Best Buy Co. Inc. BBY-N is looking to lessons it learned in Canada to help double its annual sales to $100-billion (U.S.) within a decade, as it aggressively pursues the kind of growth that has made it one of the best-performing American stocks over the past two decades.
The world's No. 1 seller of electronics, based in Minneapolis, made its first international foray to Canada in 2001 when it took over Future Shop Ltd.
Instead of replacing Future Shop's established name, Best Buy left it in place, but also began opening stores under its own distinctive, blue-and-yellow Best Buy brand a year later.
Now, Best Buy can draw on seven years of lessons learned from running seemingly similar stores, retailers that complement, rather than devour one another.
In its quest for the $100-billion target, Best Buy - whose sales in fiscal 2009 were $45-billion, with a $1-billion profit - is considering importing what it learned in Canada back to its American home turf.
The push comes as Best Buy's same-store sales, a key measure in retail, are expected to be, at best, flat this year and competition from Wal-Mart Stores Inc. and Amazon.com Inc. intensifies.
"I can easily see a world where we have several brands online. I can also see a world where we have another brand on the ground," said Brian Dunn, Best Buy president, who rises to chief executive officer at next month's annual meeting.
"We will look at any way we can reach new customers," added Mr. Dunn, in an interview at the company's Canadian headquarters in Burnaby, B.C.
Multiple brands in different businesses are not unusual.
In beverages, Coca-Cola Co. sells an array of products.
In the automobile industry, it's a hallmark of companies such as General Motors Corp. In retail, examples include Hudson's Bay Co., which operates higher-end Bay and lower-end Zellers stores.
In electronics, however, it can be more challenging to differentiate between brands. According to Best Buy Canada president Michael Pratt, the difference is in the details. "Anything that is customer-facing should be a different experience for the consumer," he said, referring to both the look of a store and the products.
In general terms, Best Buy's brand is positioned as a no-hassle electronics retailer, with ready-made packages and wider aisles designed to attract women (who appreciate having room to manoeuvre strollers or keep toddlers in tow, as well as being able to move around in a neat space without bumping into displays). Future Shop, in contrast, is the place for tech geeks.
While both brands sell computers and televisions, the selection isn't the same. More than 50 per cent of the models in various categories offered at Future Shop will be different from Best Buy.
Even the Canadian Best Buy isn't a replica of the American Best Buy, which is a bit more like Future Shop, Mr. Dunn said.
"One of the things we've learned from the team here in Canada, as they differentiate the Future Shop brand, is [that]how they position the Best Buy brand is different than we do in the United States. It's not a straight overlay."
This flexibility is key to tailoring two successful names, said Lindsay Meredith, a marketing professor at Simon Fraser University in Burnaby. Each brand must have a "particular image."
"You can run two brands as long as you're sure you're hitting two niches," Prof. Meredith said.
The first outside-of-Canada test of the dual-brand strategy will come in Britain, where Best Buy plans to soon open a store.
A year ago, it bought half of the retail arm of European mobile phone seller Carphone Warehouse Group PLC, which has more than 2,000 stores in the United Kingdom and Europe.
Best Buy embraces the notion of applying lessons learned to new ventures. For example, the company, whose core experience is selling TVs and computers, didn't have much success selling mobile phones and turned instead to half-ownership of Carphone Warehouse.
"It just wasn't part of our DNA," Mr. Dunn said. Early results are positive, with Best Buy saying the Carphone partnership has helped it double its small share of the mobile phone sales market to about 5 per cent.
Mobile phones are generally sold in smaller settings than the cavernous big boxes Best Buy calls home. So in North America, it is building a-store-within-a-store called Best Buy Mobile, expected to be rolled out across Canada by summer.
Mr. Dunn takes on the CEO post at a time of both opportunity and threat for Best Buy. Wal-Mart has become a major force in electronics retailing, but another rival, Circuit City Stores Inc. in the United States, has gone out of business and is being liquidated.
There are 1,028 Best Buy big boxes in the United States, compared with 58 in Canada. Further international expansion is part of the plan - in the United Kingdom, and Europe, and China - but Mr. Dunn sees the majority of growth happening in Canada and the United States.
Kaan Yigit, president of consultancy Solutions Research Group, said developing a second electronics brand in the United States would be a challenge for Best Buy because the market for such products has become commoditized.
"It'll be tough to build market share," Mr. Yigit said.
With Best Buy trying to keep up momentum as it struggles through the recession, there are few who know the company better than Mr. Dunn.
He started at a Best Buy store in 1985 as a sales clerk. He used a Miami Vice soundtrack to demonstrate the quality of products he was selling, and didn't envision running the company some day.
"I was just going to work there for a few months and sell VCRs."
Trends in electronics
U.S. consumer technology*
revenue in 2008, down 4 per cent. The decline follows a
4.5-per-cent gain in 2007.
TOP 5 SELLERS
1. Notebook PCs
2. LCD TVs
3. Desktop PCs
4. Inkjet cartridges
5. MP3 players
TOP 5 RETAILERS
1. Best Buy
4. Circuit City
*Consumer technology sales include information technology,
imaging, audio, video, and
consumables; and exclude video game hardware and software, PC software, and mobile phones.
Source: NPD Group
Selling the future
Best Buy, the world's leading electronics retailer, is mulling a multiple-brand strategy in the United States to fend off competition from Wal-Mart Stores Inc. and Amazon.com Inc., using lessons it has learned in Canada.
BEST BUY BIG-BOX STORES
United States: 1,028
FUTURE SHOP, ELECTRONICS
Five Star, appliances
Carphone Warehouse (50 per cent owned), mobile phones
Geek Squad, tech-support standalone stores
Pacific Sales, high-end home improvement
U.S.: 34 (all in California)
Source: Best Buy Co.