Bear Flag Republic Radio Weblog

Lora Heiny points to Acer talking about what a mistake it would be to get rid of the retail channel.

As part of my "Silicon Valley customer education" I visited a Best Buy in East Palo Alto with Dave Winer. Dave had $3000 burning a hole in his pocket. Well, heating up his Visa card anyway. The Best Buy is literally a mile from Steve Jobs' home in Palo Alto. The center of the technology world. It should be a showcase of retailing excellence.

Here's a hint: Dave walked out without buying anything (and we went to Ikea instead for a meatball lunch).

So, what did Best Buy do wrong? Several things and it isn't just Best Buy.

The retail industry seems to be giving up the fight. Everything inside the store screamed "we know you're gonna buy a Dell anyway." I agree with Acer's chairman. This is a big mistake.

First retail mistake: Letting me close to the merchandise. Why? They didn't have enough choices. When we saw that they instantly lost the sale. Solution: hide all laptops behind a counter where you have to "consult" with a salesperson.

Second retail mistake: No good central place to go to get information and the information we did get was incomplete. For instance, the price tags on each notebook didn't include the weight of the laptops (and, each was held down with a security bar so you couldn't pick it up to see how heavy it was). Solution: have a central place where we can see information on ALL the models in the market (not just the ones Best Buy stocks) and look up anything, including weight, price, etc. (and make it so that Best Buy can at least get us whatever we want, albeit at a premium price. Dave actually wanted to buy from Best Buy. Mostly to get a new computer now, but partly cause it's a national chain and he'd be more likely to get good service when back home in Boston.

Third retail mistake: Having salespeople who weren't empowered over the process. What went wrong? We found an HP model we were interested in. But, the salesperson couldn't turn off the screen saver. Someone else had locked it and this salesperson didn't know the code to turn it off. The salesperson looked incompetent and any confidence we had in the guy eroded fast after that. Solution: empower salespeople with real information and make sure they control every part of the sales process (or, do what Ikea does and get rid of them altogether, but more on that later).

Fourth retail mistake: Having a chaotic space that doesn't lead customers through the sales process. What's the sales process? Well, when I sold cameras I'd start out every conversation with "do you want an SLR or a pocket camera?" I'd get an answer. Then I'd ask "do you want a good one or a cheap one?" Do you see that I'm leading them down a path to a purchase? That's the sales process. The Best Buy didn't even attempt to get me to enter into a process. Solution: hide the stock from the customers and have a consultatative sales process that goes like this:

Salesperson: "Do you want a laptop or a desktop?"
Customer: "I want a laptop."
Salesperson: "Do you want a big screen, or a lighter laptop that you could more easily carry around?"
Customer: "I want a small one I can carry around."
Salesperson: "Do you care about brand name?"
Customer: "Yes, I don't want a Sony or a Macintosh. I'd like an IBM Thinkpad cause that's what all my friends are telling me to get."
Salesperson: "Do you want the ability to use your laptop while standing up, or do you want to read the news while on the couch?"
Customer: "I don't see myself using it while standing up, but I do like to use a computer while sitting on a couch."
Salesperson: "Can you afford more than $2000?"
Customer: "Yes, but most of the systems I've seen are around $1300. Can you give me a reason to spend that much?"
Salesperson: "Do you care about screen resolution or weight more?"
Customer: "I need something that I can take to conferences and carry around all day long."
Salesperson: "OK, here's the three models I think you'd most like. The first is a Toshiba Tablet computer. I picked that because you said you wanted to read on the couch and the Tablet form factor lets you switch the screen around so you can hold it like a book and curl up on the couch like this. The second one is an IBM Thinkpad T-series. Unfortunately we don't carry those here, but I can recommend a partner of ours that can get it. Third is a Hewlett Packard Tablet PC because it's lightweight and fits everything you wanted."

Now, compare that to our experience. We lost confidence right away because Best Buy only had one Toshiba in stock (a Tablet PC) and only two lightweight notebooks (a Sony and the Toshiba Tablet). Plus, the salespeople never entered into a consultative sales process with us. He didn't know the market and couldn't even unlock his own computer.

Now, why is that? Well, when I talk with the folks at retail places I realize that the only way they think they can make the sale is to reduce the price. Funny thing, though. Best Buy has a "bricks and mortar" store. Translation: high overhead. They'll never be able to reduce the price enough to compete with the mail order stores, right?

Well, now we get into IKEA. This store proves that the Internet is not gonna take over retailing anytime soon. This store shows the future of direct retailing. So, what did IKEA do?

First, they fired all the salespeople. Since there was no way to train salespeople to enter a consultative sales process and there's no way to make them efficient enough to get the volumes that low margins dictate, they just did away with them altogether. Dave and my son and I walked through about half of an IKEA and did not see a single salesperson, despite literally passing 1,000 customers in the 20 minutes we spent walking to the cafeteria.

Firing the salespeople reduces cost. Point #1.

Second, IKEA forces customers to go through a sales process. It is nearly impossible to go through an IKEA without walking through the entire store. And, guess what, the process leads you through every part of your home needs (bedroom, bathroom, garage, office, and then to a warehouse, and finally to a cash register).

Third, IKEA has one store for every three million people. There are only two huge stores in the San Francisco Bay Area. Only one for Seattle. Best Buy, on the other hand, has one store for every 500,000 people. In Silicon Valley alone there's three stores (I think, maybe more). That raises overhead. IKEA can have a bigger selection, and less stock, and they are more efficient about moving that stock around.

So, what I am wondering is if we could do an "TechIKEA." In some ways Fry's Electronics tries, but comes up short. Fry's still doesn't have enough selection or enough efficiencies to really make this model sing like IKEA does (Fry's, for instance, has something like half a dozen stores in Silicon Valley alone. That tells me it's vulnerable to someone who comes in with a bigger store, better selection, and lower prices due to lower overhead).

One other thing? Microsoft has to do a better job of getting selection from OEM's into stores. Best Buy in freaking Palo Alto only had only one Tablet PC on the shelf. This isn't Kansas, it's Silicon Valley within a mile of one of the most educated and richest populations in the world. That's inexcusable.

[The Scobleizer Weblog]
comments < 7:46:07 PM        >

Dell pulls some of its support back to the US from India. So much for outsourcing everything, huh?

[The Scobleizer Weblog]
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Thanksgiving Forecast: Potential Fireworks on the Sun. Three sunspots are within striking distance, and one is expected to fix its sights squarely on Earth just as Thanksgiving arrives. By Anahad O'connor. [New York Times: Technology]
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Expedition 8 Commander Enjoys First School Group QSO [ARRL Amateur Radio News]
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I've spent a bunch of time with Scoble in the last couple of days. We went computer shopping on Sunday, and then he came to Stanford Law School yesterday. He has a story to tell about computer retailing and why Best Buy couldn't take the money out of my pocket and give me a shiny new laptop. He was listening, in a way that the salesperson at BB wasn't. And he knows what I want, an Ikea like experience. Make sure I find what I came for. That's hard to do, but that's what it takes. [Scripting News]
comments < 7:40:12 PM        >

Intel's Tiny Hope for the Future. The microprocessor giant is thinking smaller than ever: tiny sensor chips that network with each other -- inside everything on Earth. Wired magazine's Brendan I. Koerner reports. [Wired News]
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