Best Buy also had other reasons for pursuing a dual brand strategy If the

Best buy also had other reasons for pursuing a dual

This preview shows page 28 - 30 out of 37 pages.

Best Buy also had other reasons for pursuing a dual-brand strategy. If the senior staff at Future Shop were focused on setting up the Best Buy operation, their activities risked affecting nega- tively on the existing sales of Future Shop stores. Putting together a separate team at Best Buy, fully dedicated to opening the greenfield stores of Best Buy, as originally planned, would speed up the process of the company’s market entry. But the dual-brand strategy also had some downsides. Said Noble: We had four concerns about the dual- branding strategy. Cannibalization was, of course, a major issue. It was likely that each Best Buy store would eat into the earnings of a Future Shop store and vice versa, particu- larly when the two were in close proximity. Since the company would have to manage two different brands, the marketing dollars in Canada would be split in half, minimizing the impact of ad-spend. Also imminent was the possibility of a blurring of brand identity in the eyes of the consumer. Finally, there would be duplication of roles at the corpo- rate headquarters at Minneapolis, with the two brands requiring separate staff inputs. The two brands were each headed by a vice president based in Vancouver, the location of Best Buy Canada Ltd. (BBYC), the newly formed sub- sidiary that maintained the two brands. BBYC took several steps to reinforce the operations of both brands at ground level: opening an auto- mated 450,000-square-foot distribution center in Ontario and, eventually, another 500,000-square- foot distribution center in British Columbia, to support store growth for both brands; outsourc- ing a call center to provide 24-hour service, seven days a week; and retaining a premier insurance company to underwrite product warranties. Stores of both brands were open 60 to 75 hours per week, seven days a week. All stores used the parent company’s SOP. An average Future Shop store was staffed by a general manager, an operations manager, one to four department managers and 48 to 95 sales asso- ciates, as well as part-time sales associates. An aver- age Canada Best Buy store was staffed by a general manager; assistant managers for operations, mer- chandising, inventory and sales; and 80 to 110 sales associates, including full-time and part-time sales associates. Although Best Buy and Future Shop effectively competed for market share, the positioning for each company was different. Best Buy, with its yellow-price-tag logo continued to offer the “grab and go” option by providing an open floor plan that allowed customers to shop on their own or with the help of a no-pressure (i.e., non- commissioned) Blue Shirt product specialist if
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Best Buy Inc.—Dual Branding in China 127 desired. Future Shop focused on offering the trusted, personalized customer service for which it was already well known in Canadian cities. By the end of the first year of operations, there were indications that the dual-branding strategy was working in Canada. For example, the Future Shop store at Mississauga had sales reve- nues of $40 million in 2001/02. In 2002/03, post-acquisition, revenues were $38 million.
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