why the #1 consumer electronics retailer sells on ebay

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Carlson School of Management

Why the #1 Consumer Electronics Retailer Sells on eBay:Augmenting traditional channels at key points in the product lifecycle

Brian HungerfordDirector, Best Buy.comFriday April 8, 2005

Agenda

> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

Best Buy Background

> North America's number-one specialty retailerConsumer electronics, personal computers, entertainment software, appliances

> Named Forbes ‘Company of the Year’ (Jan. 2004)

> 7th on Business Week’s annual ranking of best performing companies on the S&P 500 (April 2004)

> Just under $17B market cap> Over 100,000 employees> Over 830 stores (U.S. and Canada)

Agenda

> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

BestBuy.com

> Established FY 2000> “Our Largest Best

Buy Store”> No. 9 in Internet

Retailer’s “Top 300 Guide”

> Leading online Consumer Electronics destination*

* Source: Netratings/Netview, Feb 05

Customer Centricity

• Focused,active, younger malecustomer

• Wants latesttechnology &entertainment

• Family manwho wants technology thatimproves hislife

• Practical adopter of technology &entertainment

• Busy suburbanmom who wantsto enrich herchildren’s liveswith technology& entertainment

• Affluent professional

• Wants besttechnology &entertainmentexperience

• Demandsexcellentservice

Challenges

> Retail stores are primary channel for selling discontinued and end-of-life products

Desire for premium retail floor space to show latest technology.

> Desire to expand customer base in key customer segments

Agenda

> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

1998 1999 2000 2001 2002 2003

Global Registered Users(Millions)

> 50 million unique U.S. visitors per month.*

120,000+New Users

Daily

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

125 Million

2004

Why eBay?

* Source: Netratings/Netview, Sept 04

A Day in the Life of eBay Computers & Electronics

• 92,000 items sold

• 13,200 Cameras & Accessories sold

• 13,000 Cell Phones & Accessories sold

• 7,300 Home AV products sold

• 4,500 Car Electronics products sold

• 3,000 Laptops & Desktops sold

Best Buy Outlet Store on eBay

> Launched Jan. 2004> New-in-box, but end-

of-life consumer electronics and computers

> Nationwide delivery> Complements retail

and BestBuy.comchannels

Agenda


Best Buy Outlet - Benefits

> Faster turnover of end-of-life product

> Less end-of-life product in stores

Sales associates focus on new/high margin itemsStores have a fresher, cleaner look

> Extend Best Buy brand to 125+ million registered eBay users


> Product selection learnings:

High ASP, low margin products outperform on eBay.Low ASP, high margin products outperform in the retail setting.


> Customer Satisfaction:

eBay’s feedback score.Fit with Customer Centricity.

Customer Centricity Surprises

> Expectation of eBay customersMostly price-sensitive bargain huntersWould not fall into desired Customer Segments

> Reality of eBay customersBroadly distributed across all key Customer SegmentsMatch or surpass retail customers in several key Customer Segments

Who is Buying from Best Buy on eBay?

The eBay channel is a new customer acquisition machine.

IdentifiedCustomers Unidentified (New)

Customers

Agenda


Lesson Learned / Best Practices

> Corporate "buy-in" is criticalSmall, dedicated team supported by extended cast of internal experts

> MerchandisingAuction space facilitates quick movement of end-of-life productHigh quality product descriptions and content gets it doneHeavily branded

> Customer ServiceTimely customer contactDedicated customer service teamSatisfied customers pay dividends.

The Future on eBay

> Best Buy OutletServices, other attachments.New, in-market product (primarily as attachments).Market Price Monitoring near end of life-cycle.

> Non-Branded Outlet(s)Open Box and Refurbished Product.

> Technology Trade-InMulti-channel strategy includes eBay.

Key Partnerships

> ChannelAdvisor

Auction management expertise and software.

> EBay Strategic Alliance

Constantly exploring new strategic opportunities.

Questions

> Thank You!

Brian [email protected]

why the #1 consumer electronics retailer sells on ebay

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