Best Buy is getting left behind. No longer the tentpole company in electronics retailing, the big box chain has been relegated to little more than an unofficial showroom for Amazon. With declining numbers and newly appointed CEO Hubert Joly taking the place of the company’s departing founder, it’s apparent that now is the time to start thinking differently.
Joly needs to differentiate the crusty old brick and mortar retailer from its we-can-deliver-anything-immediately, ecommerce-only competitors by offering consumers exclusive access to new and innovative products. And the best way to accomplish this — while also gaining a hell of a sexy PR story along the way — is to sponsor the innovators of tomorrow’s new products. Best Buy needs to create a consumer-electronics focused Kickstarter competitor.
As noted investor Chris Dixon correctly argued recently, “If it has a UPC code, Amazon will beat you.” The only way to compete in ecommerce, he concluded, is to make a your own products or provide a marketplace for these exclusive items.
Imagine if Best Buy had the exclusive right to offer the Pebble smartwatch for one year after its crowdfunding campaign was concluded. It’s hard to argue that this wouldn’t drive traffic into its stores and likely lead to additional incremental sales of traditional products. Three to five medium scale or bigger success stories per year could entirely redefine the way the Amazon generation thinks about Best Buy.
But exclusive rights to hot products don’t come cheap. With $1.39 billion in cash as of its June earnings statement and few viable alternatives to breathe life into the company, Joly’s team has the room and the urgency to get a little creative. Here’s my suggestion for the to-be-formed “Best Buy Funder” platform.
First of all, Best Buy Funder would be all consumer electronics hardware, all the time. Kickstarter has reluctantly become the home of this type of project. If the crowdfunding platform’s founders don’t want to cater to this market — instead preferring more creative arts oriented projects — then Best Buy or someone else needs to step in and challenge their position.
Best Buy should offer to match financing raised through crowdfunding and provide preferred distribution to all companies meeting clearly defined qualification criteria. Companies proving a minimum degree of market viability, defined either as a minimum amount raised (such as $250,000) or a minimum number of backers (possibly 1,000), would get dollar for dollar matching from Best Buy. In the case of Pebble, this would have meant an additional $10 million to scale production and marketing, although Best Buy could conceivably cap its maximum contribution at a lower value.
Secondly, these newly-funded products should get preferred distribution and promotion in physical Best Buy stores and in its online store. Guaranteed shelf space and free or discounted fulfillment go a long way toward solving the biggest hurdles facing a young hardware startup. Best Buy is uniquely equipped to provide both of these solutions.
An entrepreneur contemplating crowdfunding options would have a hard time turning down a package of this nature, regardless of the current negative sentiment toward the brand. If Best Buy has the balls to take on an initiative like this, they might even be able one day to claim credit for backing a revolution in hardware startups.
As a traditional retailer, Best Buy has shown little ability to innovate on its own. Unlike Amazon, which has developed the Kindle line of ereaders and tablets as well as launched several highly successful consumer and enterprise Web services, Best Buy will need to acquire rather than build any game changing hardware devices it wishes to own (even if temporarily).
The 29-year-old Best Buy (46, if you go back to its days as the Sound of Music) has a mountain of problems it needs to solve. The first and most important thing that it can do is change the perception of its brand. A successful crowdfunding incubator initiative and a few sexy exclusive products could be the first small steps in a broader solution. Without this type of creative and disruptive thinking, the company likely won’t make it through another decade.
[Image courtesy daysofhundr46]