Best Buy 2004 Annual Report Download - page 11

opportunities or include some of our best
current customers. We believe we can
serve these customers better than we do
today and better than our competitors,
thereby increasing revenue from those
segments. The customer segments are
as follows:
•The affluent professional who wants
the best technology and entertainment
and who demands excellent service
•The focused, active, social customer
who wants the latest technology
•The family man who likes technology
but is not an early adopter—he needs
to be sure the technology is established
before he will invest
•The busy suburban mom who is
time-starved
•The small-business customer who has
specific needs related to increasing
sales and profitability.
In 32 pilot stores, we empowered the
store teams to adapt to meet the needs
of the customer segments with the great-
est profit potential in their local area, and
we taught them to track their success
through each store’s financial statements.
We have moved from our Standard
Operating Platform, under which all stores
function in exactly the same way, to an
Adaptive Operating Platform. This change
may involve some variation in product
offerings, staffing, promotions and even
store design. However, all changes are
subject to measures based on return on
invested capital, and we have spent a
great deal of time teaching our store
employees to be accountable for their
decisions based on that metric. Part of
the training includes supporting a new
”owner/operator” mindset within
the store.
The pilot stores demonstrated an ability
to gain a larger share of our customers’
technology and entertainment spending
and to increase their gross profit rates
because they focused on better serving
the needs of our best customers. We
believe that the roll-out of this customer-
centered approach will spur our growth
and profitability in the future. At this time,
we envision up to 110 additional customer
centricity stores in fiscal 2005. Even before
we commence that roll-out, we will be
implementing some of the ”better retailing”
practices we learned from the pilot,
including changes to the store labor model
and increased employee training on factors
driving store profitability.
Opportunity for Greater Efficiencies
We see many opportunities for increasing
our efficiency in fiscal 2005 by reducing
costs, investing capital more wisely and
increasing our speed to market for new
products and services. We began to make
progress with our efficient enterprise
initiative in fiscal 2004. For example, we
enhanced collaboration between store
personnel and corporate staff to streamline
decision-making. We eliminated many
unnecessary tasks for store employees.
We outsourced some Human Resources
functions to increase efficiency and accel-
erate the development of new capabilities.
Finally, we opened a direct sourcing office
in Shanghai, China.
Our cost-reduction work has been largely
decentralized. Various teams of employees
have focused on ways to streamline their
departments, simplify processes, speed
up decisions and better allocate
employees’ time. We have reduced
staffing levels at our corporate campus
and in our field leadership structure.
These savings have helped fund our
customer centricity initiative.
While we increased labor at our stores
to better assist our customers and drive
increased revenue, we have also increased
the effectiveness of our sales staff by
eliminating certain routine administrative
tasks they had been asked to perform.
The changes allowed salespeople to
spend more of their time with customers.
Best Buy Co., Inc. 9
We have received
rave reviews for the
personal shopping
assistants available in
some of our stores.
Time-starved moms
are ”thrilled” to find
someone who can
answer all their
questions and help
them in every part of
the store. Our affluent
professional customers
also appreciate this
one-on-one service.
A small-business owner
came into a Best Buy
store to purchase an
MP3 player. After a
store employee talked
with him about the
opportunities offered
by Best Buy for
Business, he bought
several computers and
hired the Geek Squad®
to set up a network
and provide computer
training. He is also con-
sidering a Geek Squad
maintenance contract
for his business.