Best Buy beefs up Web, brand efforts

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31 Dot-coms hope consumers' frustration about out-of-stock items, late deliveries and problematic returns has eased now that the latest holiday shopping extravaganza has passed.

As the Web becomes more of a destination for consumer electronics and technology purchases this year, the e-shops of traditional retail giants such as Wal-Mart Stores and Best Buy Co. could have the edge over pure Internet players struggling to build traffic, brand awareness and credibility.

"In most categories, brick-and-mortar merchants that have an established customer base and an established brand will win out in the long run over the pure-plays in terms of overall market share," said Mike May, analyst in Jupiter Communications' digital commerce group. That's because traditional retailers have the opportunity to drive sales online, offline or a combination of both.

That's certainly the thinking at Best Buy, the nation's No. 1 consumer electronics retailer, which is preparing to launch BestBuy.com later this quarter. The site will supplant Best Buy Online, which now offers only limited merchandise.

'TOTAL SHOPPING EXPERIENCE'

"The majority of consumers will be channel-agnostic," said Mike Linton, senior-VP of strategic marketing for the more than 350-store chain. "Our fundamental belief is that the majority of consumers will use both the Web and [our stores] for the total shopping experience. We consider BestBuy.com an extension of the brand and the way the consumer shops."

Best Buy also is pouring money into its brand, using a post-holiday $100 million multimedia campaign created in-house. The "Turn on the fun" ad effort attempts to show how Best Buy's offerings make life more fun.

BestBuy.com VP-Marketing Barry Judge said the online operation is mulling bringing on an agency partner as an additional resource.

Mr. May said players who adopt clicks-and-mortar strategies are likely to prevail in the technology sphere. Shoppers can easily research, compare and order online after they've sampled products in stores, which will be used for pickups and returns. Targeted promotions can be offered online, perhaps combined with in-store-only specials to drive traffic.

The chain's advertising alliance with Microsoft Corp., which will provide technical support and ads on MSN, plus a $10 million equity investment in e-town.com, a consumer electronics content and commerce referral site, also indicate its ability to extend into consumers' consciousness.

ONLINE FORAY DELIBERATELY SLOW

Best Buy has been a laggard in the online arena, but the Eden Prairie, Minn., retailer's approach has been deliberately conservative.

"The company has taken a sort of measured approach to the online space and decided to make it more of an important part of the strategy," said Mr. Judge. "I believe in the power of multichannel retailers and that, despite getting a late start, people who are strong players in the physical space will be competitive online."

Best Buy will offer all products it carries in its stores, and executives maintain BestBuy.com will have competitive prices. Details of how in-store price policies and price guarantees will be extended online have not yet been determined, Mr. Linton said.

The tech e-tailing landscape, like other consumer products categories online, remains dynamic and volatile.

"There are enough competitors in every category that retaining customers is vitally important," said Mr. May. "A year or two years ago, if you wanted to buy consumer electronics or toys online, you had a choice of one or two merchants. Now you have dozens of choices."

BIG FOOTPRINT ESSENTIAL

The challenge for the pure-plays is to drive enough traffic to build brands and establish a big footprint. Best Buy [already] has that in spades," Mr. May said.

Wal-Mart Stores, like Best Buy, is regrouping. It announced plans earlier this month to restage wal-mart.coma joint venture with a Silicon Valley venture capital firm, signaling Wal-Mart's intent to step up its Web presence.

Infrastructure is crucial to e-tailers of every stripe.

"The companies that will succeed in this business will be those who make substantial investments in infrastructure," said Tim Zuckert, VP-marketing for consumer electronics e-tailer 800.com.

Besides multimillion-dollar ad campaigns, Mr. Zuckert maintains that fulfillment processes and technical and customer support operations are all-important. Live, 24-hour phone and online customer support as well as streaming audio/video applications offering product demonstrations and setup instructions will be commonplace this year.

Additionally, segmented marketing plans that can be adapted quickly to real-time customer traffic are coming into play.

"Winners will recognize the need for multichannel and layered, segmented marketing," said Donna Driscoll, chief marketing officer for Roxy.com, a consumer electronics e-tailer partly owned by NBC Internet.

CONSOLIDATION ON THE HORIZON

Mr. May projects tech e-tailing will consolidate this year, with online-only companies aligning with offline powers. "Offline players are going online, and I expect in 2000 that the online retailers will go offline," he added.

For example, a pure-play could partner with a bricks-and-mortar chain to demonstrate big-ticket items or could create showrooms similar to Gateway's successful Gateway Country Store concept.

Copyright January 2000, Crain Communications Inc.

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