Having largely conquered the nation's major markets, Best Buy also coveted the access to the smaller markets that would be gained through ownership of the On Cue chain, which served communities of 30, people or fewer. Heightened competition and a slowdown in consumer spending cut into fiscal profits, which increased only 14 percent over the previous year. Sales of digital products reached 17 percent of total sales, compared to the 4 percent figure for fiscal This rapid growth in digital product sales also inspired a shift in the overall product mix: sales of consumer electronics products 33 percent of the total surpassed the sales of home office products 31 percent for the first time in these figures were 27 percent and 36 percent, respectively.
Among the 62 Best Buy stores opened in were the first ones in Seattle, which had been the only major U. That year Best Buy also set its sights north of the border in its quest for further expansion opportunities.
Future Shop outlets had a product mix similar to that of a Best Buy store, although the specific brands and products carried differed. At an average of 21, square feet, the typical Future Shop was also considerably smaller than a Best Buy, but the key difference was that the Canadian chain used commissioned sales associates, a practice that Best Buy had so famously--and successfully--done away with years earlier. Future Shop had been founded by Hassan Khosrowshahi, who opened the chain's first outlet in Vancouver, British Columbia, in He later expanded the chain throughout the remaining Canadian provinces and even made an abortive move into the U.
Khosrowshahi relinquished his position as chairman and CEO following the takeover, but Future Shop's president and chief operating officer, Kevin Layden, a former Circuit City executive, stayed on to head up the new Best Buy subsidiary.
Despite the completion of this acquisition, Best Buy pushed ahead with a previously planned expansion of the Best Buy chain into Canada, opening eight stores in the Toronto area in the fall of The company appeared confident that it could successfully operate the dual Canadian brands given their distinguishing characteristics.
Meanwhile, in July Schulze turned over his CEO duties to Vice-Chairman Brad Anderson, who had also served as president and chief operating officer since and had been with the company since Schulze remained involved in the company he founded as chairman and continued to be the largest shareholder in the company, owning a stake of nearly 17 percent. As the Best Buy chain pushed past the store mark in with the opening of 67 new stores in the United States, including the first stores in Alaska, Idaho, Utah, and West Virginia, the situation at the Musicland chains was deteriorating.
Sales at music retailers were ratcheting down not only because of the downloading of music over the Internet that had been made steadily more popular by Napster and other online music services but also because consumers were increasingly buying the cheaper CDs that were now being offered by such mass merchants as Wal-Mart Stores, Inc.
Best Buy announced in April that it would rebrand the On Cue stores under the more nationally known Sam Goody name. Then in January , 90 Sam Goody stores were closed, along with 20 Suncoast outlets. Musicland continued to lose money, however, and in March Best Buy announced it would sell the entire division.
In another early development, Best Buy shifted its corporate headquarters from Eden Prairie, Minnesota, where it had operated out of eight scattered buildings, to a more compact acre campus in nearby Richfield.
Paying no cash in the transaction, Sun Capital simply assumed Musicland's debt and lease obligations. In what was perhaps an understatement, Anderson told the Minneapolis Star Tribune that "this was a very expensive, but a powerful learning experience for Best Buy.
The stock had performed poorly ever since the Musicland acquisition, but during the calendar year, shares of Best Buy ascended percent. In December, Best Buy rewarded those shareholders who had stuck with the company by issuing its first dividend ever of 30 cents per share. In November the Best Buy chain opened its th U. In September, meantime, Magnolia Hi-Fi adopted the more contemporary name of Magnolia Audio Video, a move that accompanied that chain's entrance into the Los Angeles market.
Fueled by a 7. During the next year, Best Buy planned to open 60 more U. Faced with the ongoing challenges of shorter product cycles, severe downward pricing pressure, and heightened competition from mass merchants, Best Buy was also in the process of rolling out a new store concept, one the company described as "customer-centric. They also placed a greater emphasis on high-end electronics coupled with service and installation--taking a page from the Magnolia playbook.
Through these initiatives, Best Buy hoped to stay ahead of its many rivals in what was perhaps the most ruthlessly competitive segment of the retail market. By late Best Buy had more than stores around the world and opened its very first global office in China. In Best Buy introduced the Reward Zone loyalty program as part of their customer centricity transformation and hired the Virtucom group to handle their online content.
That same year they generated more than 3 billion in sales. Another notable occurrence in this year is the elimination of mail in rebates which was a first for major retailers. Another notable event in the year was the purchase of Napster and Cinema Now which they hoped would help them to keep up with the advancement of digital downloads which were causing a sharp decrease in media and music sales in stores. However, this venture did not work out to their advantage and the company was later sold when it did not provide the revenue the company expected.
By the year they were celebrating the opening of their th store in Minnesota located within the Mall of America. Pilot stores were also opened in Puerto Rico and Mexico in In the website also received a face lift with changes being made to the site layout and design. These changes appeared to be successful with more than million site visitors visiting the website in this year. In Best Buy launched the electronics recycling program which provided consumers with a way to responsibly recycle their unused and unwanted electronics.
Brian Dunn replaced Schulze as the CEO of the company in , although Schulze stays active in the company serves as the chairman of the board. In Best Buy launched their Video Game trade in program which allowed them to purchase used video games and resell them similar to that of GameStop.
This service was offered in more than stores across the United States in Because of decreasing sales and financial losses, Best Buy announced that they would be closing the 11 Best Buy Europe stores the following year leaving only CarPhone warehouse outlets open in the area. Another sign that this company was having financial struggles was the closing of stores in China in In March of Best Buy announced a quarterly loss of 1.
Best Buy plans to close 50 of their stores within the United States focusing on the smaller BestBuy mobile stores and cellphone sales. In April of CEO Brian Dunn received some controversy for not moving as quickly as he needed to keep up with online competition.
Rumors also circulated about a relationship that Dunn had with a female worker and he was asked to step down as CEO. Mike Mikan was named interim CEO until a permanent replacement could be found. Schulze the former CEO and biggest shareholder in the company also resigned this year to explore other options.
In June of Schulze was working with Wall Street bankers to devise a plan to take the company private. In August of a new CEO was named. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
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Pacific Sales Kitchen and Bath Centers offers Best Buy customers high-end kitchen and home appliances at both its standalone showrooms and in-store locations. Best Buy has remained competitive through its strategic acquisitions, vertical integration of new product lines, and expansion into a variety of repair services and technical support. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
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Category Killer Definition A category killer is a large retail chain superstore that dominates its product category. The Nielsen Company: An Overview The Nielsen Company is a global provider of market research and analyses of media and viewer interactions. That this was going to be a national concept?
Schulze: It actually happened in , when we opened the first Best Buy store in Burnsville, Minnesota. At that point, we knew the strategy we were building would work, and we immediately wanted to convert the rest of the Sound of Music stores into these Best Buy superstores. That was the springboard. There was no turning back at that point. The second-most-important characteristic for me, and one of the big items in my playbook, really has to do with empowering employees.
When I started the business, I relied on my own knowledge and experience, but I soon realized that employees, when empowered to do so, added dimensions to what we were trying to accomplish that went far beyond my own comprehension.
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