Best Buy and the birth of customer centricity

Over the last several months, I have been asked to provide a perspective on the history of omnichannel. I'm a history buff. And I strongly believe that we should remember the past in order to better learn its lessons. So, as we begin our omnichannel journey in 2015, it actually is probably a good time to look back at where this all started.

Many people think that omnichannel started in 2007, with the introduction of the iPhone. But actually, for retail, the iPhone introduction was a non-event. I mean, sure, retailers scrambled to figure out what it would mean for them, etc., etc., but in the end, in 2007, the net impact of the iPhone on shopping behaviour was zero. It was too soon to tell.

No, for me, omnichannel starts way back in 2003. And one of the reasons why it's important to go back that far is because I think a lot of people forget or lose sight of the fact that omnichannel didn't begin as omnichannel, or even cross-channel. It began as customer centricity. And the retailer who should get credit for putting customer centricity on the map is Best Buy.

In 2003, that retailer was struggling. They had been pounded by Walmart, and had sort of withdrawn into themselves at the time to figure out how to compete. I remember this well, because I was at StorePerform at the time, and our solution was playing a pretty big roll in the rollout of their customer centricity initiatives in stores. So I had somewhat of an inside view, though I'll temper this article with a caveat: this is my interpretation of events, and may not be the way that others, more directly involved, remember it. But I'm looking at it with the 20/20 of history on my side.

Best Buy's internal assessment involved bringing in the authors of the book Angel Customers & Demon Customers, which basically said that businesses need to focus on their good customers and get rid of their bad customers.

As far as I can tell, Best Buy swallowed this concept whole-hog. And if you look at press from that time, what you'll find is a lot of hyperbole about how Best Buy was going to fire all their so-called bad customers. Personally, I felt that treatment wasn't fair. I think the company even had to come out and say that they weren't really going to fire customers. They just weren’t going to treat bad customers (i.e., expensive ones – cherry pickers, serial returners, etc.) with the same degree of engagement or preference as they planned on treating their best customers. What got lost in all of that flap and bad publicity was the real message.

Omnichannel = customer centricity

Best Buy had figured out that they weren't going to beat Walmart on price. And so they needed to find a different way to compete. They concluded in 2003 that they would be far more successful if they focused on the customer experience. The way I heard it put at the time was, "Walmart will never staff enough people in their electronics department to be helpful. So instead of competing on price, we need to be where Walmart will never go."

But the company was also seeing an interesting trend online. By 2003, the retail land grab for eCommerce real estate had already come and gone. And some retailers were starting to see online purchases that were growing beyond "maybe the equivalent of a large store". Best Buy and its competitors were particularly impacted because they sold a lot of goods that you didn't really need to touch or feel in order to buy. In fact, electronics was the first category of retail good to achieve rapid growth in online-only sales. Electronics are ultimately about specifications – how many megapixels is that camera? – and you certainly don't need to touch a box of Quicken software to make that purchase decision, even in an age before digital downloads.

So, just as Best Buy was trying to figure out a strategy to compete with Walmart, they were rapidly becoming aware that they were maybe focused on a time that had already passed by. Online was going to become more important to consumers, and not just as a virtual store. In order to be successful in that new world, Best Buy was going to have to be more flexible. And that was where customer centricity was born – in a cradle of cross-channel commerce.

Best Buy's idea for how they would execute this was visionary. I mean, it was only 2003, people! We're still talking about how to make that vision a reality today. They envisioned a future where the customer is at the centre of the enterprise, and everything that the retailer does is (forgive the tech terminology) component-ised, so that a customer could essentially build their own path to purchase by assembling from the various product and service offerings that Best Buy offered. And they viewed that path to purchase as everything from researching products to post-sales service and support. They called it "co-creation" or "assembled commerce".

Now, you can make an argument for whether Best Buy stuck to this strategy over the last 12 years. And I would argue that there have been distinct places where they lost their way (the states' attorneys general lawsuits over fake prices on in-store versions of the website comes to mind).

But regardless, in 2003, the company discovered a core tenet of omnichannel, one that often gets overlooked today. And that is that at the heart of omnichannel is customer centricity. You can't do one without the other. Much of the current struggle to implement omnichannel initiatives, I believe, comes from retailers trying to preserve their current product- and channel-centric business models. Retailers who find themselves in this predicament are not going to survive the transition to customer-centric. It's happening with or without them, driven by consumers themselves and how they shop.

So that's Lesson #1 in what you can learn from omnichannel history: You can't be omnichannel without also being customer centric. Stay tuned for Lesson #2!

This article originally appeared as 'The History of Omnichannel – Part 1' on The RSR Research website. It is reproduced with the organisation's permission.