NRF DETAIL CONVERGE – If you were to ask a random sample of people, who spend time thinking about the industry, for a case study of store turnarounds, chances are, Best Buy will be the first name that comes to mind. ‘mind.
CNBC, the the Wall Street newspaper, Inc.com, Bloomberg, Forbes and just about all other business-oriented publications including this one, wrote at least one article about Best Buy’s comeback to the brink.
Best Buy’s sales declined in four of the five years between 2013 and 2017, while comparable sales were negative or increased by less than 1% during that period. These were the years when the “Amazon effect” became a common explanation for the woes of almost every retailer. Especially in light of the fall of RadioShack, electronics seemed to be as much a market for Amazon domination as books.
Hubert Joly joined as CEO in 2012 lead a business overhaul. Joly, who led the turnarounds of gaming, travel and media companies, had to get a visa before taking the job. Some analysts at the time questioned his experience and qualifications. Joly’s friends have questioned his sanity.
“Some of my friends thought… that I was either crazy or suicidal,” Joly said Thursday at a virtual conference hosted by the National Retail Federation.
Joly’s retort was that he likes a challenge. “That was the all-you-can-eat challenge menu,” Joly said Thursday. “Everyone thought we were going to die.
So why do it? “I felt the world needed Best Buy,” he said. “Customers needed Best Buy. For some of our purchases we have to see, smell and touch the products. And sellers needed Best Buy to showcase the fruits of their billions of dollars in R&D development. “
“The essence of the turnaround was a very human-centered turnaround. Listen to the front line. They had all the answers.”
Former CEO, Best Buy
Joly, who stepped down as CEO in 2019 and stepped down from the Best Buy board last year, has dismissed what many in the business world think is a standard turnaround manual. That being painful cuts in the business to increase the bottom line and downsize the business to align with declining sales. “A lot of the advice I was getting back then was cut, cut, cut,” Joly said. “Shutting down stores, firing people – like people are the problem.”
Joly added: “The essence of the turnaround was a very human-centered turnaround. Listen to the front line. They had all the answers. Make sure you have the right team at the top. Don’t start by firing people. folks, start by growing up the top line. “
Best buy top row has indeed grown during Joly’s tenure, starting in 2018 and every year thereafter, while the company has made at least $ 1 billion in net profits since 2017.
The company has done a lot under Joly to make this happen. He cut prices to match Amazon and invested in both his online experience and his supply chain to be able to ship as fast as Amazon. “In a competition with Amazon, we neutralized this because the same prices, the similar experience, the same shipping speed,” Joly said. “And then we were able to invest in our other assets, the stores, Geek Squad, unique assets, to make it the best version of Best Buy.”
He added: “The good news is that there was so much broken there was a lot of room for improvement.”
Thinking back today, including in a book published in May – Joly takes a philosophical approach. In her speech at the NRF conference with CNBC presenter Sara Eisen, Joly shot neoliberal economist Milton Friedman and avoided the obsession with shareholder capitalism, the idea that the job of a board of directors and officers is to maximize shareholder value.
“Basically everything I learned when I was in business school, at McKinsey, in my early years as an executive was either wrong, dated or incomplete,” Joly said. “We have to reinvent the way we do business, the way we lead. ”
In practice, Joly says he treated profits as a “result” rather than the ultimate goal. He also saw Best Buy as more than just a store that sold electronics. “There is a better formula, one that I know works, which is the heart of the business, is the idea of pursuing a noble goal,” Joly said. “In our case, it was about enriching lives through technology by meeting key human needs, putting people at the center and creating an environment where you can unleash human magic.”
In practice, this meant investing in services, such as the acquisition of GreatCall health and safety solutions company in 2018. Joly thinks it’s an approach – defining a business around a more thematic objective than its existing functions – that can be copied by the entire retail business.
Today, Best Buy is led by Corie Barry, who served as Director of Financial and Strategic Transformation under Joly. Sales and profits continued to grow under Barry, including during a 2020 blockbuster in which Best Buy flexed the digital and omnichannel muscle it built under Joly.
Best Buy has also removed thousands of full-time store workers this year, by replacing some of them with part-time workers. Barry has specifically argued in previous conference calls that job cuts and the shift to more part-time workers are not cost-cutting measures, but rather an overhaul of store operations to better serve customers. Joly praised Barry for his leadership during the pandemic and the strong performance of the company since leaving.
Eisen asked if he had “another turnaround” in him, Joly said his current mission is “to help the next generation of leaders”.