Best Buy 2001 Annual Report Download - page 6

Shareholders
we needed new distribution channels. W e saw an
opportunity to reach other large segments of consumers
who seek technology products and services that make their
time more fun and more productive. W e also were
challenged to look outside our national borders for new
markets in which to open stores. To fuel our long-term
growth, we needed to launch our next stage of growth
prior to exhausting the opportunity within our large
format strategy.
In fiscal 2001, we announced three growth initiatives
aimed at realizing our vision:
• The acquisition of M usicland, a retailer of predominantly
music and movies.
• The acquisition of Magnolia Hi-Fi, a preeminent retailer
of high-end consumer electronics.
• The beginning of our international expansion with the
announced entry into the Canadian marketplace.
These strategic initiatives provide us with substantial
building blocks for growth. Through these three strategies,
we have added new branded retail outlets, mall and rural
store formats, a high-end electronics sales and service
format, and hundreds of millions of new consumer touch
points. W e see significant opportunity to extend our
retailing leadership in technology and entertainment into
new spaces.
Ex tending our Leadership
Through our acquisition of M inneapolis-based M usicland,
which was completed in the fourth quarter, we can reach
consumers through four new brands:
• Sam Goody, with 630 mall-based stores;
• O n Cue, with 200 rural stores;
• Suncoast, with 400 mall-based stores; and
• Media Play, with 80 superstores.
Musicland’s more than 1,300 stores bring us 300 million
additional consumer visits per year, including more female
consumers, more rural consumers and a higher market
penetration of the teenage shopper. Currently, all four
brands sell primarily music and movies. Following market
testing, we expect to add consumer electronics to the mix.
Because of the overlap with Best Buy stores in product
categories and geography, we have the opportunity to
share best practices and achieve economies of scale.
More importantly, we have the ability to make a market
in new distribution systems for entertainment products as
consumers complement physical purchases with digital.
In the fourth quarter, we also completed our acquisition
of Magnolia Hi-Fi, based in Seattle. Magnolia Hi-Fi has
loyal customers and leads the industry in customer service.
Its ability to bring to market emerging entertainment
technologies appeals to higher-income consumers. W e
have retained the company’s management team and
commissioned sales force in order to preserve the culture
while we grow the business. W e believe that we have
much to learn from each other.
W e announced our international expansion in December
as well, beginning with plans for an initial 15 stores in
Canada. W e anticipate that in fiscal 2003 we will open
the first of several stores in the Toronto area, each of
Best Buy Co., Inc.
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Letter To Shareholders