Best Buy’s sleek blue showrooms offer few clues that six years ago, the company was on the brink of collapse.
In 2012, Best Buy’s sales and profit were sliding. The CEO resigned and its stock tanked. Shoppers were going to Best Buy to check out TVs and laptops and then buying them on Amazon for cheaper prices.
Best Buy (BBY) turned to Hubert Joly, a retail novice from France, to halt its slump.
Joly’s message to skeptical investors shortly after taking over as CEO: “Make Best Buy great again.”
Joly quickly rolled out a price-matching guarantee at stores to prevent shoppers from leaving for Amazon, and the company improved its website and mobile app. He turned Best Buy’s stores into nimble warehouses to quickly ship deliveries to customers and collect online pickup orders.
Shoppers used to see stacked boxes of CDs and DVDs at Best Buy, but Joly developed stores into mini-shops for Apple, Amazon, Google and Microsoft to show off their products.
But Joly’s biggest focus has been strengthening Best Buy’s customer service, a key advantage over Amazon. The company retrained sales workers so they could offer better advice to puzzled customers deciding which model TV or camera to buy.
Today, analysts say Best Buy is the “last man standing” in consumer electronics, benefiting from the disappearance of Circuit City, RadioShack and HH Gregg. The result has been six straight quarters of comparable sales growth above 4%.
Joly has recently taken even more risks. Best Buy partnered with Amazon (AMZN) earlier this year to sell exclusive lines of Alexa-enabled Fire TVs in stores and on Amazon. Over the summer, Best Buy acquired GreatCall, which makes Jitterbug cell phones with big buttons for elderly citizens.
CNN Business spoke to Joly about the challenges Best Buy faces and his plans for the future. His responses have been edited for length and clarity.
CNN Business: An analyst downgraded Best Buy’s stock this week over a potential slowdown in TV and gaming sales. How do you make sure Best Buy is not too reliant on volatile consumer electronic product cycles?
Hubert Joly: Six years ago, we focused on the basics. In this new phase, our purpose as a company is not to sell TVs or computers. It’s to enrich lives through technology by addressing key human needs — entertainment, communication, productivity, security, food preparation and health. We want to go beyond just selling products through transactions to selling solutions and building relationships.
CNN: You have around 1,000 stores in the United States and have not had a huge number of closings like other retailers. Will you keep all of those stores open?
Joly: Stores are a wonderful asset. If you’re not sure what you want or have questions, being able to talk to one of our blue shirts is a treat. It’s helpful to be able to interact and to touch and feel the stuff. Stores are also helpful from a pickup standpoint. 40% of our online orders are picked up in the store. People choose to go to the store because in less than an hour you can pick up your stuff. You don’t need to worry about whether your kids will see that you bought them an iPad and nobody is going to steal it either. For vendors — companies like Apple, Microsoft, Sony and Samsung — a place where they can showcase their products is a very great space. We’ll gradually optimize our store footprint. Every year we close stores, but we also open stores. This is a dynamic space.
CNN: You are rolling out In-Home Advisor, a home tech consultation service, and Total Tech Support, an annual membership for on-demand help and repairs. Why do you believe these programs will succeed?
Joly: While technology is increasingly exciting, it can also be a little bit overwhelming: ‘What to choose? Is everything going to work together? What’s going to be the best match with my needs? If Netflix is not working tonight, is it because of Netflix, the Wi-Fi, or the TV?’ We want to be the CIO for your home, and we’re uniquely positioned to do this.
CNN: You recently bought GreatCall for $800 million. What do you gain from that acquisition?
Joly: A key mega trend in this country and around the world is the aging population. GreatCall gives us a management team that has a deep understanding of the unique needs of aging customers, and a business with close to a million subscribers.
CNN: What will be the next step in Best Buy’s push into health and wellness?
Joly: We’re excited about the opportunity around monitoring seniors in their homes. The impact on seniors, caregivers and health care costs can be very significant. This is going to be a journey. We know what we don’t know, and will continue to build our capabilities by partnering with great companies and running pilots.
CNN: Do you worry that your partnership with Amazon on Fire TVs will help it eventually take your customers?
Joly: Our assortment is not going to be driven by, ‘We like these people. We don’t like these people.’ I have a bunch of Amazon products in my house. I have a ton of respect for Amazon. They are an amazing company. What we’re doing for customers is also quite unique. In the consumer electronics and appliance space, we’re the leader. Amazon is very strong player, but the two of us combined are only about 25% of the market. Retail is a business where the bar is being raised and there’s increasing differentiation between the winners and the losers. We’re clearly positioned to be a winner. This is not a zero-sum game between Best Buy and Amazon.
CNN: You moved into appliances as Sears began to disappear and started selling toys like Lego to take advantage of Toys “R” US’ bankruptcy. Where else can you pick up customers from former rivals?
Joly: The strategy is more about expanding our share of existing customers’ technology spending at Best Buy. It’s only at 26% today. What we’re also finding is that when we go to people’s homes, we get into conversations that they would otherwise not have. We help them do things that they didn’t know were possible and that they were not aware of. As an industry leader, our big mission is to trigger the growth of the market by unleashing latent demand. If, on the way, competitors have a hard time following us, we’ll pick up the pieces gladly.
CNN: What’s Best Buy’s greatest existential threat?
Joly: If I quote Jeff Bezos, he’s convinced that Amazon is going to die, and the mission he has is to extend the life as much as possible. I think the existential threat for any company is when you lose focus on the customer and if you de-emphasize inspiring the people who work at the company. That combination can be lethal. Or if you get sloppy on the cost side. The winning formula, on the flip side, is if you have employees who feel they can build human connections, have enough autonomy to do great things for customers, and believe they can master skills. My role as the leader of the company is to make sure we have the right strategy and to work on the culture.
