Best Buy Busted For Bogus Billing?

CE Pro and Consumerist are both reporting shady dealings by Best Buy in selling their HDTV video calibration services.

CE Pro: Is Best Buy Misleading Customers Over HDTV Calibration?

Consumerist: Best Buy Caught Using Sneaky Sneaky Tricks To Sell HDTV Calibration Service

While helping my father look for an HDTV at the newest Best Buy in Charlotte, NC this Sunday, I came across their demo display of their color calibration service. On the left side of the demo, they had a HDTV tuned to ESPN, and on the right, there was the exact same model of TV presumably tuned to the same station, but with a far superior picture. The difference between the two was remarkable; the left one was grainy and blurry while the right one looked sharp and detailed. Thinking that something was not right, I took a further look at the demo and realized that the inferior tv on the left was turned to plain old ESPN, and the superior tv on the right was tuned to ESPN HD. What's even worse is they had a box for their Black Tie TV Protection Plan strategically placed so that when looking at the display from most angles, it covered up the ESPN logo on the left tv as to disguise the fact that it was not an HD channel.

Aside from the fact that monkeying with the picture settings to make whichever brand of TV is on promotion that week look best is as old as the CE biz, what’s surprising and newsworthy is that there are Best Buy drones who even know how to adjust a TV’s picture.

Seriously though, deceptive marketing like this is bullshit. What's even more egregious is that Best Buy touts itself as using ISF calibration, which is not only the Gold Standard for video calibration, but quite costly to achieve certification in. If the clowns at Best Buy actually knew what they were doing, they wouldn't need deceit to promote the benefits of video calibration. Incidents like this make legitimate AV professionals look bad by association.

In my opinion, video guru Joel Silver, owner of the Imaging Sciences Foundation should be horrified at having his brand sullied by Best Buy's actions, and should seriously re-evaluate his business relationship with them.

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Best Buy picks up Napster for a song

Despite my abiding interest in digital delivery, I have to say that this acquisition took me completely by surprise, since I had imagined that Best Buy had the online music store thing all figured out already. Silly me.

Bloomberg.com: Best Buy Agrees to Purchase Napster for $121 Million

Sept. 15 (Bloomberg) -- Best Buy Co. agreed to buy Napster Inc., the pioneer of digital downloading of music, for $121 million.
Best Buy, the largest U.S. electronics retailer, will pay $2.65 a share, almost double Los Angeles-based Napster's closing price on Sept. 12, the companies said today in a statement.
Best Buy, based in Richfield, Minnesota, has tried to move music sales online as demand for compact discs wanes. Best Buy and Real Networks Inc. started a music-downloading test that ran from August 2007 to January, selling digital copies of songs by monthly subscription or individually.

Interesting. It also makes me wonder how many other digital delivery companies are still lurking around, not-yet-acquired by the big dogs. Clearly, I have more homework to do.

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Great Minds Think Alike

I see that CE Pro's art guy was on the same wavelength as me this morning:

Best Buy Tests Free e-Waste Recycling Program

His graphic looks better, though, whereas mine has a rough charm.

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Best Buy Testing E-recycling Program

As much as we enjoy kicking around Best Buy here at Lee Distad's Professional Opinion (although not nearly as much as we enjoy kicking around Circuit City), this is a positive bit of news.

Forbes.com: Best Buy testing free e-waste recycling program

"We want to take the time to learn if we can handle this before we go any further," said Best Buy spokeswoman Kelly Groehler. "We know the need is there and the waste stream is there. We think everyone needs to bear some responsibility for this - consumers, retailers and manufacturers."
As it is, Best Buy's test is believed to be the most extensive free electronics recycling program to be offered by a major retailer so far

What Best Buy understands is that the key to effective recycling is to make it convenient, and no-cost to consumers who are turning in their old electronics.

The small-"L" libertarian in me would prefer to see retailers take ownership of the front end of electronics recycling, rather than local governments. While Alberta Recycling does a credible job of managing the influx of recyclables, I'm not a fan of the "environmental levy" that retailers collect on CE goods for the province, if only because I'm not convinced that the tax thus imposed has any real impact on the fate of the goods in question.

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Partnerships & Mergers In CE: More To Come?

Christine at Marketnews has some perspective on the rash of mergers, proposed mergers, and strategic alliances that have cropped up lately among CE manufacturers and retailers.

MarketnewsGadgetTalk: Have Partnerships & Acquisitions Become a Necessary Evil in CE?

In some cases, partnerships are indeed made to strengthen a company/brand by utilizing resources that the other can provide. In others, it's to "take out" the competition. But it appears that, as of late, we're seeing more and more traditionally considered "competitors" looking at one another and saying "I need you and you need me. We can't do this alone."

The impetus for her post is the looming dogfight over who's bidding for a 49% stake in D&M Holdings:

Dealerscope: Kenwood is Latest to Enter D&M Bidding

Another day, another new bidder for D&M Holdings. The Stratecon Group reported
Tuesday, citing Japanese news service Nikkei, that Kenwood has teamed up with Bain Capital to make a bid for D&M, a 49 percent stake of which is being auctioned off by RHJ International.
Stratecon added that final bidding is expected to take place in mid-May, and that the four “finalists” are Best Buy, the Bain/Kenwood group, Merrill Lynch, and Advantage Partners LLP.

Bear in mind that mergers and alliances don't always reap positive results. As one of my regular inside sources told me in an email today when I asked him how he expected it to shake out:

Depends on who gets it and how much they borrowed to pay for it. Do they expect a return this quarter or next? 2 quarters is long term planning for many of the suitors named. One thing is for sure, Boston Acoustics sure didn't gain any strength after the D&M takeover.

Just because everyone's rushing to make a deal doesn't mean that they'll be a winner even by time the honeymoon's over. Most analysts and industry watchers are certain that there's no way Blockbuster will scrape together enough loot to buy out Circuit City. And Best Buy's foray into Venture Capital and Private Equity has been called a sign of the apocalypse Market Top.

That said, I expect we'll see many more high profile pairings announced this year, even if they're totally goofy.

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The Consumerist Tags Onto Best Buy Capital Story

And they actually manage to give credit where it's due, albeit in the smallest possible font.

The Consumerist: Best Buy Starts Venture Capital Fund

Thanks to Gawker Media for the acknowledgement.

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News Media Catches On To Best Buy Capital Story

Here's some followup on the story I ran March 18 on CE Pro, titled, Best Buy Capital to Invest in Tech Innovations.

On March 28, reporters for the Minneapolis-St. Paul Business Journal ran a story titled Best Buy builds VC unit to find next big things. While it's clear that Grayson and Vomhof did lots of research that brought extra angles to the story, it's annoying when they don't credit who first broke the story.

Me.

We all know that traditional news people all read blogs, and often are bloggers themselves, yet somehow many still act as if the blogosphere is either fluff or doesn't actually exist. Which is an irrelevant concern in this instance, since CE Pro is a major name in the CE trade media and does real industry journalism. Not citing CE Pro is like not citing the Wall St Journal for having the story first.

Tech blogger Graeme Thickens does a great job of connecting the dots about how the story spread, and giving credit where it is due in his post entitled: Bloggers Break 'Best Buy Capital' Story; Company Goes Mum, and also goes into deeper detail on how rather than comment via the PR department, Best Buy tried to pretend that this story didn't exist. For his work raising awareness of both my work, and bloggers (the hat I wear in addition to being a member of the CE trade media) in general, I am grateful.

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Best Buy's Geek Squad Promises Home Theatre And Diversity

CE Pro: Geek Squad Takes Over Best Buy’s Home Theater Installs

Geek Squad’s brand momentum continues to grow inside Best Buy, as it has become the home theater/consumer electronics installation arm for “big blue.”
If a customer goes to the Best Buy Web site or visits a brick-and-mortar store seeking home theater installation, he is directed to Geek Squad. Previously, Geek Squad installers only handled computer repair and other IT networking services for Best Buy.

I'm going to forego the obvious snipes at the often sneered-at Geek Squad, and instead focus on marketing.

Based on the images on the Geek Squad website I'm genuinely curious about what Best Buy’s marketing department wants to communicate about Geek Squad’s commitment to diversity in their employment practices. What percentage of Geek Squad’s installer force are serious, determined looking minority women (with great hair), like the one pictured? She's all over their website. Is she an actual Geek Squad team member, or a professional model?

This quandry is reminiscent of the famous "10 stock photography cliches" whose page is, sadly, defunct.

Regardless, despite Best Buy's public commitment to diversity, I bet you a bag of skittles that if you need a house call from the Geek Squad, your technician is going to resemble Dilbert more than Eva Perron.

I’m all for diversity, sure, but I have trouble reconciling the image they’re presenting with my perceptions about the Geek Squad.

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This Week In CE Pro: Best Buy Opens Their Own Venture Fund

CE Pro: Best Buy Capital to Invest in Tech Innovations

This is a pretty important piece of financial news, at least to people involved in the CE industry.

Me, I just enjoyed employing this snarky expression:

"As you can imagine, Best Buy’s plan to build not one but two capital funds requires recruitment beyond an ad on Monster.com and is not suited for the kind of in-house personnel development you’d use to produce General Managers or Category Buyers out of the rank-and-file staff."

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Best Buy Canada Not Spurning HD-DVD, Yet

Keen CE industry watchers will be surprised to learn that despite choosing to support Blu-ray in their US stores, the Canadian division of Best Buy, as well as their subsidiary Future Shop have no plans to take sides.

Marketnews' stunningly capable editor Christine Persaud has the scoop:

Marketnews: Best Buy Next to Support Blu-ray - Canadian Update!

Spokespersons from both Best Buy Canada and Future Shop tell me that Best Buy and Future Shop stores in Canada will not be following suit at this time, and will continue to support both the Blu-ray and HD DVD high-definition DVD formats.

"Future Shop will continue to carry both formats to meet the lifestyle needs of our customers," were the exact words of a Future Shop spokesperson.

Very interesting.

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Best Buy Favors Blu-ray: When It Rains, It Pours

One of my favorite positive-thinking aphorisms is "you can choose to start your day over." I'll bet right now many execs at Toshiba are thinking the same.

CE Pro: Best Buy to Promote Blu-ray; Who’s Next?

Best Buy has announced that they will recommend Blu-ray as the preferred high-definition format for their customers the same day that Netflixdecided to drop HD DVD from its stocks.
Although Best Buy will continue to stock HD DVD hardware and software, the big-box retailer says that, beginning in March, they will “prominently showcase Blu-ray hardware and software products” both online and in-store (press release).

Reading this, I can't help but think of two things: first that this is game, set and match for Sony and Blu-ray. Second, that Best Buy's decision to actively promote one over the other is a marked contrast from Circuit City's professed format neutrality.

Why is one big box retail chain taking sides, but not the other? It's because they can. By any meaningful yardstick, the big blue box has a lot of clout. Even more than Toshiba, whom I suspect exerted some pressure on Circuit City after those reports of HD-DVD being cleared out began to circulate. Suppliers squeeze dealers, and dealers squeeze suppliers: it's the retail Circle of Life (go re-read my post from Christmas 2006 about the politics of allocating Playstation 3's). In this case, Best Buy is the 800lb gorilla, and Toshiba is ill advised to complain too loudly, lest they see orders dwindle from Best Buy for everything that isn't an HD-DVD player.

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Since we're picking on Circuit City and Best Buy today

In response to my commentary on "Nielsen names Best Buy, Circuit City, eBay, top electronics online stores" I receieved this in my email from a friend in Florida:

Lee,

Best Buy vs Circuit City

Just my observations.

When I go into a best buy it seems to be a bunch of booger eating kids and rejects wandering around. They have no clue. If you ask about a TV they would be lucky to find the TV section. They haven't even memorized company sales propaganda.

Circuit City is hit or miss. A few good salesmen on the floor. Most at least can lead you around the store and parrot off info about different models. Is that universal?

Another thing about the Best Buy here. They spent huge money building on what might be the worst location in the world. They might have been better to build 10 miles out of town. They are almost under an over pass. The exit ramp is right by the store. You have to navigate through people exiting the freeway, then make a 180 degree turn onto a little service road. Then find a parking spot in a postage stamp sized lot. Getting out is even more fun. Plus it's in a declining area of town. It's by the old mall that will probably soon go under.

Circuit city is in one of the out building of the new mall. Huge parking lot and lots of nice little shops around it.

To be honest I don't really care about sales staff anymore. I do the buy online, in store pickup, no freight thing now.

It's interesting to see how many people would rather order online than shop in person.

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How is Best Buy doing so well?

When their front line retail staff are the bottom quartile of the employment market?

I recognize that it's difficult for retailers to pay enough to retain really top-notch employees, but come on. Witness the interaction I went through at a Best Buy yesterday. Against my better judgement, I braved the crowds on the last Sunday before Christmas, looking for a couple of titles for the Wii. So I went in to Best Buy, sought out the video game department, and asked one of the blue-shirted clerks for assistance.

Me: Excuse me, are you with anyone?

Clerk 1: No, can I help you?

Me: Yes, please. I'm looking for Super Mario Galaxy, and Dancing with the Stars for the Wii.

Clerk 1: (panicked deer-in-the-headlights-moment) Dancing with the Stars on DVD?

Me: No, for the Nintendo Wii.

Clerk 1: (blank stare, calls over Clerk 2) Bob, do we have, (turns to me) what was it again?

Me: Super Mario Galaxy, and Dancing with the Stars for the Wii.

Clerk 2: Um, I don't know. I'm not really an expert on the Wii yet.

Me: Are you an expert on looking up stuff on your computer and checking stock?

Clerk 2: Oh! Yeah! Okay. (taps away) Um, no, we're sold out.

Me: That's okay. Thank you.

I ended up getting them both online from Amazon.ca, since having them under the tree was not a necessity.

Taking this experience and putting it in perspective with past customer service observations at the big blue, I'm going to go out on a limb and suggest that at least subliminally, Best Buy's business model is actually self-serve. You go there, you find something shiny with blinky lights on it that you like, and you buy it. The blue shirted children wandering around are there primarily to check stock on the computer and to get things down off of high shelves for you.

On the bright side, I remained pleasant and courteous, partly because I don't believe in adding negative energy to the already stressful lives of retail workers, and also, because you never know when such behavior might lead to terrible consequences:

CF13News.com: Woman TASED at Best Buy

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Wal-mart and Toshiba go bananas with cut-price HD-DVD player

Following up on the story of Wal-mart and Best Buy teaming up with Toshiba to offer a $99 HD-DVD player for sale in an effort to strike a blow in the format war, reports are coming in that 90,000 units went out the door.

Videobusiness: HD DVD set-top player $99 sales moves units

The HD DVD format significantly pumped its installed base over the weekend, as dueling store clearances sold an estimated 90,000 Toshiba players, according to sources close to retailers.
...
That tally covers Friday to Sunday sales of Toshiba’s second-generation HD-A2 model, which Wal-Mart and Best Buy sold for about $99 on Nov. 2. That’s $200 less than Toshiba’s $299 list price and $100 off widespread retail pricing of $199.
The $99 players made up most of the 90,000 units sold, a source said.
Within three days, Toshiba corralled nearly as many sales as the best-selling stand-alone Blu-ray Disc player has sold since its launch. Sony’s dominant Blu-ray set-top, the $499 BDP-S300, has shipped about 100,000 since it bowed this summer.

It was a dirty Hail Mary ploy that reeked of desperation, but it appears to have been a winner.

Will this tip the format war's teeter-totter in HD-DVD's favor for good? Maybe.

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Best Buy ceases selling Old School televisions in US

Marketnews - Gadget Talk: The End of an Era: U.S. Best Buy Stores Say No More Analog TVs

According to a Reuters report, Best Buy's U.S. stores will no longer be offering analog TVs, opting for a digital-only tuner environment. Of course this goes in line with the FCC's decision to stop all analog broadcasts by February 2009.
...
Will the CRTC follow suit with the U.S. FCC and make similar moves for digital TV? Although the organization has taken steps to encourage the adoption of digital TV (like requesting that, by the end of this year, Canadian broadcasters offer at least two-thirds of their TV schedules in HD), there has been no specific deadlines (to my knowledge) that would absolutely ensure that this happens. Stay tuned (pun intended).

I have no doubt that the CRTC will soon follow down the FCC's path.

As far as the retail marketplace for analog televisions, given the sheer number of inexpensive flat panels from no-name Chinese manufacturers available at discount retailers, it's hard to believe that there is anything resembling a market for the old ones!

*Props to Christine at Marketnews for the idea for the graphic!

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Best Buy, Circuit City like the Yin and Yang of CE retail

Some headlines repeat themselves. Dow Up, Dow Down, Loonie at 30 year high, Bunch of Stuff blows up in Iraq, Best Buy making money, Circuit City losing money. It's the circle of life!

The Bridge: Circuit City Reports Second Quarter Losses

TOP STORY -- Circuit City's net sales declined 6.2 percent to $2.6 billion in the second quarter of 2007 compared to the same period last year, the company reported today, while same-store sales fell by nearly 8 percent. The net loss for the quarter was $63 million. In Q2 '06 the chain posted total sales growth of 11.1 percent and same-store gains of 8.5 percent. Circuit City execs blamed the shortfalls on widespread structural and procedural changes during the first half of the year. Online and call-center sales, both focuses of those changes, grew 20 percent while home theater installation revenues were up 22 percent versus 2006.

Here comes the blame game:

TWICE: Circuit City Says Retooling Stalled Q2 Sales

Richmond, Va. — Circuit City executives told analysts today that second quarter sales and earnings shortfalls were attributable to massive structural and procedural changes that disrupted operations during the first half.

Translation: "Firing all of our staff impaired our ability to sell stuff to people. We thought about blaming the weather too, but we figured you'd see through that. "

Just to twist the knife still further, contrast Circuit City's sad performance with Best Buy:

TWICE: Best Buy Q2 Sales Driven By Home Theater, PCs

Minneapolis — Best Buy reported improved margins in home theater and stronger computer sales during its fiscal second quarter, which generated double-digit gains in net earnings and revenue. The chain reported net earnings of $250 million in its fiscal second quarter, a gain of 17 percent, and a 15 percent revenue gain to $8.8 billion during the quarter vs. the previous year.

One national chain keeps on growing and doing better, and the other is floundering. It looks like the ability to actually execute strategic initiatives makes a difference.

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Best Buy to sell DRM-free music downloads

In case anybody thinks that all I do around here is look for new and cynical ways of pillorying companies for acting in stupid and shortsighted ways, here's a breath of fresh air.

TWICE: Best Buy Digital Music Store To Offer DRM-Free Music
Best Buy said its Best Buy Digital Music Store will participate in a test by Universal Music Group that will give customers the chance to purchase music unprotected by Digital Rights Management (DRM) software for the same price they would pay for protected music.
“Our customers have shared their frustration around DRM protection and we have listened,” said Jennifer Schaidler, music VP for Best Buy. “One of the most appealing aspects of digital music is the freedom it can provide to enjoy music wherever and whenever you want. Taking away DRM protection will help digital music live up to this promise.

Now, I'm going to go way out on a limb and speculate that if given a choice, all many consumers would rather buy music downloads that play without a hitch across all of the hardware platforms that the consumer owns, and doesn't make random mp3 players seize up, or report their activities back to Big Brother. If the DRM-free downloads cost the same, I imagine that it would take the consumer about a picosecond to make their choice.

Call it a hunch.

I don't know how experimental this experiment is, from Best Buy's perspective. They're not especially innovative on their own, so they wouldn't throw their weight behind this unless they really believed that it will pay off. Kudos for them. More importantly, if Best Buy is seen to do well with selling unadulterated music downloads, it will snowball to other content providers, and quickly!

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Best Buy reports Q1: sales up, profits down

TWICE: Best Buy Net Earnings Down 18%, Comps Fall

Minneapolis — Best Buy reported higher corporate revenue, but lower comp-store sales and net earnings for its fiscal first quarter, ended June 2.
Net earnings were $192 million, down 18 percent from $234 million in the prior year’s first quarter.
“Our first-quarter results fell short of our expectations. Strong revenue results from lower-margin products significantly cut into our gross profit rate,” said Brad Anderson, vice chairman and CEO of Best Buy, in a statement. “Yet our customers continued to increase our market share. Our share gains, combined with other indicators we see, show that our core business is healthy.”
Revenue increased 14 percent to $7.9 billion compared with $7 billion for the previous year’s first quarter. The increase reflected the net addition of 230 new stores (including 131 acquired stores) in the past 12 months and a comp-store gain of 3.0 percent. Last year’s first quarter generated comp-store sales gains of 4.9 percent.

"Strong revenue results from lower-margin products significantly cut into our gross profit rate" is putting it mildly. In fact, it's a malaise that is infecting most players in the CE retail business. Tweeter and Circuit City have suffered greatly this past year from the same problem. Best Buy has the momentum due to their size to absorb a lot of punishment to their bottom line, but eventually they too will run out of road. Now is definetely a good time to explore margin building opportunities.

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More bad news in Microsoft/Best Buy anti-trust case

Or good news, depending on your point of view.

Channel Register: Lawyer admits tampering in MSN, Best Buy case
A Best Buy lawyer has admitted to falsifying court documents in the longstanding racketeering case against Microsoft and Best Buy, which recently reached a Superior Court in Seattle.
A nationwide class-action suit, filed in 2003, accuses the two companies of conspiring to secretly register thousands of Best Buy customers for Microsoft’s MSN online service.
As reported by the Associated Press, a lawyer with the Minneapolis firm representing Best Buy admitted to altering emails and a paper memo before turning them over to the suit's plaintiffs - though he claims to have acted alone, without the knowledge of either Best Buy or his firm.

Of course, Best Buy has never been caught doing anything underhanded before, so the notion that their attorney was acting on his own is entirely plausible (that was sarcasm, right there).

There's really nothing I can add to this that would spin it any worse for Best Buy, so I'll just leave it alone for now.

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Best Buy/Future Shop pairing defies the critics

Globe and Mail: Best Buy's two-step begins to click

TORONTO — When U.S. electronics giant Best Buy Co. Inc. [BBY-N] snapped up Future Shop in 2001, critics took shots at its decision to run with both retail banners in Canada as being an unnecessary expense.
But Best Buy has proven the naysayers wrong. The two-name strategy has worked, giving consumers yet another place to shop, company executives say. Over the past six years, the retailer has managed to almost double its market share to more than 30 per cent from 17 per cent of the domestic electronics market, they said yesterday.
In fact, the approach has worked so well that the U.S. parent is now copying the two-banner model in other countries that it is entering, said Bob Willett, chief executive officer of Best Buy International.
"It increases the choice to the consumer," Mr. Willett said after a presentation to the Retail Council of Canada annual conference. "There are whole segments of different behaviour and different customers in Canada. They don't all want the same thing. They don't all want to shop in the same boring environment."

I will admit to having been one of those naysayers. In addition, the story at the time was that Best Buy was going to rebadge Future Shop stores as Best Buys over a two year span.

In hindsight, that story was obviously incorrect.

As much as I enjoy making fun of Best Buy, they obviously know how to do some things right, or they wouldn't occupy the top spot on the CE retail food chain. I think that maintaining distinct banners with different store cultures helps maintain some semblance of diversity in the marketplace, is good for consumers, and allows retailers to experiment with what works well versus not at all.

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