best

Best Buy - The Rise and Fall...And Rise Again

[Music]

has everyone seen Best Buy's new logo

they changed it a few months ago the

text has changed from black to white the

yellow price tag is still part of it but

in a smaller way and down there in the

corner I like it but this is a big

change that old logo was so iconic it's

been there since the late 80s which is

my entire life sewed it may take some

time to get used to it but I think it's

fitting best by itself has changed so

much over the past few years maybe it's

time for a new logo as well Best Buy

started out small as one location in

Saint Paul Minnesota

with seven or eight employees this is

the guy who started it Richard Scholes

in 1966 he remortgaged his house to get

some capital that he used to open that

store it specialized in stereos and was

called Sound of Music now when I hear

the phrase Sound of Music I think of the

Best Picture winning musical which turns

out was released in 1965 the year before

he opened the store so I heavily suspect

he took influence from it now in the

first year of business sales reached 173

thousand dollars and it just grew

steadily from there over the next 15

years or so it built up to a handful of

locations around the Minnesota area but

in the early 80s some changes were made

that helped bring them to that next

level in 1982 the decision was made to

expand their product offerings from just

speakers and audio equipment they would

now offer appliances and other

electronics such as VCRs

it was all a big hit in sales grew to

nine point three million dollars at this

point the next year they changed the

name to Best Buy the year after that

they introduced these super stores and

again it was all a big hit in those

three years they transform the business

into the one that we know today within

five years their sales grew from that

9.3 million into two hundred and thirty

nine million I think from this point we

can say that they were up and running to

a point where in the 1990s the only two

stores of this kind even worth

mentioning were Best Buy in Circuit City

by 1992 Best Buy sales were up to nine

hundred and twenty nine million and then

the next year they were up to 1.6

billion the

were in direct competition with each

other I'll cover it all in more detail

in the future when I make a video about

Circuit City but I think we all know how

the battle ended I guess best buy one

because in 2009 Circuit City filed for

bankruptcy enclosed all of their stores

at first glance you would think that

this is fantastic news for Best Buy

historically their largest and most

direct competitor was now gone a perfect

opportunity to take advantage and scoop

up their market share do you remember

that game slither dot IO or whatever

it's called when one of the other snakes

died you would eat up all those glowing

dots that they left behind and then

become bigger I think you know what I'm

saying here but that's not really what

happened it turns out that the entire

industry was having troubles I think a

more accurate metaphor would be the

giant snake coming by and terrorizing

all of them the little snakes being Best

Buy Circuit City we can put RadioShack

in that group as well you're probably

already thinking it but the big snake

would represent Amazon and the other

online retailers now obviously this is a

very simplified summary of the situation

to a point where it's almost ridiculous

but that is what was happening Circuit

City and RadioShack didn't really make

it through it or we're at least

tremendously harmed by it and around

2012-2013 it was looking like things

were going to go the same way for Best

Buy let me show you just how bad things

were looking I like this one it's a

popular article from Forbes from 2012

called why Best Buy is going out of

business

gradually right in the beginning

electronics retailer Best Buy is headed

for the exits I can't say when exactly

but my guess is that it's only a matter

of time maybe a few more years then it's

sort of what I was saying it says

consider a few key metrics

despite the disappearance of competitors

including Circuit City the company is

losing market share I'd say this was a

very fair assessment at the time this

articles from 2012 and I would say at

2012 2013 they were at their lowest

here's what I'm trying to illustrate

overall things went very well for Best

Buy from the early 80s up until around

2009 from 2009 until maybe 2013

they were losing it then from 2013 until

today they brought it back now it's nice

when I can pull up their sales graph and

it tells that exact story but it's not

the case here and that does show how

these top-line sales don't mean

everything if you were to just go buy

this you'd say their best year was 2012

and they've been falling ever since let

me show you a more applicable graph

comparable store sales this is basically

a comparison of how each store sold in

comparison to the previous year so in

2009 on average each store sold a 1.3

percent less than it did the year before

you definitely want to see positive

numbers here and I can tell you the 10

years before this range were all

positive

their first negative year was in 2009

and four of the next five were negative

as well followed by four straight

positive years once again 2018 being the

best one now I say this perfectly

illustrates a rise a fall and a rise

again I should also mention that there

are only two years of negative income

occurred in 2012 and 2013 and then their

stock price was struggling I think I've

proven that this was a bad time for Best

Buy

I mean you probably knew it already but

they brought it back their stock price

right now is hitting all-time highs like

I already showed same store sales are up

there's positive income Moody's just

improve their credit rating if you look

at their earning reports or their

balance sheet almost everything is

looking pretty good let me talk about

how they did it

Best Buy in general is smaller today

than it was five years ago they have

fewer stores in the US Plus on average

their stores are smaller but where

they've really shrunk is internationally

for the international viewers in the UK

if you're familiar with Carphone

Warehouse they used to own half of it

but they've since sold it the same goes

for phone house throughout the rest of

Europe in Canada they used to own future

shop and they've either closed them or

converted them into Best Buy's still a

much smaller Canadian presence overall

in China five star appliance company

they used to own the majority stake

have since sold it in Mexico well

actually Mexico is the only place

they've grown since 2013 but not by much

they've clearly increased their emphasis

on the North American markets

specifically the United States while

decreasing their size in general and

this is all a huge part of why the

revenue graph looks the way it does

the second way they're doing better is

they found ways to separate themselves

from Amazon and the other online

retailers are you familiar with the term

showrooming it's the practice of

visiting a store or stores in order to

examine a product before buying it

online at a lower price I've done it you

go down to Best Buy to look at a new

phone or computer then go home and buy

it online from a different company what

a terrible thing for Best Buy and a

great thing for Amazon Best Buy is

covering all the costs that are involved

for you to look at a product employees

and floorspace and everything else and

Amazon is making the sale Best Buy is

spending money so their competitor can

sell more stuff that was maybe their

biggest issue five years ago and they

needed to address it fast here's how

they did it they brought in a new CEO

who to many seem like an odd choice he

wasn't really experienced in electronics

but rather his background was in

hospitality and travel he used to be the

CEO of a travel company to put it simple

he was more concerned with the customer

experience than anything else this is

when they started a turnaround plan

labeled a tree new blue the plan was

centered around cutting their expenses

and strengthening their services was a

lot about fixing what was broken so we

ensured that we we're priced competitive

we improve the customer experience they

managed to cut billions in cost and this

allowed them to lower their prices price

matching and was a smart move if they

can match that Amazon price why would

you go home to buy it from them when you

just buy it there it's easier but on top

of that Best Buy

does have a huge advantage over Amazon

in terms of convenience just think of

the little things maybe the charging

cable for your phone stops working you

don't want to wait for Amazon to ship it

to you you want

as soon as possible by making their

prices comparable they've made

themselves an attractive option in that

situation as far as strengthening their

customer service that involved making

sure that their in-store staff is

knowledgeable about the products that

they're selling because that's more

important now than ever before along

these same lines

strengthening services like Geek Squad a

quick personal story here I had an issue

with my computer about a week ago and I

didn't know what to do so I brought it

to Best Buy

the guy from the Geek Squad fixed it in

about five minutes and didn't charge me

anything including the trip the whole

thing took 30 minutes and it gave me a

great idea for a video topic their new

customer service focus also involves

following up after the sale was made

offering services where they'll install

your fancy high-tech doorbell or mount

your TV as of last year there renew blue

plant has concluded and they've marked

the end of their turnaround face and now

have entered a growth phase that they've

labeled it best by 2020 building the new

blue the emphasis here seems to be on

doubling down on their services and

building customer relationships

specifically when it comes to smart

homes they view a large potential in

that market and hope to capture a good

percentage of it this includes their

in-home advisor program where

essentially for free they'll have an

expert come out to your home and tell

you how they can help you with your

electronics or smart home needs there's

more that can be said about the

turnaround the whole store within a

store concept was a big part of it it

builds relationships with the other

companies and gets people in their store

which is always a good thing there's

also their increased emphasis on online

sales but I feel that one's more obvious

let me summarize Amazon and the internet

changed the market and they contributed

to the failures of Circuit City and

RadioShack and almost Best Buy but they

reacted to it they saw a few years that

were less than impressive and it

motivated them to make big changes they

shrunk in size they put more emphasis on

the North American operations while

bringing in a new CEO that put emphasis

on cutting costs and customer

interactions along with many other

changes that

have seemed to work they've implemented

a successful turnaround plan and are now

focused on growth let me know in the

comments where do you stand on all of

this do you agree with the reasoning I

provided for their comeback or do you

think there's more to the story that I

fail to mention and do you think the

comeback will last to have a stable

future ahead or not also what do you

think of the new logo is it indeed a

fitting change to go along with a

changing company I'd like to hear what

you have to say thank you for watching

[Music]