Best Buy plans to expand significantly its private label technology products business, believing that customer feedback in its stores will let it make simple improvements that the big name brands might miss.
Such vertical integration might be torn right from Capitalism 101, but I’m not sure that I buy it.
On one level, it’s only fair: the brands have all opened stores, whether online or at your local mall, so why not let the stores invent their own brands? Retailers have been selling "house brands" for years, especially in grocery and personal care, and they’ve usually been lower-priced versions of branded products. So much of technology is either generically similar, or actually configured with the same parts made in the same factories. Slapping a logo on a flat screen could be a direct path to a better margin.
What’s the likelihood that Best Buy could outdo, say, Sony, on the innovation front?
Maybe the nonsense about culling improvements from consumers is just a cover story for this tried-and-true knockoff strategy.
For it to be something more, Best Buy would have to move light years ahead on the community and collaboration fronts: processes, technology, store associate training, and some robust (and not inexpensive) motivational campaign to engage with consumers. I wonder if such efforts wouldn’t cost whatever more the company thought it would gain in profit margin.
There’s a really big, problematic presumption behind such a strategy: do consumers actually have anything to say about how products are designed, or that a manufacturer would want to know it?
I know the popular wisdom these days is that brands don’t listen enough to what people want and that, if given the chance, the crowd would source the best, most useful and usable technology products.
Yeah, right.
There are always going to be instances of dumb design, but this comfortable social media argument confuses marketing with actual development. Most of the big brands are bad marketers; their creative content, along with the supporting offers, doesn’t engage with consumers in meaningful ways. Buzzwords substitute for substance. Performance characteristics are left misunderstood, or wholly unappreciated (clocks on VCRs, anyone?).
Traditional marketing channels are no longer credible, mostly because there’s nothing credible said through them any longer.
So to suggest that this marketing problem is best remedied by consumers developing their own products is kinda beside the point. Brands could always do better research, but outsourcing the function to the crowd sure feels like the wrong answer to the right question.
Fix marketing instead.
There’s lots more that’s confusing about the Best Buy plan, like the idea that it can get consumer-provided changes into production fast enough to be meaningful, or that any real improvements won’t be copied and commodified. There’s an authenticity issue here, too, as the big brand names could fight back and change their pricing and distribution, so that Best Buy was left retailing the wan common versions of the real stuff that got sold directly from Sony, Apple, et al.
Tomorrow I’ll riff on what I think could be Best Buy’s giant opportunity…
Original Post: http://dimbulb.typepad.com/my_weblog/2009/05/best-buy-in-the-house-pt-1.html
