why the #1 consumer electronics retailer sells on...
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Carlson School of Management
Why the #1 Consumer Electronics Retailer Sells on eBay:Augmenting traditional channels at key points in the product lifecycle
Brian HungerfordDirector, Best Buy.comFriday April 8, 2005
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Agenda
> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
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Best Buy Background
> North America's number-one specialty retailerConsumer electronics, personal computers, entertainment software, appliances
> Named Forbes ‘Company of the Year’ (Jan. 2004)
> 7th on Business Week’s annual ranking of best performing companies on the S&P 500 (April 2004)
> Just under $17B market cap> Over 100,000 employees> Over 830 stores (U.S. and Canada)
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Agenda
> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
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BestBuy.com
> Established FY 2000> “Our Largest Best
Buy Store”> No. 9 in Internet
Retailer’s “Top 300 Guide”
> Leading online Consumer Electronics destination*
* Source: Netratings/Netview, Feb 05
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Customer Centricity
• Focused,active, younger malecustomer
• Wants latesttechnology &entertainment
• Family manwho wants technology thatimproves hislife
• Practical adopter of technology &entertainment
• Busy suburbanmom who wantsto enrich herchildren’s liveswith technology& entertainment
• Affluent professional
• Wants besttechnology &entertainmentexperience
• Demandsexcellentservice
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Challenges
> Retail stores are primary channel for selling discontinued and end-of-life products
Desire for premium retail floor space to show latest technology.
> Desire to expand customer base in key customer segments
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Agenda
> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
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1998 1999 2000 2001 2002 2003
Global Registered Users(Millions)
> 50 million unique U.S. visitors per month.*
120,000+New Users
Daily
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
125 Million
2004
Why eBay?
* Source: Netratings/Netview, Sept 04
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A Day in the Life of eBay Computers & Electronics
• 92,000 items sold
• 13,200 Cameras & Accessories sold
• 13,000 Cell Phones & Accessories sold
• 7,300 Home AV products sold
• 4,500 Car Electronics products sold
• 3,000 Laptops & Desktops sold
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Best Buy Outlet Store on eBay
> Launched Jan. 2004> New-in-box, but end-
of-life consumer electronics and computers
> Nationwide delivery> Complements retail
and BestBuy.comchannels
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Agenda
> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
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Best Buy Outlet - Benefits
> Faster turnover of end-of-life product
> Less end-of-life product in stores
Sales associates focus on new/high margin itemsStores have a fresher, cleaner look
> Extend Best Buy brand to 125+ million registered eBay users
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Best Buy Outlet - Benefits
> Product selection learnings:
High ASP, low margin products outperform on eBay.Low ASP, high margin products outperform in the retail setting.
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Best Buy Outlet - Benefits
> Customer Satisfaction:
eBay’s feedback score.Fit with Customer Centricity.
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Customer Centricity Surprises
> Expectation of eBay customersMostly price-sensitive bargain huntersWould not fall into desired Customer Segments
> Reality of eBay customersBroadly distributed across all key Customer SegmentsMatch or surpass retail customers in several key Customer Segments
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Who is Buying from Best Buy on eBay?
The eBay channel is a new customer acquisition machine.
IdentifiedCustomers Unidentified (New)
Customers
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Agenda
> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
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Lesson Learned / Best Practices
> Corporate "buy-in" is criticalSmall, dedicated team supported by extended cast of internal experts
> MerchandisingAuction space facilitates quick movement of end-of-life productHigh quality product descriptions and content gets it doneHeavily branded
> Customer ServiceTimely customer contactDedicated customer service teamSatisfied customers pay dividends.
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The Future on eBay
> Best Buy OutletServices, other attachments.New, in-market product (primarily as attachments).Market Price Monitoring near end of life-cycle.
> Non-Branded Outlet(s)Open Box and Refurbished Product.
> Technology Trade-InMulti-channel strategy includes eBay.
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Key Partnerships
> ChannelAdvisor
Auction management expertise and software.
> EBay Strategic Alliance
Constantly exploring new strategic opportunities.