Best Buy rolls out segment-oriented stores concept

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By: Wise Marketer Staff |

Posted on October 26, 2004

Best Buy rolls out segment-oriented stores concept

Adopting a strategy of tailoring stores to meet the needs of specifically segmented groups of customers, US retailer Best Buy has announced the conversion of 68 stores in California (primarily in the Los Angeles, San Francisco, and San Diego areas). The new stores aim to deliver tailored store experiences, products, solutions and services for the targeted customer groups.

Best Buy's newly converted stores are being aimed at five specific customer segments, such as small business owners and affluent professionals, in addition to the company's existing customers. They incorporate the most successful elements of Best Buy's innovative practices from its customer centricity lab stores, which were opened in Los Angeles and two other markets almost two years ago.

Which segments? The five key segments being targeted by the updated stores are:

  • Small businesses that have specific needs related to growing sales and increasing their profitability - 24 stores.  
  • Affluent professionals who want the best technology and entertainment, and who demand excellent service - 16 stores.  
  • The family man who wants technology that improves his life, and which lasts - 16 stores.  
  • The busy suburban mother - 12 stores.  
  • The young, active, early adopter of new technologies - 11 stores.

Growth by segmentation Best Buy executives believe that these five customer segments will bring significant new growth opportunities, and will already include some of the company's best customers. Each of the 68 pilot stores focuses on one or two customer segments, which have been assigned to each store based on the demographics of the surrounding community as well as the store's existing penetration of customer segments.

"We are striving to achieve a truly customer-centric operating model," explained Mike Keskey, president of US Best Buy Stores. "These 68 California stores incorporate the best practices from our lab stores. We believe that they will enrich our customers' shopping experiences through new products and services, new store features and, most important, knowledgeable sales associates who really understand customers' lifestyles and priorities."

Staff empowered To support the expansion of its customer centricity operating model, the company has trained employees at the 68 stores to focus on specific customer segments rather than on product categories alone. The company has also decentralised decision-making to allow the employee closest to the customer to make informed changes. Store associates measure the results of all changes in terms of return on invested capital - a metric built into their customer centricity training.

The conversion of these stores provides Best Buy with the critical mass to accelerate the further rollout of the customer centricity platform in its other US stores. "Launching these customer-segmented stores just before to the holidays will provide us with great data on which to make our scale decision for next year; we'll have a much larger sample size," said Keskey. "Next year's rollout plans have yet to be determined. However, our goal of putting the customer at the centre of our operating model of all our stores over the course of the next three years remains the same."

Further expansion The company said it currently expects to allocate approximately US$50 million in capital expenditures for customer centricity pilot and lab stores in the fiscal year 2005. In addition, according to Keskey, the stores are expected to require slightly higher spending on labour and training in order to meet customer demand.

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