Salesman Travis Vaughn, right, shows Danny Renaudo laptop computers at the redesigned showroom at the Best Buy store in Westminster, Calif. Best Buy Co. has applied for a permit to a build a second store on Oahu, even though its first hasn't opened yet.
One store isn’t
enough for Best
Buy on OahuThe electronics retailer has applied
for a permit to build a second store
In an unprecedented move for Hawaii's big-box retailers, Best Buy Co., the nation's largest electronics chain, has applied for a permit to build a second isle store before opening its first.
If permits are approved, the big-box retailer would build a store in Iwilei on 4.8 acres owned by Castle & Cooke Inc. The site is at the corner of Alakawa Street and Nimitz Highway near Costco and Home Depot.
The addition of another Best Buy would bring new competition to the local electronic and personal computer market dominated by Circuit City and CompUSA. Real estate experts have also said the move could cause the regentrification of Iwilei's surrounding residential neighborhoods as development makes the area more attractive to buyers who are looking for the convenience of owning property in Honolulu's urban core.
Representatives with Minnesota-based Best Buy declined to confirm they are seeking an Iwilei store, but said the company will be making more leasing announcements in June. Bob Urquhart, a Castle & Cooke vice president, also declined to comment on any possible real estate transactions regarding the property, which is the last undeveloped site in the Dole Cannery area.
Bringing a Best Buy to Iwilei is an ambitious project that will draw other businesses and more customers to the area, said retail consultant Stephany Sofos.
If the store gets built, it will mark the first time a big-box retailer has built two stores in Hawaii at the same time, Sofos said, adding that most retailers like to test the market first.
"It's very ambitious; they must anticipate being able to capture their market place quickly," she said. "It's risky, but if it works, it will be tremendously successful."
Construction on the big-box retailer's first Hawaii store has started near the Pearl Harbor shoreline in Waimalu. Best Buy plans to open the store near the end of 2005, said Jay Musolf, Best Buy spokesman.
The 50,000-square foot store will be built on Kamehameha Highway in Aiea at the site of the former Tony Honda dealership, which was demolished. About 150 people will be employed at the store, which will cost between $8 million and $10 million to build and will include 260 parking stalls.
Best Buy operates 614 stores in 48 states, and offers a complete line of consumer electronic products, personal computers, cameras and appliances. The company also sells products through BestBuy.com.
There's no reason to think the fast-growing company won't find success in Iwilei, Sofos said. Americans love value shopping, particularly Hawaii's residents, who need good bargains to offset high living costs.
There's also a precedent for big-box success on the islands, Sofos said. Consumer traffic in Iwilei has been improving steadily since Signature Theaters, Costco, City Mill and Home Depot joined the once-failing Dole Cannery retail and office project, she said.
"We are seeing a trend of big-box value retailers concentrating in one area. It will create synergy into the marketplace and will pull the marketplace," Sofos said. "One big-box brings people to an area, two brings more, but three or four changes everything. It's now going to be a viable retail area."
Dole Cannery, which opened as an outlet mall in 1996, has struggled to find tenants and shoppers. The retail and office complex was too far off the beaten path to attract tourists and it didn't have enough to offer Hawaii's kamaaina shoppers, said Jeffrey Hall, director of research at CB Richard Ellis
"Best Buy's interest shows that there is a future in Iwilei. It should change Iwilei into a retail area instead of an old, dirty industrial area," Hall said.
If Best Buy opens a store in Iwilei, it can't help but improve retail property values as more businesses try to attach themselves to anchor tenants.
"If I was going to do something, I'd want to be near those guys even if I was just rolling around a hot dog cart," Hall said. "This is going to change the market by making Dole Cannery viable again."
It's also likely to increase land values in Iwilei and bump up rents, said Jeff Nasarallah, director of Research at Grubb & Ellis CBI Inc.
BACK TO TOP |
Best Buy beginning
a proactive overhaul
LOS ANGELES >> Best Buy is making a pre-emptive strike -- it's giving itself a makeover before any problems have a chance to develop.
The nation's largest electronics retailer is changing its marketing strategy and spending $50 million to redo its stores, trying to ensure that it will continue to hold off its competitors -- not longtime rivals like Circuit City, but a raft of newer players in the electronics market: Wal-Mart, Dell Inc. and eBay.
Best Buy has begun construction on its first Hawaii store, in Pearl City, and has applied for building permits for a second, in Iwilei.
Company president Al Lenzmeier has noted that in the past, the retailer's big changes came when it was struggling; this time it's anticipating, not reacting to, a changing marketplace. This time, he said, the competition is "much more formidable."
Consultant George Whalin said it makes sense for Best Buy to worry more about Wal-Mart, which is getting more involved in electronics retailing, and less about Circuit City.
"The competitors are a diverse lot today, and for them to continue to grow they're going to have to get much better at everything they do, and define themselves in clear ways," said Whalin, of Retail Management Consultants. "And I'm sure that's what this is all about."
Best Buy's plan is to revamp its stores according to the types of customers they serve, a strategy it calls customer centricity. The company came up with five prototypical customers, all of whom have been given names: "Jill," a busy suburban mom; "Buzz," a focused, active younger male; "Ray," a family man who likes his technology practical; "BB4B" (short for Best Buy for Business), a small employer; and "Barry," an affluent professional male who's likely to drop tens of thousands of dollars on a home theater.
Over the next few years, each of Best Buy's 608 stores will focus on one or two of the five segments, with 110 stores scheduled to make the switch by February. Best Buy began testing the new strategy about a year and a half ago, eventually trying it at 32 stores.
Best Buy showed off one of the new stores in the Los Angeles suburb of Westminster earlier this month. While much of the store looked like any other Best Buy, its home theater and computer sections were tailored toward the two types of customers this store focuses on -- "Barry" and "BB4B."
The store converted its old speaker display room to several model living rooms. In one, a laptop computer balanced on the arm of an overstuffed leather couch, which faced a plasma screen TV and a surround-sound system. Home theater manager Ryan Markell told of one "Barry" customer who walked in and said, "I'll take it." The man paid around $28,000 for all the equipment in the room, plus $2,000 for at-home installation, Markell said.
Best Buy stores that focus on the "Jill" segment have play areas for kids. Instead of a booming bass beat, the soundtrack at "Jill" stores is instrumental, or children's music.
Another part of the customer centricity project transforms the usual roles for employees -- they're now required to help analyze sales, overtime and other figures and suggest ways to improve them.
Employees begin their day by reviewing the previous day's figures, which are written on a dry-erase board and compared to the previous month. At a Westminster store meeting open to the media, Chris Smith, an operating supervisor, pointed out that the store had $550 in overtime costs the previous day, and asked employees to suggest ways to reduce it.
Another manager noted that the proportion of customers making a purchase dropped over the lunch hour, probably because more Best Buy staffers were taking lunch breaks. An employee suggested staggering lunch breaks.
"We invented this to keep controllables down, and so far it has worked," Smith said of the process.
During the busy fourth quarter, which includes Christmas, same-store sales at the 32 test stores were an average of 7 percentage points higher than other Best Buy stores. The number of customers who bought merchandise rose 6 points. Selling expenses were also higher at those stores, but the company said it expects to fix that as the concept moves to more stores.
Several analysts said the new approach, if it works for the long term, would help Best Buy lock in a lead over competitors. The company had $24.55 billion in sales in its last fiscal year, more than twice those of its closest competitor, Circuit City.
"There's nobody in the category that's doing this," said Steven Roorda, an analyst with American Express.
Roorda said he didn't know of any other retailer that has put as much decision-making power in the hands of its employees as Best Buy is proposing to do. "It just flips the whole organizational structure upside-down," he said.
