Best Buy 2002 Annual Report Download - page 13

Testing a new mix of products at the small-
market On Cue stores was our second
objective for the fiscal year. These 6,000-
square-foot stores target rural entertainment
enthusiasts with movies, music and books.
The test included an expanded assortment of
DVD movies and the introduction of video
gaming, as well as a narrowed assortment
of books. Results were favorable, and we
expect to remerchandise all 230 of the
small-market stores prior to the fiscal 2003
holiday selling season.
We also piloted a new identity for On Cue
stores, which are similar in size and product
mix to Sam Goody stores, yet have low brand
recognition. Results were very clear and very
positive. We found that stores opening with
the name of Sam Goody had significantly
higher sales than identical stores opening as
On Cue. We now plan to change all of the
On Cue stores to the Sam Goody name by
the fall of 2002.
We believe that the small-market stores offer
a significant vehicle for growth. They offer
sales as strong as that of our mall-based Sam
Goody stores, combined with a significantly
lower expense structure. We plan to open 30
small-market Sam Goody stores in fiscal
2003. The following year, we plan to embark
on a 10-year expansion plan, with a goal of
opening up to 800 stores.
Third, we identified several practices that
were transferable to Musicland, including
advertising effectiveness, merchandising,
in-store standard operating procedures and
vendor relationships.
We began to leverage those competencies at
Musicland in fiscal 2002 and expect to
continue that work in fiscal 2003. Leveraging
company competencies is our primary goal
in fiscal 2003 at 400 Suncoast stores, a
mall-based retailer of movies in a 2,400-
square-foot format, known for its high level
of service, which attracts movie enthusiasts;
and 7 6 Media Play stores, a family-oriented,
big-box retailer of entertainment software and
books in a 45,000-square-foot format.
For our fourth objective, we integrated all of
our staff functions with Best Buy stores and
produced the savings that we had expected.
Transforming the Stores
Yet significant challenges remain if we are
to succeed in increasing our share of the
spending of our core entertainment customers.
The next step after remerchandising our
stores is to transform them, which will require
additional investments.
Our fiscal 2003 goals include:
•Continue diversifying the product mix,
reducing our reliance on prerecorded music.
•Build the value of our online offering as
more consumers opt for digital delivery
of music.
•Enhance the point-of-sale systems and
adjust the labor model so we can sell
more services.
•Improve our merchandising and increase
the number of interactive displays.
•Increase advertising effectiveness.
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