Could Xfinity be a nail in Best Buy’s coffin?

New service models could pose threat to Geek Squad 

Traditional retail store chains are under siege.  Amazon and e-tailers are rapidly siphoning off core customers through very competitive prices and free shipping.  Specialty CE retailers, like Best Buy and Dixons in the UK, have turned to services to enhance their market basket profitability, and increase loyalty.  But, the Geek Squad is no longer the only game in town.  Digital providers that pipe in your TV and internet into your home are now competing to be your digital plumber.

There’s no joy in retailing CE products these days

While working in the UK, there was a great opening line on the local news to announce dismal news or pending disasters … “There is no joy here”.  That opening line pretty much sums up retailing CE products in stores. 

Retailing Consumer Electronics (CE) products has always been a tough business. And, it’s even tougher today.  Computers have gone from high double digit margins to single digits.  Printers are at 0 or below. Similar story with HD flat screen TVs is unfolding now that Walmart and e-tailers began to aggressively promote the category.   

The net spread between Best Buy’s gross margin across all products vs. its SG&A (Sales General and Administrative costs) was only 4.7% in 2010.  That leaves very little margin for error … and little hope of growing profits as CE price points and product margins continue to erode.

IF there’s no money in selling products, sell the Geeks

Give credit where credit is due.  Best Buy was one of the first to recognize the potential of selling services.  With declining margins and increasing competition from the internet, Brian Dunn’s strategy for Best Buy was to differentiate the experience via “Blue Shirts” staff on the floor.  But, the real payoff was to invest and make money via the “Black Shirts” worn by the Geek Squad performing the tech services most of us consumers don’t understand or have time for.

Best Buy was extremely successful at building a profitable market basket by adding services like installing upgrades and selling warranties with PCs.  They have become exceptionally successful at rolling trucks to your home to deliver, install, and setup TV, home theater and connected home.  In most cases, Best Buy makes far more gross margin $ on the warranty or install than they do selling the product(s) itself.  

If there’s money to be made, competitors will rush in

Even more important than the additional profit dollars from selling the service, adding maintenance and warranty contracts can generate repeat store visits and consumer loyalty to a retailer.  With a contract, consumers come back to get things fixed, viruses removed and to add to their systems.

Retail is the land of copy cats … especially if there are profits to be made. A number of retailers have jumped on the band wagon to install tech benches in store.  Most office superstores now have a tech bench for computer sales.  Even Costco, the no frills club warehouse, started offering a concierge service for large flat screen TVs.  

CE retailers worldwide are adding tech benches to grow market basket and profitability.  Best Buy has taken it a step farther and become a VAR (Value Add Reseller) who is not only serving homes, but installing and maintaining network systems for businesses.

Enter the X factor – Xfinity Signature Support

Best Buy has been beating most of the local competition on services by being able to roll trucks to perform on-site service.  But, there is always an X-factor.  An unknown competitor can rapidly emerge with a new service dimension, which can become a game changer overnight.

Such a game changer might just be Xfinity from Comcast in the US.   Frankly, I was unaware of it because I buy my TV and internet via satellite.  A frustrated friend with computer and TV challenges pointed out to me that they are now using Comcast Xfinity for Signature Support instead of Best Buy’s Geek Squad.

Comcast is a large cable company in the US.  Not only do they deliver TV programming, but once they have the cable “pipe” to your home or business, they can deliver phone and internet services as well.  While the Comcast Xfinity web site is still very product centric, you can now subscribe for a host of personal signature support services through Xfinity to maintain and support your digital world.

To see what my friend was raving about, click on the graphic below to check out Xfinity services:


Why Xfinity might pose a real threat to the Tech Bench

Comcast is a large cable company in the US.  Not only do they deliver TV programming, but once they have the cable “pipe” to your home or business, they can deliver phone and internet services as well.  While the Comcast Xfinity web site is still very product centric, you can now subscribe for a host of personal signature support services through Xfinity to maintain and support your digital world.

Some reasons why Xfinity could pose a major threat:

• They have an 800 phone number!  You can talk to real people when you have a question.
• You have the option to have them fix your computer remotely without having to drag it to a tech bench.
• The offer warranty contracts on both new AND old equipment. If they can’t fix it, they’ll replace it.
• They offer both monthly service plans and one time fixes.
• On-site fixes & services are priced very competitively.
• They integrate service plans as a “small” monthly charge right on your regular bill “digital bill”.
• They offer to be your “digital plumber” for everything in your home … computers, networks, TVs.

Will Xfinity Win the hearts and souls of consumers?

Ok, first challenge.  If Xfinity is to win consumers, Comcast needs to learn how to market and message it on their website.  It is difficult to find unless you are really looking for it.   And, if consumers find and try it, it had better be as good as, or better than the current standard for services out there.  If you promise quality service, you had better deliver … and it better fix the tech nightmare.

For the time being, Best Buy’s Geek Squad probably has a competitive advantage of brand name and installed base.  Comcast is also currently limited to the homes and businesses where it has wired cable, Geek Squad is not.  But, for markets with Comcast cable services, Xfinity could pose a real threat to the tech benches in retailer stores.

The major X Factor to watch for Xfinity is the consumer response to the different home options for acquiring service.  Xfinity offers a range of options not offered by the Geek Squad and other tech benches.  Do you really want to have to drag your equipment into a tech bench if you:

1. You can talk to a real human being 24/7/365
2. Support person can fix your computer remotely
3. They can also roll a truck to install or fix if you choose

Results Count!  Consumers vote not only with their wallet based on prices. The convenience and quality of service is probably more important than price if you can’t watch the World Series or get your email.

Moral of Story:  Best Buy is not dead, but under siege.

 
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Comments

[jennifer callanan]

its america supporting america what is there not to love about it and its green. we don't drive to work.We don't cause traffic jams and hurt the planet.

[Audry Payne]

I love working for Xfinity Signature Support. Not every computer problem will be the same. I help customers select the fastest, most affordable solution to resolve their computer problems without having to charge them for a lot of services they do not need.

[Happy Camper]

I think one major point that was not brought up in the article is that all Xfinity Signature Support Technicians are in North America and speak fluent English.

[Rick]

I love working for Xfinity Signature Support!

[Douglas Alexander Martinez]

XFINITY SIGNATURE SUPPORT. All the WAY! - 24/7 Computer and Home Network Support, By Certified Technicians.

[Dan Campbell]

Proud to be Xfinity Signature Support, to help our customers and keep the computer world easy for all to use.

[Raybecka Smith]

Gotta show support to my job! this is awesome!