At the time of the deal, Jiangsu was the fourth-largest appliance chain in China with stores across eight Chinese provinces. The market test was later expanded to Denver Colorado. In October , Best Buy became the first consumer-electronics retailer to exit the analog television market, carrying only digital products that became mandatory in June by the FCC. In July , Best Buy announced that it would start selling musical instruments and related gear in over 80 of its retail stores, making the company the second-largest musical-instrument distributor in the US.
In December, Best Buy opened its first store in Mexico. Best Buy Mobile standalone stores were opened in shopping malls and urban downtowns. Best Buy Mobile were also added in all Best Buy-branded stores. Dunn replaced Brad Anderson, who was retiring. Dunn had joined Best Buy in as a sales associate. In , Dunn became senior vice president of East Coast operations and president of North American retail operations in He had most recently served as president of Best Buy, a position he had held since The company eventually opened 11 Best Buy stores in the United Kingdom.
Best Buy and The Carphone Warehouse maintained their Best Buy Europe joint venture, which at the time operated 2, mobile phone stores throughout Europe. Best Buy named Director G. Schulze subsequently resigned his chairmanship of the company. Hubert Joly replaced G. Joly had previously served as CEO of Carlson, a hospitality conglomerate, since Adobe Systems, Inc. It offers a line of software and services used by creati Apple, Inc.
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Best Buy. In , Best Buy formed Redline Entertainment, an independent music label and action-sports video distributor. The company acquired Magnolia Hi-Fi, Inc. Show more Show less. Adobe Added by chcom 0 Views 0 Likes.
Although Circuit City was a significantly larger and more stable company in the eyes of investors, with a history of wider profit margins and negligible debt, it was Best Buy that generated the most excitement on Wall Street. With excitement, however, came volatility: in the stock nearly doubled within a three-month period but then dropped by 10 percent in a single day in mid-November.
Part of this roller-coaster pattern stemmed from Best Buy's increasingly heated battle with Circuit City, which had many analysts wary. Competition with Circuit City remained fierce, with Best Buy challenging its archrival by entering its traditional strongholds in California, Washington, D. The head-on clash prompted renewed price wars, which Best Buy was positioned to withstand because of its low cost structure. Lowered prices, however, meant lower earnings for Best Buy.
In the meantime, Best Buy moved forward with the introduction of its larger Concept III stores, which were 45, to 58, square feet in size and offered customers a greater selection of products and more information, particularly through hands-on displays. The company's strategy of cutting service to help offer lower prices continued to cost the company suppliers.
By the electronics manufacturer Hitachi had stopped supplying Best Buy, as had the appliance maker Kenwood. In addition, Whirlpool pulled its top-line Whirlpool brand from the store, although it continued to supply its lower-priced Roper brand. President of Mitsubishi Consumer Electronics America Jack Osborn explained to Forbes in that his company chose to sell through smaller retailers because they offer better service and cannot use their size to pressure Mitsubishi into offering lower wholesale prices.
Osborn said at the time, "We will not be in a national chain. In an effort to reverse this trend, Best Buy announced in that it would revamp its merchandising format for high-quality audio products. Brad Anderson, the president of Best Buy, told Forbes that the move was needed because, "We could not land some of the products we wanted.
Despite these problems, Best Buy continued to broaden its territory and bolster market share. In the company added 47 new stores and moved into new areas, including Miami and Cincinnati. By late Best Buy was breathing down the neck of Circuit City in terms of market share. With 8. The company added almost 50 new stores in and moved into additional new territories, including Philadelphia.
This decline forced Best Buy to rethink its product offerings. For instance, the company began offering cut-rate compact discs in as a loss leader and pushed the idea in the mids. Although people bought the low-priced discs, they did not stay to purchase the big-ticket, high-margin items. In the company cut back its CD selection and raised the remaining titles' prices slightly. It also added an assortment of books and magazines to its entertainment section. In addition, it decided to concentrate on higher margin items, such as computer peripherals, high-end appliances, and service plans.
Soon after the products began arriving at the stores, chipmaker Intel Corporation announced plans to introduce its latest chip, a Pentium featuring MMX technology designed to improve the multimedia performance of personal computers. Demand for existing computers running earlier generation processors fell almost immediately. In early , saddled with mountains of unsold PCs, Best Buy had to ask its creditors and vendors for an extra 60 days to pay its bills.
Schulze, however, brought in outside consultants from Andersen Consulting LLC for advice on a range of areas. Significant changes were made to the product mix, particularly by eliminating slower selling product lines and models; a greater emphasis was placed on selling service plans to customers; and "high touch" areas were added to the stores to help sell the burgeoning array of digital consumer products, such as cameras, cellular phones, satellite systems, and the fast-selling DVD player first introduced in for which customers often needed more assistance.
The management team was also overhauled; 40 new vice-presidents were hired, most coming from the outside and replacing much of the company's old guard. While this restructuring proceeded, the chain's expansion was slowed considerably, and only 12 new stores opened during the fiscal year ending in February The changes that were implemented succeeded in turning the company around. In March Best Buy officially entered the e-commerce realm by launching an online music store at its bestbuy. Later in the year the company unveiled its Concept IV format.
Typically sized between 43, and 45, square feet--actually slightly smaller than the previous model--these stores featured more high-tech products, had a more open layout with products grouped in such departments as home theater and digital imaging, and added cash registers throughout the store. The recently introduced "high touch" areas were retained, and additional hands-on features were added to the car audio section, where customers could now listen to different audio components in a "Boom Room" and a "virtual car.
Best Buy's stock leaped percent, prompting another two-for-one stock split in March During the next fiscal year, 47 more stores were opened, bringing the total to , as the chain moved into the major California markets of Sacramento, San Diego, and San Francisco, and also into Richmond, Virginia.
Best Buy also introduced a new and smaller, 30,square-foot format designed specifically for markets with populations under , Nine of these stores were opened during fiscal , and it was hoped that the new format would enable the company to continue its expansion even as its penetration of larger metropolitan areas neared saturation.
The smaller stores were also expected to serve as models for a planned move into high-density urban markets, such as New York City, where it would be impossible to build massive superstores. This translated into a profit margin of 2. In June Best Buy relaunched an expanded bestbuy. In addition to choosing delivery to the home, customers could also elect to pick up the merchandise they ordered through the web site at a Best Buy store, and they could return items there as well.
Customers at the stores, meanwhile, now had the option of logging onto an in-store computer to order products not available at that outlet. Best Buy entered into a number of partnerships to help with the content of the site and the technology behind it.
In return, Best Buy began promoting the Microsoft Network as its preferred Internet service to buyers of new computers. Microsoft also agreed to give bestbuy.
Among the 62 new Best Buy stores opened during were 15 located in the greater New York City area. The first store on Manhattan opened the following year. Next, Best Buy turned acquisitive. It had gotten its name from the Magnolia district of Seattle, in which its first store was sited. Magnolia was headed by Jim Tweten, son of the founder, who continued to run the company as an autonomous Best Buy subsidiary. Best Buy hoped to leverage Magnolia's experience as a retailer catering particularly to early adopters of new gadgets, gaining strategies for maximizing sales early in the product life cycle, when profits were at their peak.
Having conquered most of its electronics retailing rivals, and gaining the upper hand over archrival Circuit City, Best Buy set off after new challenges with its next acquisition.
Each of these stores also had a sister e-commerce site. Best Buy planned to retool some of Musicland's store formats and was particularly interested in gaining a presence within shopping malls by revamping the Sam Goody format through the addition of such consumer electronics goods as MP3 players, cellular products, and gaming items. In addition, shopping malls, a retail environment frequented by women and preteens, provided Best Buy with an opportunity to expand its core customer demographic, which had remained dominated by young to middle-aged males.
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.
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