Best Buy reported some disappointing financial figures last week blaming stalled consumer demand for TVs – including new IPTVs and 3DTVs. Going unmentioned in the company’s earnings call was its ongoing outreach to Detroit with a deal to sell and install EV charging stations for the Ford Focus EV and its plan to sell and install OnStar’s aftermarket mirrors. It’s time for Best Buy – and other large box retailers around the world – to seek closer ties to domestic car manufacturers to leverage the emerging connected and electric vehicle opportunities.
The Best Buy-partner announcements:
Best Buy-Ford Sync: http://bit.ly/eNGZ18
Best Buy-Ford Focus EV Charging Stations: http://bit.ly/e0CHWF
Best Buy-OnStar: http://bit.ly/eoJGeq
Best Buy understands the importance of connectivity as its Best Buy Mobile strategy has clearly become the engine of growth for the company. Best Buy Mobile is gaining more square footage in Best Buy’s large box stores – absorbing floorspace previously dedicated to selling shiny discs. And the company says it intends to open 150 Best Buy Mobile standalone stores in the U.S., bringing the total to 325.
The importance of Best Buy Mobile to the future of Best Buy is important to understand on two levels. The arrival of smaller Best Buy Mobile stores reflect Best Buy’s need to explore alternatives to its existing large box retail store model – built around destination shopping. And it also reflects the wider so-called “connections” business strategy of selling hardware that comes with a connection and, usually, a service subscription.
The category cited on the Best Buy earnings call as generating the single largest sales increase was mobile broadband and Wi-Fi connectivity devices, up 50%. The only category garnering more attention from Best Buy merchants than mobile broadband devices and, of course, smartphones themselves (where Best Buy claims a 6% U.S market share) is tablet computers. Best Buy has seen significant sales from tablets and expects even bigger numbers in the future, hopefully replacing sales lost from other computing platforms.
This is precisely where the automotive industry outreach comes into the picture. Traditionally at odds with the automotive industry, Best Buy has suddenly become the go-to retail partner for auto makers seeking stronger customer relationships. Car makers are themselves wrestling with the rise of the smartphone and table computing platforms and their influence on consumers.
Best Buy is experiencing this outreach from Ford and OnStar at precisely the moment it is experiencing the most competitive heat from online retailers and audio and video content streamers. Ford and OnStar need Best Buy’s trained sales people to explain new connectivity solutions to their customers – and to validate device compatibility, as in the case of Ford Sync. Best Buy needs Ford and OnStar to connect with new car buyers who may be considering aftermarket purchases.
Best Buy fields an army of connectivity experts in its stores – which is precisely the marketing force needed by car makers bringing systems such as MyLink, Sync, Entune, mbrace and Uconnect to the market. But is Best Buy missing the boat even as it welcomes Ford and OnStar aboard? Yes!
The challenge facing Best Buy is preserving the relevance of its large box retail stores – where growth has eased or ceased altogether – in a market where consumers have almost perfect visibility to product assortments, information, and pricing online and gasoline is expensive. It is no coincidence that Best Buy launched two new online-to-store initiatives in 2010: Ship to Store and Friends and Family guest pick up.
Best Buy touted the improvements in its online-to-store initiatives in the past year. The company said in its earnings call that the number of in-store pick-ups for online sales grew to 40% from 35% in the year-earlier period. And 80% of big screen TV purchases made online were picked up at physical stores.
Best Buy’s large store future is inextricably linked with the pervasive car culture in America and elsewhere. It is a strange irony, then, that the mobile electronics department has become a virtual afterthought buried in the back of most Best Buy stores and frequently unstaffed.
One of the indications that Best Buy has not recognized, on its own, the opportunity presented by its new-found auto industry connection is the disconnect between the OnStar initiative and the Ford initiatives. The OnStar mirror is handled by the mobile electronics department, while the Ford Sync initiative is handled in the mobile phone department – and never the twain shall meet.
Normally such a disconnect would be rational and tolerable except for the fact that smartphones and tablet computers are playing an increasingly important role in the automotive market. What better marketing environment than a large box Best Buy store for companies such as Apple and RIM and Motorola (and?) to tell their tales of in-vehicle integration?
The opportunities to be derived from leveraging auto maker relationships include:
- Demonstrating smartphone and tablet computer integration alternatives in cars – along with distracted driving mitigation messages. (Tablet computers are ideally suited to aftermarket rearseat video solutions.)
- Demonstrating and selling aftermarket safety systems.
- Demonstrating and selling mobile broadband devices.
- Safe driving clinics for teens
- "Pimp My Ride" rallies in the parking lot?
Best Buy’s large box stores are veritable palaces to destination shopping actually dependent on the automobile. It makes sense for the company to take advantage of the in-store space and product assortment and trained sales force to promote enhanced driving experiences.
The strangest thing about this emerging opportunity is Best Buy’s failure to recognize it. Auto makers have historically been hostile to automotive aftermarket retailers – and with good reason. A substantial proportion of a typical OEM’s profitability and of the profitability of its dealer base comes from aftermarket sales. (Maybe Best Buy could coordinate its efforts with local car dealers. Better yet, maybe Best Buy could negotiate pricing on new cars - it works for Costco.)
The mere fact that OnStar and Ford are reaching out to Best Buy and other retailers marks a tipping point in the industry. Auto makers are suddenly recognizing that they have entered into the consumer electronics market. On this new turf they clearly understand that they will need all the help they can get in explaining and demonstrating their own consumer electronics solutions. (Coincidentally, Ford and GM have drastically cut the size of their dealer organizations - adding a further rationale to the retail outreach.)
While Ford has reached out to its dealers to offer more training and more incentives to usher them into this new consumer electronics-laden era, retailers like Best Buy are being asked to fill a yawning gap between the available technology and the available means of explaining it. The marriage of Best Buy and the automotive industry is a marriage of convenience, but Best Buy should take advantage of this opportunity to build stronger customer relationships, higher connectivity market share and increased profit from the resulting service and installation business.
http://bit.ly/ePD2Df - GM Shrinks Development Cycle in Game of Connectivity Catch-up - Roger C. Lanctot - Automotive Multimedia & Communications Service
http://bit.ly/dJXnU2 - Aftermarket Telematics: Let's Get It OnStar - Roger C Lanctot - Automotive Multimedia & Communications Service