Best Buy to expand high-tech market

Friday, September 27, 2002

Steve Maxcy is hoping for a lot of wide eyes and open wallets today as area shoppers get their first look inside Best Buy, Cape Girardeau's newest place to buy high-tech toys like TiVo, satellite radios, MP3 players and more.

"I think people will be impressed," said Maxcy, 50, the store's general manager, who has worked for Best Buy in St. Louis for a year and had been the manager for Kmart in Sikeston, Mo. "We really do have everything imaginable."

Best Buy, the country's largest consumer electronics chain, opens today at 10 a.m. at 3026 William St. Before today's opening, the nearest Best Buy location had been Carbondale, Ill.

Sharing the market

Circuit City is Best Buy's biggest competitor, on a local and national level. Cape Girardeau's Circuit City manager, Paul Wilson, said there's no reason for his store to panic.

"I don't think so," he said. "I'm looking forward to the competition. There's a wide area to draw from and we think there are enough customers for everybody."

In fact, Wilson said, market studies done by Circuit City have shown that in cities where Best Buy comes in business actually picks up.

"There's lots of cross-shopping," Wilson said. "They want to see what both stores have. So the way we look at it, there's no reason to be worried about them coming in."

But a generally lackluster economy has given Best Buy and other retailers a basis for concern.

It was announced last week that Best Buy Co. Inc. has put international expansion and acquisitions on hold for 18 months, citing a 27 percent drop in its second-quarter earnings. The company announced it is cutting costs amid a period of sluggish consumer spending.

"We recognize the results we reported are disappointing, and that the challenges facing us are not small," vice chairman and CEO Brad Anderson told a group of analysts last week.

To build profitability and market share, Best Buy will focus on selling popular home theater, video gaming and digital products. The company, Anderson said, has frozen hiring at its corporate offices, but won't reduce staffing levels or the pace of new store development.

In fact, Anderson said, the retailer expects to open 70 stores this fiscal year, which is 10 more than they had originally planned.

"We believe this will put us in a strong position for the holidays," Anderson said.

Expecting increase

Overall, Best Buy expects flat sales in the second half of its fiscal year. Best Buy posted net earnings of $62 million, or 19 cents a share, for the second quarter ended Aug. 31. But for its total fiscal year, Best Buy continues to expect total sales to increase 17 percent to nearly $23 billion.

The 30,000-square-foot Cape Girardeau store features Best Buy's latest interior design -- set up in a circular manner -- with wider aisles and demonstration areas to try CDs, DVDs, computer software and video games.

"You won't find any 'please don't touch' signs in here," Maxcy said.

Best Buy has hired 117 people to work at the store, including four assistant managers and 12 supervisors. Ninety percent of those are local hires, Maxcy said, and all of them have gone through three to six weeks of training to become knowledgeable about the merchandise.

The store is one of the company's new small-market operations being tested in towns with populations under 125,000. The store is about 15,000 fewer square feet than big-market stores.

Maxcy said that the local store has everything a larger Best Buy would have, but they just have smaller quantities.

Unlike many stores, Best Buy's salespeople do not work on commission and instead draw a salary. That means that the salespeople are there to explain how gadgets work and to answer questions. The products will sell themselves, Maxcy said.

With Circuit City already here, as well as Radio Shack and other stores that have some electronics, Maxcy said it's the service that will set Best Buy apart.

"We will have a high customer service level," Maxcy said. "We're knowledgeable about our merchandise and we treat our customers well."

Maxcy said the chain has also done a demographic study that shows the Cape Girardeau area is a good market.

"We want to be a good member of the community, but we also want to do well from a business sense," Maxcy said.

Chamber of Commerce president and CEO John Mehner said that, locally, Best Buy should have a positive impact on the economy.

"Best Buy is a recognizable name," he said. "It could draw people to town who might otherwise not come here. Then they could shop at other places too. But once they're here, it's up to everybody else's marketing technique to draw them into their stores."

Based in Minnesota, Best Buy was founded in 1966. They have more than 500 stores.

The Associated Press contributed to this story.

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