Businessmodel of Best Buy

Customer Segments

Best Buy provides a range of technology products, services and solutions to a broad range of customers. The Company is directly customer-facing, serving general consumers primarily through its network of retail outlets. In the mid-2000s Best Buy began organising its retail operations to targets five principal consumer segments:

Small business customer who has specific needs related to growing sales and increasing the profitability of his or her business.

• Affluent professionals who are looking for the best technology and entertainment products, and demands excellent service;
• Family men who are looking for technology that will improve their lives and that will last;
• Busy suburban mothers; and
• Young consumers who are active early-adopters. Best Buy exclusively serves customers across North America. Its largest market by far is the US, with Canada and Mexico serving as secondary markets.

Value Propositions

Best Buy provides value to its customers in the following ways:

• The quality of its customer service, with the Company providing personal assistance to customers through its knowledgeable in-house sales staff;
• Its competitive pricing and discount deals, with the Company offering products at reasonable prices, as well as offering deals and discounts, including weekly and daily deals;
• Its broad sales reach across North America, with the Company operating a network of 1,200 large-format and 400 small-format stores, principally in the US, as well as in Mexico and Canada;
• Its technical support offerings, with the Company providing expert, in-person technical assistance to its customers through its Geek Squad agents and service centres; and
• Its accessible digital channels, with the Company operating online and mobile channels that enable customers to purchase products and services on the move. ### Channels

Best Buy operates a corporate website at www.corporate.bestbuy.com, through which it provides information on its various products, services, and locations. The Company also operates an online sales channel at www.bestbuy.com, as well as through its Mexican and Canadian sites www.bestbuy.com.ca and www.bestbuy.com.mx, through which customers are able to make purchases, arrange deliveries, and manage accounts. Best Buy online merchandise sales are typically either picked up at Best Buy stores or delivered directly to customers from a distribution centre or retail store. The Company also operates a mobile channel through its iOS and android apps, which offers much of the same functionality.

The majority of Best Buy’s sales are made directly through its sales and customer service staff located at the Company’s physical retail stores. Best Buy operates approximately 1,200 large-format and 400 small-format retail outlets across the US, Canada, and Mexico. The Company also provides direct services through its in-house technical Geek Squad staff, who are located in-store and at specialist service centres.

Customer Relationships

Many of Best Buy’s products are available to customers on a self-service basis through its online sales channels in the US, Canada, and Mexico, as well as through its mobile apps. These channels allow customers to browse products, make purchase, organise deliveries and pickups, and manage transactions without interacting directly with members of the Company sales and customer service staff.

Through its chain of physical retail stores, Best Buy’s sales and customer service staff provide personalised assistance to customers, advising customers on which products are best suited to their needs. This is supplemented by the Company’s Geek Squad staff who provide customers with direct technical support across its product catalogue. Best Buy also provides support through its refund and exchange promise, its protection plans, and trade-in program, as well as through telephone support staff and online resources.

Best Buy also hosts a community forum through which customers are able to interact with one another, discuss problems, and identify fixes. The Company also operates social media accounts with Facebook, Twitter, YouTube, and Google+, through which it is able to interact directly with customers.

Key Activities

Best Buy is a retailer of technology products, services and solutions. The Company serves a spectrum of general consumers through its network of retail stores, its Geek Squad agents and service centres, and its online and mobile sales channels. The Company’s business activities are divided into two operating segments: Domestic

and International. The Domestic segment which comprises the Company’s operations across all states, districts and territories of the US, under its various brand names, including its online and mobile channel bestbuy.com and Best Buy Mobile; International, which comprises the Company’s operations in Canada and Mexico across all its brands, including www.bestbuy.com.ca and www.bestbuy.com.mx. Best Buy’s Domestic and International segments offer products across six categories: consumer electronics, computing and mobile phones, entertainment, appliances, services and other. It has a network of more than 1,600 stores across North America.

Key Partners

Best Buy collaborates with a range of partners across its two operating segments. These partners include:

• Supplier and Vendor Partners, comprising suppliers of goods, services, and tools which support the Company’s operations and provide outsourcing services;
• Affiliate and Marketing Partners, comprising a range of websites and companies that earn commissions for generating sales and traffic for Best Buy’s online and mobile channels;
• Developer Partners, with the Company making its API available so that developers can integrate third-party services into Best Buy functionality;
• Non-Profit and Community Partners, comprising a range of charitable organisations and programs with which the Company collaborates on projects; and
• Strategic and Alliance Partners, comprising a range of companies with which the Company shares resources and collaborates on joint venture projects. Best Buy has recently launched a number of partnerships, including a deal with Macy’s, which has agreed to open small-scale Best Buy sections within its own stores, and a partnership with Eero, with which it has non-exclusive retail agreement to sell Eero-branded Wi-Fi products in its stores.

Key Resources

Best Buy’s key resources are its stock of products, its network of physical retail and distribution infrastructure, its online and mobile channels, its intellectual properties, its partnerships, and its personnel – notably its specialist technical Geek Squad staff.

Best Buy has secured a number of domestic and international trademark and service mark registrations for its brands, as well as a number of patents. The Company deems its intellectual properties to have significant value in its marketing, stores, products and websites.

Best Buy owns and leases a number of properties across the US, Canada, and Mexico. This includes the Company’s 1,600 stores, as well as its distribution centres, service centres, and warehouses.

Cost Structure

Best Buy incurs costs in relation to the acquisition of stock and supplies, the operation and maintenance of its retail stores and distribution infrastructure, the maintenance and development of its online and mobile channels, the maintenance of its IT infrastructure, the management of its partnerships, and the retention of its personnel.

Best Buy’s most substantial expense relates to the cost of goods sold, which amounted to $30.33 billion in the year ended 30th January 2016. The Company also accrued significant selling, general, and administrative costs, which totalled $7.62 billion. The Company’s costs include the payment of salaries and benefits to its workforce of 125,000 full-time employees.

Revenue Streams

Best Buy generates revenue through the sale of various technology and electronic products through its physical retail stores and online channels, as well as the provision of technical support services. The Company’s revenue is derived from sales across the following product categories:

• Consumer Electronics, including home theatre, home automation, digital imaging, health and fitness, and portable audio products;
• Computing and Mobile Phones, including computing and peripherals, networking, tablets, mobile phones, wearables, and e-readers;
• Entertainment, including gaming hardware and software, movies, music, and other software;
• Appliances, including large appliances such as refrigerators, dishwashers, and ovens, and small appliances such as, coffee makers and blenders;
• Services, including consultation, design, delivery, installation, set-up, protection plans, repair, technical support and educational classes; and
• Other, including snacks, beverages and other sundry items. In the year ended 30th January 2016 Best Buy generated annual revenue of $39.53 billion, down slightly on the $40.34 billion recorded by the Company the previous year. The largest portion of the Company’s sales related to its computing and mobile phone products, which accounted for 46% of revenue for the year. This was followed by the sales of consumer electronics which accounted for 32% of revenue.