Carlson School of Management
Why the #1 Consumer Electronics
Retailer Sells on eBay:
Augmenting traditional channels at key points
in the product lifecycle
Brian Hungerford
Director, Best Buy.com
Friday April 8, 2005
1
Agenda
> About Best Buy
> Best Buy.com
> Best Buy on eBay
> Measuring Success
> Lessons Learned
> Q&A
Page 2
Best Buy Background
> North America's number-one specialty retailer
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Consumer 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)
Page 3
Agenda
> About Best Buy
> Best Buy.com
> Best Buy on eBay
> Measuring Success
> Lessons Learned
> Q&A
Page 4
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
Page 5
Customer Centricity
• Affluent
professional
• Wants best
technology &
entertainment
experience
• Demands
excellent
service
• Focused,
active,
younger male
customer
• Wants latest
technology &
entertainment
• Family man
who wants
technology that
improves his
life
• Practical
adopter of
technology &
entertainment
• Busy suburban
mom who wants
to enrich her
children’s lives
with technology
& entertainment
Page 6
Challenges
> Retail stores are primary channel for
selling discontinued and end-of-life
products
ƒ
Desire for premium retail floor space to show
latest technology.
> Desire to expand customer base in key
customer segments
Page 7
Agenda
> About Best Buy
> About Best Buy.com
> Best Buy on eBay
> Measuring Success
> Lessons Learned
> Q&A
Page 8
120,000+
New Users
Daily
Why eBay?
125
Global Registered Users
Million
(Millions)
Q1
Q3
1998
Q1
Q3
1999
Q1
Q3
2000
Q1
Q3
2001
Q1
Q3
2002
Q1
Q3
2003
Q1
Q3
2004
> 50 million unique U.S. visitors per month.*
* Source: Netratings/Netview, Sept 04
Page 9
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
Page 10
Best Buy Outlet Store on eBay
> Launched Jan. 2004
> New-in-box, but endof-life consumer
electronics and
computers
> Nationwide delivery
> Complements retail
and BestBuy.com
channels
Page 11
Agenda
> About Best Buy
> About Best Buy.com
> Best Buy on eBay
> Measuring Success
> Lessons Learned
> Q&A
Page 12
Best Buy Outlet - Benefits
> Faster turnover of end-oflife product
> Less end-of-life product in
stores
ƒ
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Sales associates focus on
new/high margin items
Stores have a fresher,
cleaner look
> Extend Best Buy brand to
125+ million registered
eBay users
Page 13
Best Buy Outlet - Benefits
> Product selection
learnings:
ƒ
ƒ
High ASP, low margin
products outperform
on eBay.
Low ASP, high margin
products outperform in
the retail setting.
Page 14
Best Buy Outlet - Benefits
> Customer
Satisfaction:
ƒ
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eBay’s feedback score.
Fit with Customer
Centricity.
Page 15
Customer Centricity Surprises
> Expectation of eBay customers
ƒ
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Mostly price-sensitive bargain hunters
Would not fall into desired Customer Segments
> Reality of eBay customers
ƒ
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Broadly distributed across all key Customer
Segments
Match or surpass retail customers in several key
Customer Segments
Page 16
Who is Buying from Best Buy on eBay?
The eBay channel is a new customer
acquisition machine.
Identified
Customers
Unidentified (New)
Customers
Page 17
Agenda
> About Best Buy
> About Best Buy.com
> Best Buy on eBay
> Measuring Success
> Lessons Learned
> Q&A
Page 18
Lesson Learned / Best Practices
> Corporate "buy-in" is critical
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Small, dedicated team supported by extended cast of internal
experts
> Merchandising
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Auction space facilitates quick movement of end-of-life product
High quality product descriptions and content gets it done
Heavily branded
> Customer Service
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Timely customer contact
Dedicated customer service team
Satisfied customers pay dividends.
Page 19
The Future on eBay
> Best Buy Outlet
ƒ
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Services, other attachments.
New, in-market product (primarily as
attachments).
Market Price Monitoring near end of life-cycle.
> Non-Branded Outlet(s)
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Open Box and Refurbished Product.
> Technology Trade-In
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Multi-channel strategy includes eBay.
Page 20
Key Partnerships
> ChannelAdvisor
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Auction management expertise and software.
> EBay Strategic Alliance
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Constantly exploring new strategic opportunities.
Page 21
Questions
> Thank You!
Brian Hungerford
Brian.Hungerford@bestbuy.com
Page 22