50 Facts About Best Buy

The Beginnings of Best Buy

Best Buy's journey from a small audio specialty store to a global electronics giant is nothing short of fascinating. Let's dive into its early history and significant milestones.

1. Founding: Best Buy was founded by Richard M. Schulze and James Wheeler in 1966 as an audio specialty store called Sound of Music in St. Paul, Minnesota.

2. Early Success: The first store, Sound of Music, opened in 1966 and achieved $173,000 in sales during its first year.

3. Expansion: In 1971, Schulze bought out his partner and began expanding the retail chain, initially focusing on audio components.

4. Product Diversification: By the early 1980s, Schulze expanded Sound of Music's product line to include appliances and VCRs, which significantly boosted sales.

5. Name Change: In 1983, Sound of Music was renamed Best Buy Co., Inc., marking a significant shift towards consumer electronics.

The Evolution of Store Formats

Best Buy's store formats have evolved over the years to enhance customer experience and adapt to market trends.

6. Superstore Format: In 1984, Schulze introduced the superstore format, which quickly captured 42% of the local market. This format featured high-volume, low-price business models and significantly expanded warehouse sizes.

7. Going Public: Best Buy went public in 1985, raising $8 million through an initial public offering (IPO).

8. NYSE Listing: Two years after going public, Best Buy gained a listing on the New York Stock Exchange (NYSE) in 1987.

9. Revenue Growth: By 1987, Best Buy had tripled its store count to 24 and achieved revenues of $239 million, with net earnings reaching $7.7 million.

10. Concept II Stores: In 1989, Best Buy introduced Concept II stores, which featured well-stocked showrooms with fewer salespeople and more self-help product information. This format eliminated commissioned sales help, creating a more relaxed shopping environment.

Major Acquisitions and Expansions

Best Buy's strategic acquisitions and expansions have played a crucial role in its growth.

11. Concept III Stores: In 1994, Best Buy debuted Concept III stores, which were larger than previous stores and included expanded product offerings, interactive touchscreen kiosks, and demonstration areas for products like surround sound stereo systems and video games.

12. Concept IV Stores: Launched in 1998, Concept IV stores featured an open layout with products organized by category, cash registers located throughout the store, and large areas for demonstrating home theater systems and computer software.

13. E-commerce Entry: In March 1998, Best Buy officially entered the e-commerce realm by launching an online music store at its bestbuy.com website.

14. Musicland Acquisition: In January 2001, Best Buy acquired Musicland Stores Corporation for $425 million in cash and the assumption of $271 million of Musicland debt. Musicland operated under several brands including Sam Goody, Suncoast Motion Picture Company, Media Play, and OnCue.

15. Geek Squad Expansion: Best Buy expanded its Geek Squad market tests in March 2006 by opening Geek Squad precincts in FedEx Kinkos stores located in Indianapolis and Charlotte, North Carolina.

International Ventures and Challenges

Best Buy has ventured into international markets, facing both successes and challenges along the way.

16. Chinese Expansion: In May 2006, Best Buy acquired a majority interest in Chinese appliance retailer Jiangsu Five Star Appliance for $180 million. At the time of the deal, Jiangsu was the fourth-largest appliance chain in China with 193 stores across eight Chinese provinces.

17. FCC Fine: On April 26, 2008, the U.S. Federal Communications Commission (FCC) fined Best Buy $280,000 for not alerting customers that the analog televisions it sold would not receive over-the-air stations after the digital transition on June 12, 2009.

18. Musical Instruments: In July 2008, 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.

19. Best Buy Mobile: In February 2009, Best Buy leveraged its partnership with The Carphone Warehouse to launch Best Buy Mobile, a Best Buy-branded mobile retailer. Best Buy Mobile standalone stores were opened in shopping malls and urban downtowns.

20. Transformation Strategy: In 2012, in response to the overall revenue decline, Best Buy announced plans to undergo a "transformation strategy." Stores began to adopt a redesigned "Connected Store" format, providing the Geek Squad with a centralized service desk and implementing a "store-within-a-store" concept for Pacific Kitchen & Bath and Magnolia Design Center.

Leadership Changes and Financial Struggles

Best Buy has faced its share of leadership changes and financial challenges over the years.

21. CEO Resignation: In April 2012, Brian Dunn resigned as Best Buy's CEO during an internal company investigation into allegations of personal misconduct stemming from an inappropriate relationship with a female Best Buy employee. Best Buy named Director George L. Mikan III interim CEO following Dunn's resignation.

22. International Operations: Best Buy operates internationally in Canada and formerly operated in China until February 2011 and in Mexico until December 2020 due to the effects of the COVID-19 pandemic. The company also operated in Europe until 2012.

23. Subsidiaries: Best Buy's subsidiaries include Geek Squad, Magnolia Audio Video, and Pacific Sales. The company also operates the Best Buy Mobile and Insignia brands in North America, plus Five Star in China.

24. Market Share: By the late 1990s, Best Buy was breathing down the neck of Circuit City in terms of market share, a position it has maintained over the years despite significant challenges.

25. Product Offerings: Best Buy markets its products under various brand names including Best Buy, Audiovisions, Best Buy Mobile, The Carphone Warehouse, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, Napster, Pacific Sales, and The Phone House.

Technological Advancements and E-commerce

Best Buy has continuously adapted to technological advancements and the rise of e-commerce.

26. High-Tech Products: By 1998, Best Buy's Concept 4 format featured more high-tech products, with merchandise grouped into departments like home theater and digital products. High-touch areas were added to help sell these products, which often required more assistance from employees.

27. DVD Players: The fast-selling DVD player, introduced in 1996, was a significant product that customers often needed more assistance with, further emphasizing the need for high-touch areas in stores.

28. E-commerce Growth: By the year 2000, Best Buy had 357 locations with profits of $347 million on sales of $12.5 billion. Over the next two years, the company would purchase Magnolia Hi-Fi Inc., Musicland Stores Corporation, and Future Shop Limited for a combined $880 million.

29. Store Expansion: In 2003, Best Buy pushed past its 500-store mark with the opening of 67 new stores in the U.S., including the first stores in Alaska, Idaho, Utah, and West Virginia.

30. Musicland Divestment: In June 2003, Best Buy divested itself of Musicland in a deal with Sun Capital Partners, under which Sun Capital acquired Musicland's assets.

Financial Challenges and Strategic Moves

Despite its success, Best Buy has faced significant financial challenges and made strategic moves to stay afloat.

31. Financial Challenges: Despite its success, Best Buy faced significant financial challenges, particularly in 1996 when it borrowed heavily to add $300 million of merchandise mainly for the holiday season. This move was ill-timed and led to financial difficulties.

32. Inventory Turnover: By 1998, inventory began turning over at a quicker pace, a key criterion for retail success. Net profits for 1998 jumped to a record $94.5 million on record revenues of $8.36 billion.

33. Concept Store Evolution: The evolution of Best Buy's concept stores from Concept II to Concept IV reflects the company's continuous effort to improve customer experience and stay competitive in the market. Each new concept introduced more advanced features and better product organization.

34. Customer Base Expansion: Initially targeting a core customer base of 15- to 18-year-old males, Best Buy expanded its offerings to include home appliances and VCRs, aiming to attract a broader and more affluent customer base.

35. Store Layout Innovations: The introduction of Concept II stores featured brighter and more fashionably fixed stores with all stock on the sales floor rather than in a stock room. This layout change aimed to create a more relaxed shopping environment free of high-pressure sales tactics.

Supplier Relations and High-Tech Merchandising

Best Buy's relationships with suppliers and its approach to high-tech merchandising have been pivotal.

36. Supplier Relations: The shift to a commission-free sales environment was unpopular with salespersons and suppliers. Some suppliers like Maytag, Whirlpool, and Sony stopped selling their products in Best Buy stores due to the lack of salesperson push. However, Best Buy's sales and revenue grew following the roll-out of Concept II, leading suppliers to return.

37. High-Tech Merchandising: In an effort to reverse the trend of smaller retailers offering better service, Best Buy announced in 1995 that it would revamp its merchandising format for high-quality audio products. This move aimed to improve customer service and product knowledge.

38. Gourmet Kitchen Appliances: In 1996, Best Buy introduced gourmet kitchen appliances to its outlets, offering cookware, small electronics, cutlery, and spices. This expansion into kitchen appliances aimed to attract a wider range of customers.

39. Unsold PCs: In early 1997, saddled with mountains of unsold PCs, Best Buy had to ask its creditors and vendors for an extra 60 days to pay its bills. This financial strain highlighted the risks associated with rapid expansion and changing market trends.

40. Industry Leadership: By 1997, Best Buy had achieved its goal of becoming the industry leader but paid the price in profits, which had fallen to a dismal $1.7 million on revenues of $7.77 billion. This period marked a significant challenge for the company as it navigated intense price competition and market fluctuations.

Geographic Expansion and Community Involvement

Best Buy's geographic expansion and community involvement have been key aspects of its growth strategy.

41. Store Count Increase: By the end of 1993, Best Buy had opened nearly 151 stores across various regions, including the Midwest and key markets like Atlanta and Phoenix. The company's rapid expansion was driven by its successful superstore format and strategic market entries.

42. Market Entry Strategies: In 1992, Best Buy entered the U.S. market by opening 28 stores in five states. Although this move was initially successful in terms of market share, it ultimately resulted in significant financial losses due to operational challenges.

43. Pacific Northwest Expansion: In 1994, Best Buy expanded into the Pacific Northwest region, a move aimed at solidifying its presence in strong consumer electronics markets. This expansion strategy was part of a broader plan to penetrate new territories and bolster market share.

44. Annual Foundation Sponsorship: Since 1994, Best Buy has sponsored the annual Best Buy Children's Foundation LPGA Golf Tournament, demonstrating its commitment to community involvement and charitable activities.

45. Market Share Competition: By the late 1990s, Best Buy was in a fierce competition with Circuit City for market share. This competition pushed both retailers to innovate and improve their services, leading to significant advancements in retail strategies and customer experience.

Adapting to High-Tech Products and E-commerce

Best Buy has continuously adapted to the rise of high-tech products and the growth of e-commerce.

46. High-Tech Product Sales: The introduction of high-tech products such as cameras, cellular phones, satellite systems, and DVD players required more assistance from employees. Best Buy responded by adding high-touch areas in its stores to better serve these customers.

47. E-commerce Initiatives: Best Buy's entry into e-commerce marked a significant shift towards digital retailing. The launch of an online music store in 1998 was a precursor to more extensive e-commerce initiatives that would follow in subsequent years.

48. Store Format Evolution: The evolution of Best Buy's store formats from Concept II to Concept IV reflects the company's continuous effort to improve customer experience and stay competitive in the market. Each new concept introduced more advanced features and better product organization.

49. Geographic Expansion: Best Buy has operated internationally in Canada and formerly in China and Mexico. The company's global expansion strategy has been driven by its desire to tap into diverse consumer markets and leverage local retail expertise.

50. Brand Diversification: Best Buy markets its products under various brand names including Best Buy, Audiovisions, Best Buy Mobile, The Carphone Warehouse, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, Napster, Pacific Sales, and The Phone House. This diversification strategy aims to cater to different customer segments and preferences.

Best Buy's Journey Through Time

Best Buy's evolution from Sound of Music to a global electronics giant is nothing short of impressive. Founded in 1966 by Richard M. Schulze and James Wheeler, the company has consistently adapted to market changes. From introducing the superstore format in the '80s to launching e-commerce in the late '90s, Best Buy has always been ahead of the curve. The acquisition of Musicland and expansion into China and Canada show its ambition. Despite challenges like the FCC fine and financial hiccups, Best Buy's innovative store concepts and customer-focused strategies have kept it relevant. With subsidiaries like Geek Squad and Magnolia Audio Video, Best Buy continues to diversify its offerings. Its commitment to improving customer experience and staying competitive ensures that Best Buy remains a key player in the retail industry.