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photo: TOOLBOX STUDIOS (DUELING CARTS)
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It's On
By MIGUEL BUSTILLO Best Buy finally buried its longtime competitor, Circuit City Stores. Now the big electronics retailer is gearing up to fight an even more powerful enemy: Wal-Mart. Leading the challenge will be Brian Dunn, the executive who will take over as Best Buy’s CEO next month. Mr. Dunn’s new strategy is to head off Wal-Mart Stores’ brutal price competition by giving consumers something the discounter cannot: more interactive stores. Mr. Dunn envisions a retail environment where customers can step into the world of a new video-game or see their faces captured by a high-definition video camera, instead of trudging through aisles stacked with merchandise. NO TIME TO CELEBRATE For years, Best Buy had competed intensely with Circuit City, which went out of business earlier this year, a victim of management and sales miscues as well as the recession. Analysts expect Best Buy to pick up at least half of Circuit City’s old business. Mr. Dunn won’t have time to celebrate. Wal-Mart has already beefed up its once-tiny selection of name-brand television sets, videogames and mobile phones to become a fierce contender in consumer electronics. The giant retailer says electronics have fueled a sharp rise in sales recently. Best Buy remains well ahead of Wal-Mart in U.S. electronics sales, but Wal-Mart is gaining ground in critical growth areas such as flat-panel TV sets, according to TraQline, a firm that tracks market share. By contrast, Best Buy’s sales have shrunk during the recession, and it has cut inventory to compensate, perhaps too sharply. ‘A SERIES OF EXPERIENCES’ Mr. Dunn hopes to leapfrog growing competition from Wal-Mart by transforming Best Buy’s stores into lively showrooms for the latest gadgets. A former Best Buy stereo salesman who has spent 24 years climbing the company’s ranks, Mr. Dunn says he still believes that the best retail innovations come from front-line workers. So to prepare for his job as CEO, he embarked on a tour of stores in search of inspiration for his remodeling plans, which he sees as a way to differentiate Best Buy from competitors such as Wal-Mart and Amazon.com. “We want our stores to morph into a series of experiences,” he said as he toured a Dallas-area Best Buy directly across the street from a Wal-Mart. “To do that, you have to go where the rubber meets the road, the sales floor,” he added. Focusing on showmanship and service to combat Wal-Mart’s low-price draw is risky in a recession where consumers are more interested in no-frills bargains. But Mr. Dunn says he intends to win customers by matching Wal-Mart on prices, and then offering something more, building on Best Buy’s existing strategy of helping customers figure out increasingly complicated technology. The key, he says, will be making the most of Best Buy’s tech-savvy sales force. “Wal-Mart is trying to copy us,” Mr. Dunn, who had visited some of Wal-Mart’s new prototype stores in Arkansas days earlier, told a conference of Southwest store managers. “But there is one thing nobody can copy, and it’s this,” he said, grabbing a Best Buy employee who was wearing one of the company’s blue polo shirts. GENUINELY INTERESTED Mr. Dunn started his own career with Best Buy on the sales floor in Minnesota in 1985, and quickly caught the eye of superiors by using the soundtrack from the then-popular “Miami Vice” TV show to help sell stereos and Zenith-brand television sets. He was promoted to store manager in 1989, to district manager a year later, and to vice president of East Coast operations in 2000. He was named head of North American retail in 2002 and chief operating officer in 2006, putting him in line to succeed the current CEO, Brad Anderson, who is retiring. “Brian’s particular gift is that he is genuinely interested in the ‘blue shirts’ as people, and they can tell,” Mr. Anderson says. “What that gives you, which a lot of leaders miss, is that you understand what is happening in an organization on a more granular level.” Mr. Dunn hasn’t always agreed with some of the changes at Best Buy; most notably, he opposed the 1989 decision to do away with commissioned sales in favor of salaried staff, which was widely opposed by salespeople who feared losing income. He now concedes it was the most important shift in company history, lowering worker costs and changing the way electronics are sold. Best Buy expanded across the U.S., and Circuit City eventually followed by eliminating sales commissions. Executives who have worked alongside Mr.Dunn say he can think broadly as well as deliver practical results. “Right now, retailing needs leaders who can guide companies through troubled times, not visionaries,” says Advance Auto Parts CEO Darren Jackson, a former Best Buy vice president who worked with Mr. Dunn. “Brian is someone who can still command respect from the rank and file.”
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