Is Best Buy undermining its storybook turnaround?
Even Hubert Joly's friends thought he was nuts when he took over as CEO of Best Buy in 2012.
A few years earlier, the retailer's largest direct rival, Circuit City, had filed for bankruptcy and ultimately liquidated. A couple years into Joly's tenure at Best Buy, RadioShack fell into bankruptcy (the first time) as well.
Even with its main competitor gone, Best Buy was flanked by competitors. On one side were generalists like Walmart and Target, who offered shopping convenience and low prices. On the other side was Amazon, quickly growing into an online "everything" store, expanding its electronics sales in the process.
As Joly has freely stated in public, the world thought Best Buy was doomed. Yet he took on the challenge. "I felt that the world needed Best Buy," he said at a virtual National Retail Federation conference this summer. "Customers needed Best Buy. For some of our purchases, we need to see, feel, touch products."
Best Buy's sales declined in four out of the five years between 2013 and 2017. Then, starting in 2018, they began a steady march back up. Joly credited Best Buy's now famous turnaround to an approach that centered on the company's front-line workers. "The essence of the turnaround was a very human-centric turnaround," Joly told the NRF audience in June. "Listen to the front line. They had all the answers." Explaining what this means, the former chief said he ignored advice to cut employees and close stores. "Don't start with firing people, start with growing the top line," Joly said.
“The essence of the turnaround was a very human-centric turnaround.”
In 2019, Joly passed the baton to longtime Best Buy executive Corie Barry, who until then had served as chief financial and strategic transformation officer. The next year, a pandemic swept through the country, and Best Buy weathered one of the biggest upheavals the industry has ever seen. It came out seemingly as strong as ever, with sales and profits up.
Then, early this year, Best Buy started making the kinds of staff cuts that Joly said he shunned.
Best Buy employees have weathered the growth of Amazon, e-commerce generally and a pandemic. Current and former employees who spoke with Retail Dive say they already struggled with understaffing at their stores. Now with cuts to full-time staff this year, they have lost knowledgeable, invested coworkers from their stores and are feeling more squeezed than ever.
A new operating model that Barry and the executive team have rolled out recasts Best Buy sales floor workers, the "blue shirts" in company parlance, into roving generalists and jacks-of-all-trades.
Workers are being asked to work across product departments and fulfillment channels, taking on ever more tasks even as staffing is tight and allotted time to properly learn new areas is slim. At the same time, they are trying to sell to and assist customers in purchasing products that can be complex, confusing and intimidating for customers.
Through the cuts and operational shakeups, Best Buy may be compromising one of the primary competitive advantages it has: its stores and customer service.
This story is based on interviews and exchanges with more than 10 current and recently departed employees, who worked at different stores and in various departments, most of whom spoke with Retail Dive on condition of anonymity out of fear of losing their jobs and other negative consequences. Their observations and sentiments have been echoed by many more anonymous posters identifying as Best Buy employees on social media sites like Reddit and The Layoff.
Best Buy did not respond to requests for comment on this story.
A changing sector
Electronics are different from many other retailed products. Complex, interconnected, ever-changing — they can baffle many consumers.
Best Buy and other box players over the years displaced smaller, service-oriented stores, offering a stripped-down version of the salesmanship that made those stores attractive.
As Françoise Carré, research director at the University of Massachusetts Boston's Center for Social Policy, explained, Circuit City and Best Buy became the two leaders in consumer electronics, with box players acquiring smaller retailers or knocking them to the wayside.
In doing so, they reduced the expectations for customer service going into an electronics store. "Knowledge was less important," Carré said. "You no longer had the small specialty shops where somebody knew a ton about the technology. And these companies were able to package enough of the information so that the person could do it without being an aficionado of high technology and audio technology."
Even so, Best Buy and Circuit City in years past offered a level of customer service and product knowledge above what customers would encounter at pure commodity retailers like Walmart or Target.
Tied to a certain product department — televisions, appliances, computers and so forth — Best Buy's staff had relative specializations and knowledge of a category compared to generalists.
Large players also developed high-service units within their organizations and stores. In 2004, for example, Best Buy developed its Magnolia division, a store-within-a-store specializing in home theater equipment that once boasted of "a fanatical dedication to customer satisfaction."
This May, Best Buy restructured Magnolia, merging its sales team with the retailer's in-home advisers and Pacific Kitchen & Home staff.
