Case | HBS Case Collection | April 2006 (Revised October 2006)

Best Buy Co., Inc.: Customer-Centricity

by Rajiv Lal, Carin-Isabel Knoop and Irina Tarsis

Abstract

With FY2005 sales of $27.3 billion, Richfield, Minn.-based Best Buy Co., Inc. was the leading retailer of consumer electronics, home-office products, and related services in North America. Its operations included the distinct store formats Best Buy, Future Shop in Canada, and Magnolia Audio Video as well as service provider Geek Squad. For the eight years leading up to 2004, Best Buy had reported double-digit revenue growth every year and rarely missed earnings. But on December 13, 2005, Best Buy missed its third-quarter earnings per share (coming in at $0.28, not $0.30). The company's stock price fell nearly 12% that day, a loss of $2 billion in market cap. The poor results were attributed to the aggressive rollout of 144 new "centricity" stores--revamped retail formats featuring a customer-centric operating model designed to offer targeted "value propositions" to one or two distinct customer segments. The new format was a departure from Best Buy's winning formula and required adjustments in interactions between various parts of the Best Buy organization, including a new set of segment leaders.

Keywords: Customer Focus and Relationships; Service Operations; Business Earnings; Financial Crisis; Failure; Business Model; Leadership; Segmentation; Value Creation; Electronics Industry; United States; Canada; Mongolia;

Citation:

Lal, Rajiv, Carin-Isabel Knoop, and Irina Tarsis. "Best Buy Co., Inc.: Customer-Centricity." Harvard Business School Case 506-055, April 2006. (Revised October 2006.)