Bieber No Steve Jobs as Best Buy Remakes Ads
Until Steve Jobs died, Best Buy co. (BBY)was plotting a familiar course for its Super Bowl ad: hiring acelebrity spokesman.
Then all the tributes poured in after the Apple Inc. (AAPL)founder’s Oct. 5 death, and Best Buy’s U.S. marketing chief,Drew Panayiotou, realized Silicon Valley inventors are today’sstars.
Instead of heavy metal rocker Ozzy Osbourne and teenheartthrob Justin Bieber, who starred in last year’s ad,Panayiotou opted to hire innovators who could personify BestBuy’s selling premise: that no one knows more about gadgets andhow they work together than the chain’s blue-shirt sales force.
It’s a point the world’s largest electronics retailer badlyneeds to prove if it is to compete with the likes of Wal-MartStores Inc. (WMT) and Amazon.com Inc. (AMZN), according to Joe Feldman, ananalyst at Telsey Advisory Group in new York.
“That service side of the business is where they’re tryingto position themselves,” Feldman said Jan. 30 in a telephoneinterview. “The fight they are fighting is against the massmerchants and the online merchants.”
The retailer is trying to attract U.S. consumers enduringunemployment and weak wage growth. Retail sales will advance 3.4percent to $2.53 trillion this year, compared with a gain of 4.7percent in 2011, according to the Washington-based NationalRetail Federation. Best Buy may grow even more slowly, withanalysts surveyed by Bloomberg projecting a revenue increase of2.6 percent in the fiscal year that ends Feb. 25, followed by again of less than 1 percent the following year.
Investors punished the Richfield, Minnesota-based companyDec. 13 after it reported Black Friday discounts aimed atboosting sales also hurt gross margin. The shares tumbled themost in more than nine years and ended 2011 down 32 percent; theStandard & Poor’s Index was unchanged last year. The shares fell5.6 percent to $23.95 yesterday in New York.
Best Buy also took heat during the holiday season aftercanceling online orders on some products after running out ofstock. though the company said cancellations affected less thanone percent of online orders during that time, the backlashspurred Chief Executive Officer Brian Dunn, blogging on BestBuy’s website, to apologize and pledge to fix the misstep.
Best Buy canceled Tom Nenon’s order for a 42-inch Samsungplasma TV, the University of Memphis vice provost and philosophyprofessor said in a telephone interview. The chain offered alesser model or a comparable model for at least $50 more, hesaid. Nenon declined.
CEO Dunn is betting Best Buy can tack on revenue and boostmargins by selling more voice and data plans, damage and lossprotection and accessories to mobile phone buyers.
The market for such “connections” is worth “$150 billionand growing” in the U.S., with Best Buy controlling less than 1percent, Dunn, 51, told analysts Nov. 7. Doubling its sharewould add more than $1 billion in revenue, he said.
Best Buy has trained employees to show shoppers how gadgetswork together. The company is lowering shelves and creatingless-cluttered stores akin to Apple’s retail minimalism. InNovember, Best Buy teamed up with London-based CarphoneWarehouse Group Plc to create a new venture to extend theirsuccess at selling smartphones and related services to otherproducts such as tablets and notebook computers.
“There will be a moment in time when every product we sellis connected to a network somehow,” said Mike Vitelli, anexecutive vice president who took over U.S. operations Jan. 16.he said he’s focusing on basics, such as greeting customers andanswering phones promptly. “We have to make bigger visibleleaps in our customer service,” he said in an interview.
The Super Bowl commercial, airing in the first quarter ofthe Feb. 5 game, will spotlight inventors such as Philippe Kahn,who developed one of the first camera phones. Another is KevinSystrom, who developed a free photo-sharing application calledInstagram introduced on Apple’s app store in 2010.
“They may not be at the same level as Steve Jobs, but theycreated some amazing stuff,” said Panayiotou.
Trading in big names like Bieber and Osbourne for unknownsis a risk, he said.
“Big brands like to hire celebrities,” Panayiotou, 44,said by telephone Jan. 27. “We looked at everyone from George Clooney to Stephen Colbert. we believe the inventors are morethan enough. I give those 125 million viewers a lot of credit. Ithink they’ll appreciate the story.”
The commercial will air during the third nationalcommercial break of the matchup between the New York Giants andthe New England Patriots in Indianapolis. It’s appearing in thesame break as commercials for Anheuser Busch InBev, the maker ofBudweiser beer, and Mars Inc., which plans to introduce a M&Mcandy character named Ms. Brown, according to its website.
Best Buy’s commercial isn’t “intended to be funny,”Vitelli said by telephone Jan. 27. “It’s a statement that thesepeople are inventing technology and what we’re inventing is away to bring that technology to you and make it easy for you.”
Professor Nenon, 60, plans to watch the Super Bowl on hisold television. Nenon said he may shop for a new set this week,though he wouldn’t buy the TV from Best Buy even if it offeredthe best deal. He’s not likely to be swayed by the Super Bowlad, either.
“Which would you believe — your own experience or a paidad?” he said.
To contact the reporter on this story:Chris Burritt in Greensboro at
To contact the editor responsible for this story:Robin Ajello at
Copyright 2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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