Best Buy 2004 Annual Report Download - page 13

As technology becomes more integrated
and sales transactions become more
complex, our store employees must spend
extra time helping customers find the
right solutions. By reducing the time our
employees spend on non-customer-facing
work, we can increase customer service
levels without adding to payroll expense.
In fiscal 2005, we will implement a new
store staffing model based on each store’s
sales volume (instead of square footage) to
maximize employee productivity.
In fiscal 2005, we see an opportunity to
increase markedly our global sourcing
of products directly from manufacturers.
Direct sourcing increases efficiency by
reducing our cost of goods sold and
decreasing the time it takes to bring
products to market. In our competitive
marketplace, the retailer fastest at
bringing new products to market enjoys
a significant advantage with the customer.
Through a more direct relationship
with manufacturers, we can relay our
customers’ feedback on new and existing
products, enabling manufacturers to adapt
more quickly to the changing needs of our
marketplace. The ability to source directly
also gives us insight into new technology
and facilitates the introduction of private-
label products, enabling us to fill in gaps
in our product assortment while continuing
to offer great value to our customers.
In addition, we see opportunities to
improve the efficiency of our supply
chain in the coming year, including
shipping containers of product directly
from manufacturers to our stores. By
working more closely with our suppliers,
we expect to reduce inefficiencies while
creating more flexibility for responding to
customer needs. As a result, we hope
to ensure that we have the right product
at the right location at the right time.
Thus, we expect to improve our in-stock
percentage, customer satisfaction,
inventory turns and overall profitability.
Opportunity for Enhanced
Service Offerings
We see the introduction of new services
as a significant opportunity in fiscal 2005
and as a competitive advantage. Our
customers increasingly need Best Buy’s
help in keeping their technology experi-
ences trouble-free as the products we sell
become more complex.
Service is an important factor in our
customers’ loyalty and likelihood to shop
with us again, as well as having higher-
than-average margins. Customers rely on
their technology every day, making fast
installation, repairs and upgrades key to
their satisfaction. In fiscal 2004, we contin-
ued to improve our in-store computer
service capability, increasing the number
of repairs done in our stores and reducing
the average turnaround time. Because we
have 750 locations with high productivity,
we can offer more services at very
convenient locations.
Increasingly, customers are networking
their technology products throughout
their homes, so in fiscal 2004 we
expanded the number of markets
patrolled by Geek Squad agents to a
total of seven markets. This premier
24-hour installation and repair task force
features in-home service, a complement
to the services offered by our in-store
agents, call centers and on-line assistance.
We believe this combination gives us a
competitive advantage. By August of fiscal
2005, we plan to expand Geek Squad to
approximately 425 stores in 45 markets,
or close to two-thirds of our U.S. Best Buy
stores. At the same time, we will be
rebranding the computer service desks
in those markets as Geek Squad Precincts
to reflect the upgraded capabilities,
leveraging our 4,000 in-store computer
technicians. We anticipate that this service
will break even in fiscal 2005 and earn
a profit in fiscal 2006 and beyond, as we
create winning customer experiences
through this premier service offering.
Best Buy Co., Inc. 11
Best Buy’s internal
research showed that
few customers used
the Sunday newspaper
insert to find their
local store’s address;
most simply called us.
Now we allocate that
space in the insert to
vendors for their
product advertising.
The net benefit: nearly
$2 million per year.
When Best Buy was
awarded exclusive
rights to sell the
Rolling Stones
Four Flicks DVD,
we generated nearly
2,000 purchase orders
for drop-shipping the
DVDs to our retail
stores. By automating
the process, an
employee reduced by
85 percent the time
required to run invoices
for drop shipments.