands because of its excellent real-time marketing capabilities.
Every year Best Buy also spends a large sum on advertising and promotions. According to its annual report, during fiscal 2021 (ending Jan 31, 2021), the company spent $819 million on advertising and promotions.
Best Buy has differentiated its brand from other retailers using a clever technique. Its storefronts are blue and yellow. The company website also uses the same color theme. The same pattern can be observed in dresses and packaging.
Employees are a key asset for any organization driving most of its competitive advantage. The focus on organizational culture and employee management has grown higher in recent years in the retail industry. Performance management of employees is also now a key focus for retail brands since it helps improve employee performance and organizational productivity.
Best Buy has intensified its focus on HR management in recent years. The company has invested in the use of digital tools for managing its human capital strategically. The company had 102,000 employees as of 2020. Its CEO is Corie Barry. The company should continue to invest in its human capital to gain a stronger competitive advantage and reduce its HR-related concerns.
The retail industry is increasingly investing in digital resources and improving its technological capabilities. Apart from sales and marketing, digital is now increasingly playing an important role in retail brands’ supply chain. Best Buy has been investing in the digitalization of its business processes over the past several years. Its strategic investment in digitalization of its business processes helped the company during the pandemic and helped it improve its productivity and sales. Apart from its websites and apps that double up as sales and marketing channels, the company has adopted other cloud-based resources to grow the efficiency of its business processes overall. It has increased the company’s cost efficiency and helped it improve output and operational performance.
Best Buy has maintained a strong market presence in the US market. It also operates in Canada. However, its main market is the United States where it has around 991 stores operational (as of end of 2020).
Physical evidence is part of a company’s service mix which customers can see and experience while using it. The company’s large number of physical stores, logo on those stores, staff dresses, packaging, and merchandise provide for its physical evidence. Best Buy storefronts are blue and yellow in color which is done for the purpose of branding. The storefronts carry a large logo, which is also visible in other parts of the store while you shop there.