Best Buy CEO Brian Dunn resigns; tech retailer seeks new strategies

Best Buy CEO Brian Dunn resigns; tech retailer seeks new strategies

Summary: Best Buy CEO Brian Dunn throws in the towel, underscoring the fact that the tech retailer is still stumbling online and off. Can an Amazon or Apple alum turn the ship around?

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Brian Dunn, chief executive of big box tech retailer Best Buy, resigned this morning.

"There were no disagreements between Mr. Dunn and the company on any matter relating to operations, financial controls, policies or procedures. There was mutual agreement that it was time for new leadership to address the challenges that face the company," according to the company's official statement.

G. Mike Mikan will serve as interim CEO while a search for a new CEO is underway. A Best Buy director since April 2008, Mikan brings a load of financial and operational expertise to the top position. He was formerly CFO of UnitedHealth Group and CEO of healthcare services company Optum.

Best Buy founder Richard Schulze will keep his role as chairman.

“I have enjoyed every one of my 28 years with this company, and I leave it today in position for a strong future," Dunn said. "I am proud of my fellow employees and I wish them the best."

Given the severity of the change, we can only wonder when both sides came to the realization that the ship was sinking. The good news: at least no one's in denial anymore. With the company shuttering 50 stores -- no doubt due to Amazon's continued dominance online -- it appears that Dunn simply couldn't hack it in e-commerce, or at least in balancing multiple channels.

It's a real shame -- Dunn's a 26-year veteran of the company, starting at the bottom as a sales associate in 1985 and rising through the managerial ranks over the years. If there's someone at Best Buy who's seen the company's rise, it's Dunn.

But that may be the exact problem. The landscape of technology retail has changed rapidly and drastically, and it's hard for anyone to hang on when the winds of change are this fierce. It would be in Best Buy's best interest, then, to hire a veteran of the e-commerce sector -- an Amazon, eBay or Apple alum would do well here.

Dunn wrote in a blog post in January (the original has been removed):

First, some believe the internet has made physical retailing (i.e., stores) irrelevant. There’s no doubt that the internet, and the mobile web in particular, have changed the way people shop, but there is strong evidence that consumers continue to value the experience of shopping in stores. A recent study by the NPD Group, a leading market research company, notes that nearly 80% of consumer electronics revenue still moves through physical stores. Additionally, approximately 40% of customer purchases made through Bestbuy.com are picked up in one of our stores. And the truth is, traffic in our physical stores increased in our third quarter and has been trending positively for most of the year.

Finally, there are those who question the validity of Best Buy’s business model. This misguided perspective is especially troubling for me, because it blatantly and recklessly ignores overwhelming evidence to the contrary. Best Buy is a financially strong and profitable company that has generated more than $2.6 billion in cash flows from operating activities in the first three quarters of the fiscal year. We also delivered positive operating income in each of the first three quarters of fiscal 2012. We grew total market share in the third quarter according to the most recent public data available. We have closed down certain operations that were not profitable, which we expect to have a positive impact on our earnings going forward. And we are focusing the company on areas where we see the greatest opportunities for growth and profit: mobile devices and connection plans; enhanced digital and e-commerce strategies; growth in our services business; and expansion of our established business in China.

Dunn is right, at least in principle. For all the talk of how Amazon is eating Best Buy's lunch, the game isn't quite the same -- Amazon's primary platform is the web, whereas Best Buy's remains its stores. Apple has shown the world that the brick-and-mortar store, done right, can be an effective tool.

But you could argue that Best Buy wasn't walking the talk, positioning its stores as blue-and-yellow distribution centers, rather than experiences. Sure, the cash continues to flow, but its sources are weakening, and the company is not taking strides to find and tap the next revenue well. In its search for a new CEO, then, Best Buy's board needs to find someone who knows the value of each platform and can knit them together seamlessly.

Topics: Legal, Banking, CXO, Enterprise Software

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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47 comments
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  • It's an image issue

    When you think Best Buy, you don't think of a website. You think of those buildings with the giant price tag stamped on them. And that's the biggest issue. When people think "I want to buy something online", Amazon is the very first thing that pops into most people's heads. People visit retail sites to check stock at a local store, rather than wanting to buy stuff from them online. It certainly doesn't help that everything is retail price. I've only bought stuff from BestBuy.com when there was a particularly good deal going on. Unfortunately for Best Buy, sometimes even those deals are only on par with Amazon's normal prices. Fact of the matter is, if you shop Amazon, you're probably going to get a better deal.

    I love Best Buy and have racked up countless points on my rewards card, but it's still just a brick and mortar shop to me.
    Aerowind
    • I agree with you, mostly.

      It's true that Best Buy's website isn't thought of as a go-to, but the other problem is pricing -- Amazon regularly offers the same gadgets for cheaper. Without much to differentiate the experience of an effective e-commerce website, that's what they compete on. And they lose. Tech as a commodity is tough.

      On the other hand, every time I've dared to venture into a Best Buy store, I'm met with inept sales associates (or none at all! hello?) and poorly stocked inventory. When I can't get a basic black Xbox 360 controller at a Best Buy, nevermind that I'd get gouged for it, I'm going elsewhere. Fast.

      Finally, and this is less important: Best Buy's stores need focus. Candy, auto tech, TVs -- there's everything and nothing at the same time. It's tough to be a generalist, and being one is not always a bad thing. But it fractures the experience and the company's reputation -- as you said, it's an image issue.
      andrew.nusca
      • Yup, if you are ever bored and want some fun...

        ...hang around the computer department at a Best Buy and listen in on what the sales reps are telling customers. My favorite was when the rep told my father-in-law that he needed the fancy new computer to speed up his internet connection. He was using AOL dial-up at the time. So I asked the guy how this computer is going to "speed up his internet access" when he is using dial-up. With a straight face he proceeds to explain to me how the fancy new CPU will speed up video processing. I just let him ramble on to see what he would say. This kid was about 20 years old and had probably never used a dial-up connection in his life.

        The point being that hiring no nothing sales staff pretty much negates the advantages of a brick and mortar store. On the other hand, hiring people who actually know something costs money and would drive prices up even more. Its kind of a no win situation.
        cornpie
    • Yup, Best Buy "sales" not that great a deal

      Long ago, I used to look through the weekly Best Buy add that came in the Sunday Paper (remember news papers?). After a while though, something became painfully obvious. This week's sale price will be next week's regular price. An item being "on sale" just means that if you wait a week or two you will find it as the regular price and it will still be more than NewEgg.com or Amazon.com.

      The one thing I still go to a Best Buy store for is if I want to actually see a product before buying. For example while shopping for a new TV I was curious about LED VS LCD, 60 Hz Vs 120 etc and whether my eye would be able to tell the difference. But....once I had looked at TV's and knew what brands I liked and what features I wanted, I actually ordered one online. This is where Mr Dunn's statement "traffic in our physical stores increased" may not be particularly meaningful. My visit was "traffic" in the physical store, but I didn't actually buy anything from them.

      Another great use for Best Buy is that when the wife is shopping for shoes or some such, it gives me someplace to go where I can stroll around looking at toys. Once again, generating traffic in the store but no actual sales.
      cornpie
      • Exactly, traffic does not equate to sales...

        Brick and Mortars are really more about seeing the physical product. Regardless of how good the images are, shopping online does not give a buyer the confidence in a product that actually physically touching or seeing the product does.

        However, when it comes to finally making the purchase, many people compare that stores price to what is available online. With smart phones these days, all you need to do is scan the SKU with your phone, and bingo, 5 listings that are usually cheaper.

        What Brick and Mortars need to do is make that connection from seeing it in the store to buying it online or there at a more reasonable price. Provide some motivation for buying at the store rather than online.
        spaulagain2
    • Best Buy Vs New Egg = New Egg 99.99% of the time for me

      Best Buy isn't what it was 20 years ago or even 10 years ago ......H.H. Greg destroys then to here in Tenn. on price ,knowledge and servise. For me its either New Egg or Tiger Direct first and than any one else after that period.................
      Over and Out
      • And TigerDirect

        I've had good luck with both of them.
        ScorpioBlack
  • will go the way of circuit city

    local taxes and rents are a big advantage for online retailers.
    The Linux Geek
    • No... they are not.

      Shipping costs apply to online retailers. Pretty soon most states will have sales taxes on it too but online will still trump box stores.
      codecrackx15
      • No they won't

        [i]Pretty soon most states will have sales taxes on it too but online will still trump box stores.[/i]

        Everytime they've tried that, it's failed. Unless they have a physical presence in that particular state.
        ScorpioBlack
      • @Scorpio . . . Yes They do.

        Most Online sites automatically pay the State sales tax for you, now, including Newegg, Amazon, etc. The big secret is they have to have distribution centers in almost every state, or group of states, in order to guarantee overnight shipping, etc. That means most of the biggies that have the best prices HAVE to include sales taxes, so they just do it for all of them.
        JLHenry
      • Wrong, @JLHenry

        I just bought an external DVD drive over at Newegg, and they didn't charge me tax since I don't live in CA, NJ or TN where they have distribution centers. And I didn't get overnight shipping, either.

        EPIC FAIL for you.
        ScorpioBlack
    • There are many more factors involved than that

      And giving them every tax incentive or free ride won't change those other factors.
      HypnoToad72
  • The whole experience is terrible

    The problem is, the experience is terrible. As someone stated above you either can't find help or the help you find knows nothing about the product. I go to amazon to find user reviews on products. I go to amazon to get information about a product. And if I can wait and am not in a hurry, I will buy from Amazon.
    The other problem with Best Buy is their online experience is poor. So if you do visit BestBuy.com you get a mumbo jumbo of stuff. Its not intuitive. The customer experience is lacking both in their physical store and their online store.
    Finally for the level of service you get, they are over-priced. If the employees cant answer my questions and I either cant find the product or cant test it out properly then the extra cost is not worth it.
    If they would add value such as assigning you a sales rep that actually knows his information. Maybe create an app (another very poor product is their app) that can take a picture of the room where you want to put your tv or xbox, or sound system and let their experts help you decide what size tv would be good, where you might get the most out of the product. They need to integrate current technology such as apps, augmented reality, etc to add value to the customer experience and justify their higher prices.
    Finally the geek squad is over priced as are their installation services. I'm in the IT industry and the what the geek squad charges for basic repairs and maintenance is outrageous.
    TheWhat
  • The main reason you walk into...

    a brick and mortar store such as BB is to get help from a sales rep on a product your thinking about buying. When you either a) can't trust the sales rep to tell you the truth, b) they have no clue about what they are selling, or c) they try to push useless expensive warranties/contracts, then what is the point. Throw in the fact that it more than likely costs more than online and you have a "checkmate" for no sale. It sounds like BB is still in the denial stage.
    ewell44
    • You forgot d)

      You know exactly what you want to buy but you need assistance because they have it locked behind the counter, and you can't even get someone's attention because three sales reps have been spending the last hour trying to sell a keyboard to someone who doesn't know if it will work with their computer.

      I'm guessing BB has lost at least $2,000 of my business over the years due to crap like that.
      Michael Kelly
      • Believe it or not . . .

        I usually get the best prices at my local walmart! And i can see how the device looks/feels in the store. Our 32" CRT HDTV (Sanyo) bought the farm last november, and we had to get a new tv. Looked around around, and found a Vizeo 120hz 42" for $548. And was able to take it home the same day and set it up. They have the updated version of this same tv (WIFI, webapps built in) for around $599. Picture was great. I didn't have to get one on-line, and wait for it to arrive, only to find out it was damaged in transit, or I didn't like the picture, etc.

        People can claim Brick and mortar stores are going away, but they're not ever going to, simply because most want to see what they buying before they buy it.

        Best Buy just needs to examine HOW they selling and the prices, not what. I agree with you about the sales reps, they're horrible. They descend on you like locusts, and they usually don't have a clue about what they're taling about.

        I told one my my drivers (at my old job) that when they went to look for an HDTV, don't buy the latest and greatest just becuase the salesman says it's the best. If they liked the picture on several tv's, buy the cheapest due to the fact that there aren't that many people who actually make the screens. This is true for most electronics today. Most companies making them just assemble them from pre-made parts that are manufactured by just a few companies. Just look at FOXCONN, and all the different PCs, etc., that they make.
        JLHenry
    • It's a shame society has come down to that

      I'd usually slam customers for going into a store to check things out before ordering online, as ethics works both ways, except BB chose to cut quality corners by hiring only young know-nothing kids, as hiring qualified people might ding their profits and profits means more than everything else combined in the new normal.
      HypnoToad72
      • What?

        [i]I'd usually slam customers for going into a store to check things out before ordering online, as ethics works both ways...[/i]

        I do that all the time. Unless I'm in a hurry and I need it right then and there.

        Now if they're willing to meet the internet price, no problemo. But they usually don't.
        ScorpioBlack
      • RE: It's a shame.......

        I hate to say this, but, [b]you get what you pay for[/b].

        A case in point:

        Years ago I worked for a wholesale distributor of jewelers tools and supplies. One of the things a 'brick and mortar' store [b]always[/b] has to 'deal with' is the [i]competitor that cuts you on price[/i].

        My then employer was not different; and one day this "customer" (btw, who had [u]never[/u] purchased from us previously) came in with a piece of defective equipment from a manufacturer that we also sold. He wanted [b]US[/b] to send it back for warranty repair. That manufacturer's warranty policy required the end user to send the equipment back to them (at the end user's expense), along with a copy of the sales receipt.

        Now, this "customer" had not purchased the equipment from us; and was [b]getting nowhere[/b] in his requests from the actual seller for a copy of the invoice in order to get warranty service. Unfortunately, we could not help him.

        Two weeks later, one of [b]our customers[/b] came in with the [u]exact same item, with the exact same problem[/u]; and because we sold it, we had not only a copy of our invoice to him; but a copy of the invoice from the manufacturer showing how long we had this item in stock.

        A bit of sleuthing determined what was causing the problem, and after consulting with the manufacturer and the customer (who [b]really needed this equipment in his business[/b]); we were able to get the defective thermostat back. The alternative was to ship that 85 pound burn-out oven back, and wait 2 - 3 weeks for the repair.

        The part was sent out next day, and was installed in the customer's oven by 5:30 on the day it arrived.

        [b]That is what 'after the sale service[/b] is all about.

        Now, if you want to consider [b]only price[/b] then you [u]get what you pay for.[/u]
        fatman65535