Geek Squad: Best Buy’s $3 Billion Best Bet?
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- October 17, 2012
Geek Squad, the electronics repair and service arm of Best Buy, is being positioned to bring the struggling electronics retailer back on the path to profitability. Best Buy, plagued by slumping sales and now operating under new management, announced last week that it would offer Geek Squad’s services to customers through eBay. The company is also testing a pilot program to place Geek Squad representatives in Target-brand stores.
The two moves seem to suggest that paid services — and not products — represent the key to a turnaround for Best Buy. According to Bloomberg Businessweek, the company’s U.S. revenue from services rose 6 percent last quarter, while comparable-store sales dipped by 3.2 percent. A private-equity firm speculated that Geek Squad may have annual revenues of $3 billion.
But while service may be Best Buy’s last hope for relevancy amid stiff price competition on consumer electronics, the company hasn’t exactly charged full-speed ahead with it — yet. Let’s take a look how we got here:
In the space of just a few weeks this Spring, Best Buy posted a $1.7 billion quarterly loss, announced the closure of 50 stores, and saw its CEO resign following an investigation into an alleged inappropriate relationship with a young coworker. At the time, Motley Fool consumer goods editor Austin Smith posted a video online, explaining, “Best Buy needs to become the thing that Amazon can’t: They need to get into your home. … Best Buy needs to become a service-centric company again.”
Geek Squad scored a big hit when Best Buy announced a partnership with AARD offering subscribers a $169 year-long electronics support program featuring 24/7 phone, Web, and in-store service, plus discounts on in-home services. Mike Mikan, the company’s interim CEO, said during a first-quarter earnings call with reporters that the “mandate” for Geek Squad techs “will be to shift the customer execration from repair, our traditional Geek Squad offering, to one of relationship.”
Just as it began to look like Best Buy was throwing its weight behind services, the company suddenly announced in early July that it was laying off 2,400 employees, including 650 Geek Squad techs.
Then, a week later, the company announced it would hire 500 techs back on — although this time, the company was focusing on adding techs with more high-end capabilities, rather than simple electronics repairs and installations. The company also announced it was partnering with Verizon to offer tech support for small and medium-sized businesses doing things like securing data.
The store, still not apparently convinced that it can’t compete on hardware, announced this week that it will exclusively offer the “Insignia Flex” Android-powered tablet PC, priced under $250. We’ll see what that release brings.
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