Best Buy 2001 Annual Report Download - page 17

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Best Buy Co., Inc.
16
W e believe that we can improve the performance of
O n Cue, beginning in fiscal 2003, by:
• Leveraging existing distribution centers to reduce
expenses.
• Achieving cost efficiencies by centralizing purchasing
of music and movies.
• Adding fast-growing consumer electronics products.
• Transforming the merchandising, lighting, fixtures and
other aspects of the shopping experience.
• Introducing W ebStations in the stores as a way to
expand the offering of products and services and to
leverage our clicks-and-mortar capabilities.
W e also intend to expand O n Cue, opening up to
30 locations in fiscal 2002 and approximately 75 in
fiscal 2003.
Integrating Profitable Suncoast Stores
Musicland’s approximately 400 Suncoast stores attract
consumers with 16,000 movie titles and a Hollywood-
inspired décor. These 2,400-square-foot stores provide
us with direct access to 60 million visits from customers
per year, over half of whom are male, many in their 30s.
Suncoast enjoys a loyal customer base and is able to deliver
a higher gross profit on popular entertainment software
products because of the stores’ convenient mall locations.
The stores offer movies in both VHS and the increasingly
popular DVD format. DVD recently was estimated to have
penetrated 13 percent of U.S. households. As the installed
base of DVD hardware grows, sales of DVD software
are expected to continue to increase.
Suncoast already is operating profitably, and we do not
expect to make changes to its mix of products,
merchandising or labor models in fiscal 2002. However,
we do expect to integrate Suncoast operations with
those of Best Buy stores in areas where there are
opportunities for leverage, such as purchasing, distribution
and inventory control.
Leveraging our Media Play Stores
Media Play, the fourth brand we acquired through
Musicland, includes approximately 80 superstores located
in secondary markets across the country. The stores’ larger
Musicland
CD sales are heavily dependent on new releases.
Top sellers at Musicland in fiscal 2001 were
Eminem, N*SYNC, Dr. Dre and Britney Spears.