Brand Audit and SWOT Analysis of Best Buy

Executive Summary

Best Buy created its current name in 1983 but was originally established in 1966 as a stereo store called the Sound of Music (Twice, 2011). By 1993, they became the second largest consumer electronics company in America (Lowe, 2008).

While the company enjoyed much success for several years, big challenges and threats emerged. The increase in online shopping resulted in consumers window shopping at Best Buy, and then making purchases at a lower price from other online sellers. Also, the huge rise of Amazon threatened Best Buy due to their convenience, quick shipping, and competitive pricing. Other big competitors include Target, Walmart, and Ebay. However, Best Buy was able to react to these threats by altering their strategies by putting extra focus on customer service. This ranged from free installations, in-store experiences, in-home advisors, technician expertise, and even smart home advice.

The company took necessary measures to remain competitive such as price matching and quicker shipping. Best Buy also understood the increase in the aging baby boomer population and tailored their services to accommodate their lack of tech-savviness. In order to represent their new offerings, Best Buy also introduced a new slogan, as well as a slightly refined logo. This paper is intended to provide a comprehensive analysis of Best Buy’s brand and offerings, new opportunities, competitive landscape, marketing tactics, and general recommendations on how to improve their brand and position in the market.

Company Analysis

For over 50 years, Best Buy has been one of the largest electronic companies, and it has made drastic changes in order to maintain its brand image. According to Felix Lowe (2008), Best Buy was “founded in St Paul, Minnesota, in 1966 as the Sound of Music store, it was rebranded as Best Buy in 1983”. Since then, Best buy has experienced its ups and downs in the business world. Lowe (2008) also states that “by 1993, Best Buy had become the USA's second-largest consumer electronics retailer, breaking into Fortune magazine's annual ranking of America's 500 largest corporations two years later”. During this period, the advancement of technology was at its prime for both consumers and businesses.

Consumers started buying personal computers and electronic devices, which is also a huge advantage to Best Buy due to its compatible nature of the business. Best Buy currently offers appliances, TVs, computers, cameras, audio devices, cell phones, video games, and much more technology devices. Many financial analysts believed that Best Buy would go out of business after the existence of Amazon. Best Buy did experience some financial struggles as a result of Amazon providing a new service that is more convenient for consumers right from their homes. In addition, according to Panos Mourdoukoutas (2019) “Best Buy’s most important assets—location and scale—turned into liabilities. In what has come to be known as “show-rooming,” customers did their window-shopping at Best Buy, and their actual shopping at Amazon.com — which offered better price deals than Best Buy”. After Amazon came into business, it became a new era and changed the retail industry. As a result, Best Buy was required to reevaluate and enhance their marketing strategies in order to maintain their competitive advantage and brand equity.

One of the ways that Best Buy changed their marketing strategy was by introducing “Renew Blue” which was intended to help maintain current consumers’ loyalty and attract new buyers. According to Elliot Maras (2019), “the first part of Best Buy's turnaround was to match Amazon's prices and provide free delivery as fast as Amazon”. This was part of the Renew Blue strategy which had some positive results. Since Best Buy’s biggest challenge against Amazon was selling the same or similar products, Best Buy is focusing on providing exceptional customer service. According to Maras (2019), “the physical stores gave Best Buy an edge since they allow customers to have an in-store experience, and at the same time give Best Buy the ability to send advisors to peoples' homes”. Some of their new and renovated services are the free in-home consultations and Geek Squad services. Geek Squad not only provides computer support but also phone protection and smart home advice. These services have also become a competitive advantage for Best Buy because they’re building personal relationships with their customers.

Identify Opportunities

Target Market for brand

Since Best Buy is providing new and modified services to consumers, they also reevaluated who they’re targeting these services to. According to Joan Verdon (2019), “Best Buy looked at the demographic forecasts and saw an aging population seeking technology like in-home video chats with doctors and smart-home capabilities that help seniors live safely”. Sometimes seniors need assistance using and/or buying electronic devices, and the in-home consultation service has shown positive results among this age group. Since some older generation consumers are not tech savvy, Best Buy’s strategy of focusing on services is compatible with seniors (age 65+). Verdon (2019) also states that “Best Buy last year spent $800 million to acquire Great Call, maker of the senior-friendly Jitterbug phones, and an operator of call centers that provide emergency alert services”. Since Best Buy is targeting the older generation, this provides an opportunity of growth and enter a new market like the healthcare industry. Being able to provide emergency alert services and electronic devices aids their target consumers to live a more secured and safe life right from their homes.

Another target group is based on consumers’ preferences. According to Revelle (2016), Best Buy’s “main target, can be summed up as highly engaged consumers who love technology. They seek the latest tech, especially emerging categories, and are omnichannel shoppers. They want high-touch service. '' This age group has most likely been Best Buy’s target since the company first started. Based on its continued success, they have achieved to understand customers’ wants and needs throughout the years. Since the technology industry is always changing, Best Buy needs to ensure that they keep up with their competitors and trends. Their main target consumers could be anyone from any age group that loves technology and wants the latest devices at a low price. Since Best Buy offered a variety of brands, this produces a larger target group for those who have brand loyalty on a certain brand. The popularity of technology among consumers’ everyday lives is a great advantage to Best Buy.

Online Competitors

Amazon

Amazon was established during 1994 and is headquartered in Seattle. It is the top rival for Best Buy and the strongest competitor in the online retail industry. Amazon is the world’s largest online retailer and an exceptional cloud services provider. In the past, Amazon was originally a bookseller but has developed to sell an extended variety of digital media consumer goods. In addition, they sell electronic devices, such as the Kindle Fire tablet, Fire TV, and Kindle e-book reader (Bhasin, H.)

Currently, Amazon has a stable base of loyal customers who keep buying repeatedly from them because of Amazon Prime. Due to the success of the online books, Amazon.com was established and constantly has many product categories like electronics, toys, apparels, accessories, footwear, home and kitchen and many more. Thus, many customers feel they can find everything on this website, thus eliminating Best Buy from some consumers’ minds. Additionally, the company established excellent logistics providers and has a strong supply chain. Due to its efficient distribution network, Amazon’s products are available at many locations, even though they do not have many stores like Best Buy.

eBay

eBay is a successful e-commerce company that was established in 1995, headquartered in San Jose, California. They have operated the business in over 30 countries around the world. Its site, eBay.com, provides an online auction and also a shopping platform, which people can buy and sell various products on this platform. The company is acknowledged worldwide; therefore having a strong customer base. The various products that are sold on eBay are electronics, apparel, home appliances, furniture and many more which were made possible with partnerships. eBay shoppers can look for a cheap price by joining an auction and bidding for a used product, while Amazon shoppers are exploring for a product that the price is affordable.

Offline Competitors

Walmart

Walmart is the largest retailer in the world and been ranked number one on the Fortune 500 for many years. The company was established in 1962 and headquartered in Bentonville, Arkansas. Walmart operates its business through a chain of discount department stores and hypermarkets. The main objective of the company is “to save people money so they can live better” (Ferguson E.) Walmart has approximately 11,718 stores and is located in over 28 countries. Plus, it has an online store for e-commerce.

The internal distribution system of Walmart is associated with the use of technology and great innovative methods. Alike Best Buy, Walmart offers a gift card system to encourage the customers to make a purchase. Walmart has a strong buyer bargaining power, so they can buy electronics from suppliers, and then sell those goods at a competitive price. The gift card can be used for their purchase, which can be redeemed at the stores. The number of Walmart’s customers increased over the years, thus becoming a retailer leader, which resulted in them becoming one of Best Buy’s strongest competitors.

Target

Target Corporation is the second-largest department store retailer, which was established in 1902, headquartered in Minneapolis, Minnesota The company operates through in-store and online shopping, which is similar to Walmart strategy, but it has a unique competitive advantage, which is affordable but stylish (Passikoff 2016.) The company offers value, quality, and variety at low prices and has formed a strong customer relationship. Regarded as a top Best Buy competitor, Target is a strong competitor which has economies of scale that has its tremendous buying power and can offer everyday low prices. Thus, Best Buy strives hard to meet the requirements of the customers by affording quality products, especially for an electronic item.

SWOT Analysis

Strength

• International presence – Apart from being an electronic store leader in the US, Best Buy expands its business to many countries such as Canada, China, and Mexico.
• Brand loyalty – Although Best Buy struggles the increase of the e-commerce business like Amazon.com and other online business, the company is still the best electronic seller brand for Americans. The brand is recognized as the best destinations for people who are looking for any good electronic product or technician service.
• The exceptional product line – As Best Buy has a wide range of products with various brands on the shelf, the company also develops its product such as Rocketfish, Init, Dynex, Pacific Sales, Insignia, Magnolia Home Theatre, and Modal.
• Warranty plan – Most of Best Buy products are guaranteed with an exceptional warranty policy.

Weakness

• Unsuccessful in the international level – Although Best Buy tried to expand its business to many countries, the brand is still unsuccessful outside the US and not recognized by a foreigner.
• The cost of inventory - Increasing inventory level affects all costs of Best Buy operating expenses such as the cost of transportation and the cost of handling or stocking inventory
• Discounting cost – Heavy discount promotion which supports marketing activities and the product has placed a lot of financial pressure on the company's income statement.

Opportunity

•  Online channel – Even though the online channel can increase the number of competitors, the brand can benefit from a presence in the online media which is a huge opportunity for the company to sell their products alternatively.
• Strong supplier relationship – Other than providing the product to Best Buy, suppliers can be a vital source of advice, insight information and trade credit.
• Developing new technology – A new invention introduced from the tech industry can benefit Best Buy to offer an up-to-date product on the shelf.
• The Necessity of electronics – In the age of digital, most people need an electronic device for their convenience. Thread
• Tough competition – Both online and offline competitors is tough. Many companies compete with huge discounts and offers. As a result, this kind of growing competition forces fixing up low prices for the company and it could lead to a serious threat to the future revenue operation.
• Auction websites – A customer can get a lower price from the auction sites such as eBay.com. Some customer who is looking for a cheap electronic product will tend to go for these sites.
• Change in government regulation – The significant changes in government policies can affect the business operations of Best Buy.

Brand Audit

Slogans

Best Buy had not used a slogan in over a decade until recently. In the 2000s, they used the slogan “More Ways To Shop.” In 2018, they unveiled their new message, which is “Let’s talk about what’s possible.” We feel that a slogan would serve as a benefit to increase brand recall and strengthen the connection between the company and consumer. The new slogan that is recommended for Best Buy to use is “The best expert service where you can buy the best electronics.” It is in the best interest for Best Buy to emphasize the superior customer service that they offer and use that as a competitive advantage. Online shopping does not offer a showroom experience and staff that can assist the customer in person. The slogans strength will serve as a reminder of that relationship between the consumer and the organization.

Category

The target group is retail. There is no narrow target market, the store is for a wide audience. This is a large chain with stores accessible in most cities. They offer a wide variety of diversified goods. Luxury to affordable brands. Best Buy is big on being price competitive. There locations are strategically set to be apart of outdoor strip malls or retail lots next to other big retailers. They are pretty consistent with interior design, store structure and will own a large parking lot. Best Buy is trying to generate electronic and retail sales of an age group of all ages. Their demographic had previously been baby boomers, but it’s time for a shift on the upcoming generations and those who are on the verge of becoming loyal to Amazon.

Promotion

Best Buy attempted a rebranding attempt by changing their logo in 2018. After using the same logo for nearly 30 years, Best Buy added more blue and took out a lot of yellow. Thus far, Best Buy has experienced an increase in sales since the logo change. The 2018 revenue saw nearly a 7% increase, while in 2019 the company is on pace for a 1.7% increase (Macrotrends, 2019). The new logo has cleaned up the image and has more of a tech feel to it to be recognized as a competitor of

Amazon

A promotion that Best Buy has offered is Black Friday in July. This is an important sale for the retailer annually in November. Sales is an effective way to attract store traffic and increase the likelihood of a purchase. Now Best Buy is attempting to annually have this event in July as well because many of the large retailers participate in this event. It may be a little more difficult to match sales of November because a lot of people do their shopping for Christmas. This event has occurred for a few years and was even established before Prime Day. Although Best Buy isn’t projected to be the leader for this event, they are projected to take home 24 percent of the sales (Spector, 2019).

Best Buy established mobile stores in 2009. The intent was to increase phone sales by opening locations in malls. This was meant to compete with large phone retailers and have a competitive advantage over Target and Walmart who also sell phones. Though this was an effective way to increase brand exposure, it did not go as planned. The format ultimately did not end well because in 2018, all the remaining 250 stores were closed due to low sales and high costs.

One promotional idea to enhance the emphasis of superior customer service is to launch a sale in the first quarter of the year, which relates to equipment repairments. Best Buy is attempting to build a strong relationship with its customer base. By showcasing it superior customer service, it can help build a strong brand reputation. It’s difficult to find electronic repair shops that offer discount weeks, so this is an innovative opportunity to capitalize and gain customer loyalty because Best Buy will offer superior customer support. Becoming the go-to stop for repairments will also increase foot trafficking throughout the store and increase the likelihood of in-store purchases.

Establishing smaller-scale Best Buy locations the size of the average mobile carrier store is an innovative method to gain sales. This would be different than the Best Buy mobile stores because this focuses on smaller electronic goods that are often bought online. Phone chargers, earbuds, electronic wire cables, small appliances, computer equipment like keyboards, laptops are all items suggested that these stores carry. In addition, store repairs would be offered as well. These stores would be strategically located near college campuses and urban neighborhoods that are easily accessible. The goal is to appeal to the locals that live down the street to gain their business. This strategy worked for Target, so it’s something Best Buy can copy to be quicker than online shopping and be a fast shopping experience for those that don’t want to walk through a large store or mall.

Budgets and Constraints

Best Buy does not need to invest much into research and develop. The research that is conducted is primarily market based to better understand the consumer. Funds need to be allocated towards employees. Hire wages lead to better performance and encourage stronger candidates to apply. The logo was recently modified, so that can remain the same to avoid confusing the customers. Older locations may be better off by receiving store remodels to build a pleasant atmosphere for the shopper. Best Buy isn’t risking stepping into any legal boundaries because they trademarked their logo and are developing their product through strong customer service. Best Buy has enough operating income to invest on store innovations that’ll maintain the company’s savviness. The largest constraint for Best Buy right now is getting customers in the store. Advertising is essential to increase brand awareness of what Best Buy’s services have to offer.

Overview

Best Buy is on the right path to improving its brand image. The plans are satisfactory because management is building a fresh look for the company. The marketing campaign team is showcasing customer service and helpful staff. With social media becoming so prominent, Best Buy has to be market their products and customer service on these platforms to gain customer attention. There have been some recent store closures over the past few years, but by building a stronger online presence they can win back those communities. The strategically located smaller stores will be an effective strategy to be more convenient than online shopping. The executives at Best Buy now understand the weaknesses of the company and are utilizing the opportunities to remain relevant. In a landscape that changes about every decade, Best Buy is on the right path to focus on its strengths and use strong customer service to win back customers.

Conclusion

Although Best Buy’s success was threatened by an emerging online marketplace and new competitive landscape, the company made important moves to remain competitive. They leveraged the fact that they had physical stores by focusing on providing top notch customer service. This is evident by opening its first in-store Magnolia departments in 2006, in addition to opening Geek Squad City, a 165,000-square foot IT repair depot (Twice, 2011). This enabled them to offer captivating in-store experiences with their home theatres, and also showcase their electronics expertise. Their technological know-how and physical store presence enabled them to offer a unique service that differentiated themselves from competition.

Furthermore, Best Buy understood the need there was to assist seniors on how to use or buy electronic devices, even providing in-home consultation. This was illustrated by their acquisition of Great Call, which provided senior-friendly phones and a call center to provide emergency alert services (Verdon, 2019). The moves Best Buy made highlighted the fact that they knew they had to have a unique offering compared to big name rivals such as Amazon, Target, and Ebay. To remain even more competitive, they also offered price matching on certain products and similar shipping speeds as Amazon (Maras, 2019).

Overall, we think Best Buy made the appropriate changes in order to maintain a strong position in the consumer electronics industry. However, there are other creative ways we believe they can improve their market position even further. Like mentioned earlier in this paper, one idea is to open up smaller scale stores in ideal locations with a lot of foot traffic. They could offer common everyday electronics as well as provide tech savvy technicians to do repairs and offer knowledge. This would certainly increase their brand presence and reputation. Another idea they could implement that focuses on excellent customer service could be having a special day similar to Black Friday, where they offer services to repair electronics.

The new competitive landscape has certainly put pressure on Best Buy to adapt, and it appears they have made the right decisions in terms of re-branding themselves to focus on unique and quality customer service. Given how drastic technology can affect an industry, it’s essential that Best Buy continues to be flexible and make strategic changes that are necessary, while keeping their core competency in mind.