Best Buy by Sutherland Global Services

Consumer Experience Study January, 2012

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Best Buy Customer Experience Study Client • Client is a leading retailer based out of U.S.; as a part of ‘Customer Experience Enhancement’ initiative, client needed to understand the experience of customers for one of its competitors

Project Scope • Key objective of the study was to provide a brief overview of the competitor as well as select financial information. Highlighting customers’ satisfaction and concerns with regards to the competitor’s services was also an added requirement

Sutherland’s Solution • SGS conducted extensive secondary research to prepare the brief overview of the competitor and further deep dived to understand the satisfaction level and concerns of the customers • A ‘Customer satisfaction ratings study’ done by a third party vendor was also used in order to draw comparison across various service and operational parameters • Additionally, voices of the competitor’s customers on social media were captured as a part of the collated report

• Benefits to the Client • The research provided significant and exclusive intelligence to the client with regards to the ‘customer experience’ for the required competitor; and helped the client upgrade its customer service strategy

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Company Overview Company Background

Best Buy Revenue Mix (FY11) – U.S.

About Best Buy • Best Buy Co., Inc. is a multinational retailer of consumer electronics, home office products, entertainment products, appliances and related services • The Company operates in the U.S. (74% of revenue) and in other international markets such as Canada, China, U.K. and other European nations. Its European business is a joint venture between Best Buy and U.K. based mobile phone retailer Carphone Warehouse • At the end of FY11, Best Buy employed approximately 180,000 full-time, parttime and seasonal employees worldwide and generated revenues of $50.2B • The Company operates retail stores and conducts online retail operations under a variety of brand names, such as Best Buy, Best Buy Mobile, The Carphone Warehouse, Five Star, Future Shop , Geek Squad, Magnolia Audio Video, Napster, Pacific Sales and The Phone House

Revenue FY11 - $37.1B Home Office 37%

Services 6% Appliances 5% Other 1%

Customer Electronics 37%

Best Buy Revenue Mix (FY11) – International

About Geek Squad • Geek Squad is the tech support services brand of Best Buy. Geek Squad was acquired by Best Buy in FY03 to provide better tech support to Best Buy’s customers • Geek Squad “precincts” exist at all Best Buy store locations in the U.S., Canada, the U.K. and Mexico • Geek Squad operates a nationwide service center network, headquartered at Geek Squad City, a 165,000-square-foot repair facility in Hillview, Kentucky • Geek Squad’s tech support task force serves consumers in-home, in-store and remotely via Geek Squad Online, and employs 20,000 technicians in the U.S.

Entertainment 14%

Revenue FY11 - $13.1B Entertainment 6% Home Office 55%

Services 9% Appliances 9%

Customer Electronics 21%

Other <1%

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Financial Snapshot Revenue ($ M) & Revenue Growth (%) - 1.3% 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000

0.6%

10.4%

-1.8% 1.2%

12.5%

$45,015

$49,694

$50,272

FY09

FY10

FY11

Revenue

In FY10, a large part of Best Buyâ&#x20AC;&#x2122;s revenue growth was achieved through the organic route. Of the total increase of 10.4% (YoY) in revenue, 5.8% was due to the acquisition of Best Buy Europe and 4.3% was due to the opening of new stores

Operating Income ($ M) & Operating Margin (%) Same Store Sales (Growth %)

20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% -50.0% -60.0%

3,000 2,500

5.0% 4.5%

4.2%

4.5% 4.0%

2,000

3.5% 1,500

3.0%

1,000

2.5% $1,870

$2,235

$2,114

FY09

FY10

FY11

500

YOY Growth

The modest increase of 1.2% in revenue in FY11 was primarily driven by the net addition of 147 new stores and favorable impact of foreign currency fluctuation Declining (or flat) Same Stores Sales of Best Buy indicates that the organic growth of the company has been muted over the past 3 years

2.0% EBIT

EBIT Margin

Operating income margin in FY11 declined from 4.5% to 4.2% despite improvement in the gross profit margin. The decline in operating profit margin can be attributed to the 70bps increase in SG&A expenses as % of revenue

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Best Buy Customer Satisfaction Ratings (1/2) Customer Satisfaction Score – Specialty Retailers (2010)

Online Purchase Intent Score – Specialty Retailers (2010)

Barnes & Noble

Costo

Costco

Barnes & Noble

Staples

Lowe's

Staples

Office Depot

Sam's Club

Best Buy

Lowe's

Home Depot 75

Data from American Customer Satisfaction Index (ACSI) indicates Best Buy’s rating is relatively poor when compared to most other retailers in the specialty retail segment Over the last four years Best Buy’s customer satisfaction score has been consistently below the Specialty Retail category average

Best Buy

OfficeDepot

75 70

HomeDepot.com

82 75

Online purchase intent score measures the likelihood that an individual will purchase from any channel of the store (online or physical transaction) as a result of their website visit.

Purchase intent is an outcome of satisfaction

Best Buy’s low ‘online purchase intent score’ is an indicator of the low customer satisfaction levels for its online customers Best Buy would need to improve its online customer satisfaction going forward as the online channel has become the key influencer of future growth across all channels

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Best Buy Customer Satisfaction Ratings (2/2) Indicative Only Home Appliance Retailer Ratings - 2011 Overall Satisfaction

Company

Store Facility

Sales Staff and Service

Merchandise

Price

Delivery Service

Installation Service

Best Buy hhgregg Lowe‘s Sears The Home Depot

Best Buy’s customer satisfaction ratings in the Home Appliance category is one of the lowest. Its low rating of the ‘Sales Staff and Service’ parameter is indicator of the poor customer service as compared to its peers

Among the best

Over the telephone, staff at hhgregg, Lowe’s and Sears perform well in assessing customer needs, and are more likely than staff at other retailers to ask about the customer’s budget and appliance use habits, which leads to better advice to customers

Better than most

Although revenues from the appliances segment only contribute for ~6% of Best Buy’s U.S. business, the above ratings provide an indication of the customer satisfaction levels at Best Buy across various parameters

About average

The rest

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User Reviews of Best Buy Customer Service (1/2) Indicative Only “I placed an order for a laptop on 12/11/2011 and got an email that it's back ordered. On 12/16 got an email that your order will be cancelled. When I called BestBuy they put me on hold for 15 minutes and was then asked to submit a request online on bestbuy.com a was given a reference#. I haven't heard from BestBuy since then. When I call them I am told that you can cancel your order or wait until they get shipment from the manufacturer” -Anonymous, 12/29/11

Several customers have expressed dissatisfaction about the way Best Buy has managed orders. There have been several instances where Best Buy has cancelled customer orders

“Horrible Customer Service, Please Order elsewhere if you can. I would not, repeat NOT shop here again! I ordered a camera for my daughter, and 2 weeks later after calling several times I got an email saying it is on backorder. I got hung up on twice by Customer Service Agents after waiting 20 minutes to talk to someone live! Frustrating, and Horrible Service! Spend your hard earned money someplace that appreciates it!” - Mel B, 12/19/11

“Yesterday was my first and last customer service experience with BB. I called customer service to order a mobile phone as a gift for store pickup in another state. It toke the first rep more than 40 mins to take the order, the second rep more than 30 mins to correct what the first rep did incorrectly. Then after following their instructions, I found out today that a 3rd party could not pick up a phone. So I cancelled the order and found the same phone, for a reduce price with another vendor.Best Buy needs to train all staffers much better to avoid lost of revenue and bad word of mouth by consumers” - First Now Last, 11/26/11

Several customers complain of long waiting period to get to a customer service agent

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Customer Comments on Social Media Indicative Only

Several instances of customers tweeting about rude customer service experiences at Best Buy

Several customers have tweeted about the dissatisfied customer service experience with Best Buy and several mention they would not shop at Best Buy going forward due to poor customer service

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End of Presentation