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Best Buy brings in a new CEO
A sign is posted in front of a Best Buy store on April 10, 2012 in New York City.
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Stacey Vanek Smith: Struggling electronics retailer Best Buy has named a new chief executive. Frenchman Hubert Joly will likely take the helm in early September.
Our own Scott Tong joins me live from Washington. Good morning, Scott.
Scott Tong: Good morning Stacey.
Smith: Scott, who is this new CEO?
Tong: Mr. Joly is now the CEO of a big hospitality company -- the parent company of the hotel chains Radisson and the Country Inn & Suites, and the T.G.I. Fridays restaurant chain. That is until he takes over, as you say, in the fall. We should say, Stacey, Mr. Joly is a Frenchman.
Smith: Well give us a sense of some of the challenges Joly faces at Best Buy?
Tong: Oh, let us count the ways! The company lost $1.2 billion last year. Stocks have lost half their value; the bonds are now in junk territory according to Standard & Poor's. And swirling around all of that, is we have this question of new management coming in to change things. And there's talk of this publically-traded company going private.
The founder and the former chairman of Best Buy, Richard Schulze, wants to raise and borrow a whole lot of money to buy out the company from the current shareholders and he wants to make change. So the big word, "T" for turnaround, Stacey.
Smith: Scott, what happened at Best Buy? A few years ago I thought they were doing pretty well when their main competition Circuit City went bankrupt? What happened there?
Tong: The market's changing. So there's a rumor on the Morning Report that you've bought a new laptop, is that right? And you bought it where?
Smith: It was a while ago, but yes. I bought it online.
Tong: Well there you go -- that's our new marketplace, that's the new competition in this space. And I just bought a TV -- my first that's bigger than 12 inches. And so we're all buying online, and that's what all these companies have to deal with now. So Best Buy is talking now about ditching its big box stores; trying to integrate more with the e-commerce platform -- you know, a place where you can go to do web pick-ups and web returns. And hopefully we'll hear a little bit more when they announce earnings tomorrow.
Smith: Scott Tong in Washington, thank you.
Tong: You're welcome.
Ditto! Best Buy has absolutly the worst customer service--especially service after the sale. Once they've got your money, they will do everything they possibly can to avoid making good on any extended warranties. My wife and I bought a washer and dryer several years ago. Between Best Buy sending us the wrong machines, then getting that corrected, but having continuing problems with the washer, then refusing to abide by their own "lemon" clause in their extended warranty, and finally having to resort to hasseling the CEO's office to get it dealt with (over the course of 5 years), we decided that they would never get another dime out of us. Ours was not an isolated experience either. I know of way too many people who have had similar rotten experiences with Best Buy. Competition isn't their problem--their antagonistic and dismissive approach to customer service is what's killing them. I won't cry any tears at their demise.
While I'm sure that online retailers (not to mention Target and Wal-Mart) have eaten into Best Buy's sales, I think that it's erroneous to look at just external factors for the company's declining fortunes. When Best Buy and Circuit City were the top dogs in electronics retailing, they paid little or no attention to customer service - as a result, they have little or no customer loyalty.
I'll shop in a brick-and-mortar store if they offer a better experience than online. The problem is that at Best Buy, the experience is less pleasant that dealing with Amazon. (It's the only place where I've ever had a sales associate follow me out of the store, berating me, loudly, for my choice of digital cameras.)
My take: Best Buy does have stiff competition, but another challenge that they must meet is their own reputation - they need to have stores that people want to enter.
