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Foundational Excellence
Assuring Sustainable and Profitable Growth

December 2008

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Page 1 of 2 Over the past twenty years we have been involved with major retail businesses that through bold and entrepreneurial leadership, aggressive strategies and rapid store front expansion experienced dramatic revenue growth. Each business grew to hold top market share positions in their industry.

In each case rapid top line growth did not result in sustainable or profitable outcomes. Just touching more customers did not lead to profitability. Root causes included a lack of quality people throughout the organization, weak “foundational” processes, procedures and systems, and a priority focus on sales growth at the expense of providing a great employee and customer experience and cost reduction.


Best Buy Company – United States

Best Buy had experienced significant growth, opening 212 stores between 1991 and 1996. In 1997 with over 251 stores and 33,500 employees, annual revenue exceeded $7.2 billion. Many stores had been opened in new markets that allowed Best Buy to serve many more customers. For all this hard work Best Buy achieved 0.02% in net profit ($1.7 million). A poor return for their shareholders and no liquidity to fund future growth.

The leadership group at Best Buy realized that it had to change and clearly understand what they were doing that produced such weak profit performance. The priority was “Change or Die”. The business must be transformed and quickly.

A 3rd party consulting group was hired to evaluate all aspects of their business. The findings clearly showed that Best Buy was missing the “basic foundations” required to grow a profitable business. Best Buy did not have effective systems and processes for category management, a productive inventory management system, little focus on maximizing profitable businesses, inconsistent selling strategies, and no standardized SOPs for retail stores and retail operations.

The resources of the entire company were organized around this “foundational” transformation.

• Basic process and procedure SOPs were developed for assortment planning, pricing, vendor management, competitive awareness
  
  
• Inventory management and demand planning were improved - instock performance and measurement, forecast accuracy, inventory turnover performance, replenishment process, open to buy, and at-risk inventory reduction
  
  
• Strategies for “selling more profitably” were implemented, focusing on warranties, accessories, and baskets. Scorecards were developed to provide visibility to performance and improve results competition among stores and managers
  
  
• SOPs for retail stores in all disciplines were developed and implemented - sales, inventory, operations, merchandising and loss prevention. With over 250 stores, all stores had to do it the same way
  
  
• Under the mantra of “Great people don’t sometimes make a difference, they always make a difference”, the quality of leaders and staff were improved throughout the organization. The training department was strengthened and training became a priority for all managers. Improving the employee experience was an enabler for a top customer experience and achieving top business results
  
  
• In order to differentiate Best Buy from the competition, the customer experience and customer loyalty was improved with better and more highly engaged employees, world class merchandising standards, compelling presentations, quality store leadership and a WOW customer experience