According to the Harvard Business Review, Best Buy is using clustering to move away from a standardized big-box strategy. It has revamped close to 300 of its 700 U.S. stores, introducing "customer-centric" formats to appeal to local shoppers.
The company identified five representative types (consumer persona) of customers. First, there's "Jill," a busy mother who is the chief buyer for her household and wants quick, personalized help navigating the world of technology. In Eden Prairie, Minnesota, the company designed a store that caters to the needs of this suburban moms segment. The company found that this group of previously untapped consumers offered the best opportunity for expansion in the region.
To attract this group, the store has an uncluttered layout with wider aisles and warmer lighting, and technology-related toys for children. Personal shopping assistants educate technology neophytes about products, and there's more floor space allocated to household appliances. Although the store still serves other, more traditional electronics shoppers, the company hopes the store can boost its sales by attracting a set of local customers that have felt overwhelmed inside a Best Buy store.
Other stores are being designed around the remaining four types of customers and are based on local demand patterns. For example, there's "Buzz," a technological junkie who wants the latest gear for entertainment and gaming. Stores catering to Buzz have lots of interactive displays that allow shoppers to try out new equipment and media.
Then there is "Barry," an affluent, time-pressed professional who is looking for high-end equipment and personalized service. Stores tailored to his needs feature a store-within-a-store for pricey home-theater setups.
Stores made with "Ray" in mind emphasize moderately priced merchandise with attractive financing plans and loyalty programs for the family man on a budget who wants technology that can enhance his home life.
Finally, for small-business customers, there's a set of stores with specially trained staffs, extensive displays of office equipment, and mobile "Geek Squads" of service technicians. While the chain plans to phase out these individual names beneath its banner, the terminology helped Best Buy crystallize the vision of each target customer for each cluster of stores.
By customizing stores in clusters, rather than individually, Best Buy has been able to maintain many of the scale economies that have long underpinned its success. So far, the new strategy is delivering strong results. The eighty-five Best Buy stores that had been localized as of early 2005 posted sales gains two times the company's average. Encouraged, the company is accelerating the conversion, with plans to change over all its U.S. stores in three years and localize outlets in other countries as well.