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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
Page 2
Agenda
> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
Page 3
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)
Page 4
Agenda
> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
Page 5
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 6
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
Page 7
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
Page 8
Agenda
> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
Page 9
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
Page 10
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 11
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
Page 12
Agenda
> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
Page 13
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
Page 14
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.
Page 15
Best Buy Outlet - Benefits
> Customer Satisfaction:
eBay’s feedback score.Fit with Customer Centricity.
Page 16
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
Page 17
Who is Buying from Best Buy on eBay?
The eBay channel is a new customer acquisition machine.
IdentifiedCustomers Unidentified (New)
Customers
Page 18
Agenda
> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A
Page 19
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.
Page 20
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.
Page 21
Key Partnerships
> ChannelAdvisor
Auction management expertise and software.
> EBay Strategic Alliance
Constantly exploring new strategic opportunities.