WEBVTT - How Best Buy Survived the Amazon 0:00:04.120 --> 0:00:07.520 Welcome to Business on the Brink, a production from I 0:00:07.680 --> 0:00:14.320 Heart Radio and How Stuff Works. If you avoided crazy 0:00:14.440 --> 0:00:18.320 Eddie and navigated cities of circuits, you would inevitably find 0:00:18.360 --> 0:00:21.000 yourself there. You might consult with the squad of geeks, 0:00:21.120 --> 0:00:24.079 or lose yourself in aisles of electronic do dads and gizmos, 0:00:24.560 --> 0:00:27.560 and Heaven help you if you happen to be wearing 0:00:27.640 --> 0:00:30.560 a blue Polo shirt at the time. This is best 0:00:30.640 --> 0:00:43.680 Buy in Business on the Brink. Hey everybody, I'm Jonathan 0:00:43.720 --> 0:00:46.920 Strickland and I'm Ariel Casting, and today we're talking about 0:00:46.920 --> 0:00:50.279 best Buy. This topic was requested by to Count them 0:00:50.320 --> 0:00:54.000 to listeners Emily Welch and Ryan MacArthur, both employees the 0:00:54.040 --> 0:00:56.640 Best Buy who wanted to hear how the company avoided 0:00:57.080 --> 0:00:59.640 the pitfalls at all these other big tech and big 0:00:59.640 --> 0:01:05.280 box stores. Hit. Yeah, the retail apocalypse that has closed 0:01:05.280 --> 0:01:07.440 down many stores, like we talked about Borders being one 0:01:07.480 --> 0:01:10.080 of them, and Radio Shack. And then there's also a 0:01:10.080 --> 0:01:12.080 circuit city, which I'm sure we'll cover at some point, 0:01:12.160 --> 0:01:14.160 and we'll talk about a little bit in this episode. 0:01:14.200 --> 0:01:16.600 It does play into the history of best Buy. So 0:01:16.680 --> 0:01:19.800 in the age of Amazon and online shopping. Best Buy 0:01:19.840 --> 0:01:23.200 stories pretty interesting, and you could say that the company 0:01:23.280 --> 0:01:28.679 owed its entire existence to a natural disaster. It's a twister. 0:01:28.880 --> 0:01:33.320 It's a twister. It's like Wizard of All. Yeah. Here's 0:01:33.319 --> 0:01:35.319 the crazy thing is that we're making a joke, but 0:01:35.400 --> 0:01:38.800 that's actually true. The reason why best Buy exists, you 0:01:38.840 --> 0:01:44.360 could argue, is largely because of a rogue tornado. How 0:01:44.400 --> 0:01:48.280 many businesses can say that, I mean, usually they don't create. 0:01:48.520 --> 0:01:52.640 Usually tornadoes don't create industry. They destroy industry. They might 0:01:52.680 --> 0:01:56.040 create opportunities for construction, and that's but they rarely, they 0:01:56.160 --> 0:02:01.040 rarely improve a business. Yes, okay, so uh, how did 0:02:01.040 --> 0:02:04.840 best Buy get started? Jonathan? Well, if you look at 0:02:04.840 --> 0:02:08.560 the name best Buy, that dates back to three but 0:02:08.680 --> 0:02:12.000 the history of the company is older than that. It 0:02:12.040 --> 0:02:16.639 actually goes back another twenty years almost, and that history 0:02:16.680 --> 0:02:19.239 really starts in nineteen sixties six. There was a guy 0:02:19.320 --> 0:02:23.320 named Richard M. Schultz, and he also had a mysterious 0:02:23.520 --> 0:02:29.520 business partner. And no, no, I don't. I don't know 0:02:29.520 --> 0:02:33.920 who the business partner was because every article I read, everyone, 0:02:34.080 --> 0:02:40.359 every single one said Richard Schultz and his business partner. Yeah, 0:02:40.400 --> 0:02:43.880 there was never a point where it actually identified who 0:02:43.960 --> 0:02:47.440 that person was. Now, ultimately we could say that name 0:02:47.520 --> 0:02:50.400 doesn't really play into the history of Best Buy that 0:02:50.520 --> 0:02:52.880 much because Schultz would go on and buy out his 0:02:52.960 --> 0:02:56.440 business partner after about a year, so it was pretty 0:02:56.440 --> 0:03:00.680 early on when that business partner was extricated for the business. 0:03:00.880 --> 0:03:03.280 So I guess it doesn't really matter, but it bugs 0:03:03.280 --> 0:03:06.000 me as a researcher. I'm sure when you've researched some 0:03:06.040 --> 0:03:09.240 of these topics, you've encountered similar things where you Yeah, 0:03:09.320 --> 0:03:11.400 I go down a rabbit hole and I spend hours 0:03:11.560 --> 0:03:16.040 trying to find and then corroborate information, Like, uh, we 0:03:16.080 --> 0:03:19.160 recorded an episode on Blastic and I tried to find 0:03:19.160 --> 0:03:21.240 the stork's name, and I could find one article and 0:03:21.280 --> 0:03:24.800 it was uncorroborated, but I spent so much time trying 0:03:24.840 --> 0:03:27.800 to confirm the information. Yeah, that's the level of detail 0:03:27.960 --> 0:03:30.959 and dedication we bring to you to figure out the 0:03:31.040 --> 0:03:34.760 name of a cartoon mascot stork of a pickle company. Anyway, 0:03:35.160 --> 0:03:39.840 let's get back to Best Buy. So, according to the story, 0:03:40.320 --> 0:03:43.640 Schultz would actually mortgage his own home in order to 0:03:43.720 --> 0:03:47.720 get enough money to really get into this business and 0:03:47.800 --> 0:03:50.000 to open up a store, which was at the time 0:03:50.480 --> 0:03:54.600 a stereo equipment store for car stereos and home stereos, 0:03:55.120 --> 0:03:58.920 and he called it Sound of Music. Oh, Jonathan, I 0:03:58.920 --> 0:04:01.360 know who the mysterious part there was. Are you gonna 0:04:01.400 --> 0:04:03.360 say it was Julie Andrews. I was going to say 0:04:03.400 --> 0:04:05.640 a nun named Maria, but save different. Okay, no, if 0:04:05.720 --> 0:04:08.720 neither of those are correct. Uh. The first store was 0:04:08.840 --> 0:04:13.839 established in St. Paul, Minnesota, and within the first year 0:04:13.920 --> 0:04:16.840 of business he he led the company to go ahead 0:04:16.839 --> 0:04:18.839 and make its first acquisition. I guess you go bigger, 0:04:18.880 --> 0:04:20.800 you go home. And in this case it was actually 0:04:20.839 --> 0:04:23.920 a couple of companies called Kincraft Hi Fi Company and 0:04:24.040 --> 0:04:27.760 the Burgo Company. These were other audio equipment companies, guessing 0:04:27.760 --> 0:04:31.479 in a similar area. You know, this was all in Minnesota. 0:04:31.880 --> 0:04:36.000 It was all in the the stereo business arena. Like 0:04:36.080 --> 0:04:38.680 that was all that he was concentrated on for for 0:04:38.720 --> 0:04:41.159 about twenty years. So he was just cleaning up street 0:04:41.160 --> 0:04:45.120 corners at that point. He was just getting the music 0:04:45.160 --> 0:04:50.719 out to the people by selling them the equipment. So uh, 0:04:50.960 --> 0:04:55.119 the Sound of Music store hit hit a good amount 0:04:55.160 --> 0:04:56.760 of revenue in its first year. And I say a 0:04:56.760 --> 0:04:58.600 good amount of revenue. The figure I have in our 0:04:58.600 --> 0:05:01.400 notes is a hundred sixty thousand dollars. But again, I 0:05:01.440 --> 0:05:04.480 just want to be clear here. There are a lot 0:05:04.520 --> 0:05:08.799 of conflicting reports in the sources, and so while many 0:05:08.960 --> 0:05:12.480 of the sources referred to a hundred sixty thousand dollars, 0:05:12.680 --> 0:05:15.680 not all of them did. Some of them had it hires, 0:05:15.760 --> 0:05:17.960 some lower, and it was a private company so it 0:05:18.000 --> 0:05:22.840 didn't have to report. Yeah, so let's just say it 0:05:22.880 --> 0:05:25.400 was doing okay. Now, that was just in revenue. That 0:05:25.440 --> 0:05:28.839 wasn't in profit. You know, obviously your profit is dependent 0:05:28.880 --> 0:05:32.800 upon your product, and stereo comments a decent profit margin 0:05:33.320 --> 0:05:35.120 if you don't mark it up too high, and if 0:05:35.160 --> 0:05:38.719 your retail space isn't that expensive. Yeah, so I don't 0:05:38.760 --> 0:05:41.560 know how profitable the company was, but it was doing 0:05:41.720 --> 0:05:46.560 good business. Uh. And he was pretty aggressive in those 0:05:46.600 --> 0:05:49.680 early days as a businessman. By nine sixty nine he 0:05:49.760 --> 0:05:53.040 had opened two other locations, also in Minnesota, so now 0:05:53.080 --> 0:05:56.720 there's three stores. And around that same time he bought 0:05:56.760 --> 0:05:59.839 out his mysterious partner person whose name we never learned, 0:06:00.320 --> 0:06:03.599 and became the sole owner of Sound of Music. Again, 0:06:03.720 --> 0:06:07.360 the store, not the musical. The hills were not alive 0:06:07.560 --> 0:06:10.359 with radio equipment. No, it's just the stores at this 0:06:10.400 --> 0:06:14.599 point receivers just trampling all over the yes and and 0:06:15.080 --> 0:06:20.680 having adorable songs as they went to bed. So once again, 0:06:21.640 --> 0:06:24.840 the details of the history are pretty sketchy. No one 0:06:24.920 --> 0:06:30.440 was really chronicling the sound of music chain of stores, 0:06:30.480 --> 0:06:33.880 which means that things probably were not going poorly. No, no, 0:06:33.960 --> 0:06:37.280 they weren't. They weren't remarkable, and they weren't terrible. Uh 0:06:37.640 --> 0:06:41.640 sometime around nineteen sixty, nineteen seventy or nineteen seventy one 0:06:41.640 --> 0:06:46.120 this all happened. That's because again reporting is shaky. Yeah, 0:06:46.160 --> 0:06:49.320 and by the end of nineteen seventies, by the end 0:06:49.320 --> 0:06:51.400 of that they had nine stores from three, right. Yeah. 0:06:51.400 --> 0:06:54.640 They continue to grow throughout the seventies, again still focusing 0:06:54.680 --> 0:06:57.960 on stereo equipment. So he keeps on pushing for the 0:06:58.000 --> 0:07:01.920 company to grow. And uh, yeah, he was doing well. 0:07:02.000 --> 0:07:05.240 He had nine stores open. And and this is when 0:07:05.240 --> 0:07:10.640 we get up to this pivotal moment in with the tornado. 0:07:10.720 --> 0:07:13.480 Do you want me to make the noise again? It's okay, 0:07:13.520 --> 0:07:15.160 I think we can just play it back because we 0:07:15.200 --> 0:07:18.600 haven't recorded. Tari can actually insert that wherever she likes 0:07:18.760 --> 0:07:21.360 into this episode. Every five minutes, you're going to get 0:07:21.360 --> 0:07:25.600 a poor tornado sound could be. She seems pretty excited 0:07:25.640 --> 0:07:28.760 about this possibility. We don't know when it's gonna happen, alright, 0:07:28.800 --> 0:07:35.080 So we get this regular old music stereo store. They 0:07:35.120 --> 0:07:38.760 would do commercials and stuff. Schultz would appear on them occasionally. 0:07:39.040 --> 0:07:41.360 Uh you know, they had their little Sound of Music logo. 0:07:42.160 --> 0:07:46.120 And the tornado in question is a truly historic event 0:07:46.360 --> 0:07:49.880 in this part of Minnesota. It's called the har Mar tornado, 0:07:50.200 --> 0:07:53.119 not the Hardy hard tornado, which is what I first 0:07:53.120 --> 0:07:54.680 read when I looked at the next She thought it 0:07:54.720 --> 0:07:57.840 was like a hilarious tornado from the cat's skills or 0:07:57.880 --> 0:08:01.400 something cartoon tornado. No, No, that it's called the hard 0:08:01.440 --> 0:08:06.240 Mar tornado because it really devastated the area around the 0:08:06.280 --> 0:08:09.720 har Mar mall um At. Some other people called the 0:08:09.760 --> 0:08:14.520 Lake Harriet tornado or the Adina tornado, and a tornado 0:08:14.520 --> 0:08:16.600 by any other name would reak just as much havoc 0:08:16.600 --> 0:08:19.440 as Shakespeare once wrote, or would have if you knew 0:08:19.440 --> 0:08:23.960 about tornadoes. So the tornado touched down. Now this I 0:08:24.040 --> 0:08:26.679 have a lot of information on, because when tornadoes happened, 0:08:26.720 --> 0:08:29.320 people really pay attention to. The Weather Service does keep 0:08:29.360 --> 0:08:35.200 decent notes, yes, so on June four, at three forty pm, 0:08:35.440 --> 0:08:38.000 the tornado touched down in Adena, Minnesota, and then it 0:08:38.040 --> 0:08:41.960 began a fifteen mile journey to the northwest. And in 0:08:42.040 --> 0:08:45.280 case you aren't familiar with the way tornadoes travel, we 0:08:45.679 --> 0:08:51.360 live in Georgia, where tornadoes are not uncommon. Tornadoes tend 0:08:51.400 --> 0:08:55.120 to hop right, they'll they'll touch down, they'll travel along 0:08:55.120 --> 0:08:57.240 the ground for a bit. They tend to hop up. 0:08:57.520 --> 0:08:59.760 They might travel another couple of miles and they might 0:08:59.760 --> 0:09:03.040 touch down again. So you can have In fact, we've 0:09:03.080 --> 0:09:06.120 seen this. We've seen neighborhoods that are completely destroyed, with 0:09:06.200 --> 0:09:09.240 the exception of maybe a house where the tornado just 0:09:09.280 --> 0:09:13.880 hopped over. I was actually in a tornado quite a 0:09:13.880 --> 0:09:15.679 few summers back, I want to say, like six or 0:09:15.960 --> 0:09:20.960 seven summers back, and all around me there was destruction, 0:09:21.280 --> 0:09:24.320 but my little community was fine. Yeah. Yeah, that's happened 0:09:24.320 --> 0:09:27.080 a few times in fact, where I was growing up. 0:09:27.120 --> 0:09:32.000 The same thing. Well, Sound of Music's main store, the 0:09:32.120 --> 0:09:34.720 largest store, not their first one, but their largest and 0:09:34.760 --> 0:09:37.960 most popular store, was not so lucky. It was not 0:09:38.320 --> 0:09:41.800 spared this tornado. So it was a store that was 0:09:41.840 --> 0:09:45.000 near this harmar Mall area and by the way, trying 0:09:45.040 --> 0:09:47.760 to say, harmar mall is very tricky for me. You 0:09:47.800 --> 0:09:49.880 can understand why I thought it was hardy hard It's 0:09:49.920 --> 0:09:54.319 just it's easier, fair enough. And the roof was completely 0:09:54.400 --> 0:09:57.800 torn off of the store. It raised the roof, it 0:09:58.080 --> 0:10:00.560 raised it and then threw it away. Yeah, and this 0:10:00.640 --> 0:10:04.400 is a stereo store, like this is still what they're 0:10:04.440 --> 0:10:06.840 selling is stereos. Around this time, they were also looking 0:10:06.880 --> 0:10:11.440 at getting into other electronics, but still really largely stereo equipment. 0:10:11.840 --> 0:10:14.400 And a lot of the stuff was destroyed, but some 0:10:14.720 --> 0:10:16.800 was salvageable. In fact, all the stuff that was in 0:10:16.840 --> 0:10:23.200 the storeroom was water damaged but not completely destroyed. So 0:10:24.520 --> 0:10:28.000 Schultz got this idea. He said, why don't we have 0:10:28.040 --> 0:10:30.240 a fire sale, Except it's not really a fire sale, 0:10:30.320 --> 0:10:33.120 it's a water damage sale. Tornado sale is what they 0:10:33.160 --> 0:10:36.160 would think of it. And they set up a tent 0:10:36.360 --> 0:10:40.120 essentially across the street in a parking lot from the store, 0:10:40.120 --> 0:10:44.560 because of course the store was not structurally ready for 0:10:44.600 --> 0:10:47.640 people to walk through it, so they set that up, 0:10:48.080 --> 0:10:51.600 and a lot of histories will mention that this sale, 0:10:51.800 --> 0:10:55.160 Schultz was talking about offering up the best buys of 0:10:55.200 --> 0:10:58.160 electronics in the area. So that's how he got the name. 0:10:58.559 --> 0:11:00.400 That's the way a lot of the story tell it, 0:11:00.440 --> 0:11:03.520 But to me it sounds like, uh, it took a 0:11:03.520 --> 0:11:07.000 little longer for that to really take effect, Like maybe 0:11:07.160 --> 0:11:09.520 thinking back on these best buys, because they would refer 0:11:09.559 --> 0:11:13.079 to that again, they would make this an annual sale. 0:11:13.440 --> 0:11:15.680 They would have a tornado sale on the on the 0:11:15.679 --> 0:11:19.120 anniversary of the first one in order to try and 0:11:19.480 --> 0:11:24.960 uh recapture the performance of that because the sale did 0:11:25.040 --> 0:11:28.680 really well. Yeah, in four days they made as much 0:11:28.720 --> 0:11:31.760 in sales revenue as they would in a full month 0:11:31.920 --> 0:11:35.600 at that typical store. Yeah, so that's that was enough 0:11:35.600 --> 0:11:37.640 for Shultz to say, like, well, we should definitely do 0:11:37.760 --> 0:11:41.040 this on the reg maybe not with the tornado but 0:11:41.240 --> 0:11:42.959 with the sale, but with the sales. I mean, if 0:11:42.960 --> 0:11:46.080 you can bring in revenue send selling your goods at 0:11:46.120 --> 0:11:49.319 a lower cost, why not. And there's actually a commercial 0:11:49.360 --> 0:11:53.439 that you can find on YouTube from two I believe 0:11:53.480 --> 0:11:56.800 it is where they refer to getting the best buys. 0:11:57.120 --> 0:11:59.320 But this store is still Sound of Music at that 0:11:59.320 --> 0:12:02.240 point it was or they had changed the name. Uh. 0:12:02.400 --> 0:12:05.280 And so again, this is right around the time they're 0:12:05.280 --> 0:12:08.800 starting to get into other electronics, particularly the brand new 0:12:08.920 --> 0:12:14.040 technology known as the VCR, which predates the Blue Blu 0:12:14.160 --> 0:12:16.760 ray and DVD player for those who do not know, yeah, 0:12:16.800 --> 0:12:19.360 and is no longer in production. As of a few 0:12:19.440 --> 0:12:23.520 years ago, the very last factory making VCRs stopped doing it, 0:12:23.600 --> 0:12:26.800 which is unfortunate because my VCR broke a few years back. 0:12:27.800 --> 0:12:30.800 I know, I know some guys over at uh At, 0:12:31.640 --> 0:12:35.200 a VCR repair company in Wisconsin, who could help you 0:12:35.280 --> 0:12:40.000 open nice Well back to your story. Yes, so comes 0:12:40.000 --> 0:12:43.520 around and at this point, partly because they're no longer 0:12:43.679 --> 0:12:47.720 just carrying stereo equipment, but also because they were looking 0:12:47.800 --> 0:12:54.600 at how the sales event was so successful, Schultz decides 0:12:54.679 --> 0:12:57.160 to rename his company. This is when he calls it 0:12:57.240 --> 0:13:00.280 best buy. Um. I mean it makes sense. You want 0:13:00.280 --> 0:13:03.000 to capitalize on the thing that is bringing you success. Yeah. 0:13:03.040 --> 0:13:06.080 And also you no longer want to send people the 0:13:06.120 --> 0:13:10.120 message that the only thing you're selling is music equipment yea, 0:13:10.440 --> 0:13:14.120 or musicals or children or nuns. You don't want people 0:13:14.120 --> 0:13:15.600 to think that those are all the things you're selling. 0:13:15.720 --> 0:13:18.640 But people didn't because the store brought in around ten 0:13:18.640 --> 0:13:21.720 million dollars in sales revenue. Yep, yep. So this was 0:13:21.760 --> 0:13:25.680 where he had changed the names to all the remaining stores. 0:13:25.720 --> 0:13:27.520 At that point there were only seven left, so he 0:13:27.520 --> 0:13:31.240 had built nine, but h Or had established nine and 0:13:31.320 --> 0:13:34.120 now he was down to seven. He made ten million 0:13:34.200 --> 0:13:36.280 in that time, and that same year he would open 0:13:36.360 --> 0:13:41.600 up a new type of store in a place called Burnsville, Minnesota. 0:13:41.760 --> 0:13:45.839 And this was the superstore model. So you know, it 0:13:45.920 --> 0:13:49.160 would jump into a phone booth and change into a 0:13:49.240 --> 0:13:53.440 cape and you know, I was holding back a Burnsville pun, 0:13:54.480 --> 0:13:57.120 but yours was better and worse at the same time. 0:13:57.120 --> 0:14:00.280 But Chells didn't invent the superstore. No, no, this was 0:14:01.280 --> 0:14:04.120 an idea that had been around since the nineteen sixties. 0:14:04.240 --> 0:14:11.600 In fact, the questionable but probable original superstore was called 0:14:11.640 --> 0:14:14.640 thrifty Acres and it was in Kalamazoo, Michigan, which is 0:14:14.679 --> 0:14:18.480 just fun to say it. And also Circuit City, the 0:14:18.600 --> 0:14:22.600 big competitor to best Buy, had established its own superstores 0:14:22.640 --> 0:14:26.000 in the nineteen seventies, so that the best Buy superstore 0:14:26.040 --> 0:14:28.640 idea was not brand new. But they had a different 0:14:28.640 --> 0:14:31.680 approach than Circuit City. Yes, because that Circuit City, Uh 0:14:32.080 --> 0:14:34.120 for you young uns who never win to a circuit 0:14:34.160 --> 0:14:37.800 city in that era, they did things on commission, so 0:14:37.840 --> 0:14:42.200 they had salespeople who would greet customers as soon as 0:14:42.200 --> 0:14:44.360 they came in the door, and they would try and 0:14:44.400 --> 0:14:46.560 find out what the customers were looking for. They would 0:14:46.560 --> 0:14:50.320 answer questions, they would run through demonstrations. They would typically 0:14:50.560 --> 0:14:54.400 steer people to the most expensive version of whatever it 0:14:54.480 --> 0:14:56.440 was they were looking for that they felt like, Yeah, 0:14:56.520 --> 0:14:57.840 just like when you asked what the best thing on 0:14:57.880 --> 0:15:01.240 a menu is? Yeah, yeah, I let me ask you, 0:15:01.280 --> 0:15:05.320 what do you like the nachos or the filet mignon. Well, 0:15:05.360 --> 0:15:07.360 I like the filet mignon and it goes really well 0:15:07.360 --> 0:15:11.000 with this very expensive line. That's very expensive radio. Yeah. 0:15:11.040 --> 0:15:14.040 And they also could I interest you in the radio set? Yeah, 0:15:14.120 --> 0:15:18.120 So circumstany did this commission thing. Also, their stock was 0:15:18.160 --> 0:15:20.920 almost always just in a stock room. They had demonstration 0:15:20.960 --> 0:15:23.840 models on the floor. But you couldn't just pick up something, 0:15:23.880 --> 0:15:26.720 put in a in a cart and then push it 0:15:26.760 --> 0:15:30.680 to a cashier. Instead, you were kind of joined at 0:15:30.720 --> 0:15:34.760 the hip with the salesperson, who, once they had established 0:15:34.920 --> 0:15:39.040 what you wanted, would arrange for a stock person to 0:15:39.080 --> 0:15:41.080 go and get it, and then they would ring you 0:15:41.200 --> 0:15:43.960 up at one of the mini cash registers throughout the storeroom. 0:15:44.120 --> 0:15:46.800 But Best best Buy let you grab your own stock 0:15:46.840 --> 0:15:49.200 and bring it up to a cash register, right, yeah, exactly. 0:15:49.240 --> 0:15:51.280 So it's it's very much in the model that if 0:15:51.360 --> 0:15:53.320 you've ever been the Best Buy, it was like that 0:15:53.400 --> 0:15:56.360 from the beginning, which I mean to me, I personally 0:15:56.640 --> 0:15:59.120 would rather have that because I'm not going to go 0:15:59.160 --> 0:16:01.320 to a store if i feel like I have to 0:16:01.400 --> 0:16:04.240 buy something. But I'm going to go to a store 0:16:04.400 --> 0:16:06.800 if hey, I kind of need something and I want 0:16:06.800 --> 0:16:08.560 to look at options, I'm more likely to buy it 0:16:08.600 --> 0:16:10.560 than if I'm feeling pressured. Not to say that Circuit 0:16:10.600 --> 0:16:14.560 City employees were pressuring you, they were, but they were 0:16:14.920 --> 0:16:17.440 because it's it's sales. It's what sales does, right, Like 0:16:17.520 --> 0:16:21.200 if you've ever bought anything that had someone working on commission, 0:16:21.360 --> 0:16:25.160 because I mean, the incentive there obviously is to make 0:16:25.240 --> 0:16:27.480 the sale, because that's how you make your money, right, 0:16:27.520 --> 0:16:29.600 You're getting money from every sale you make. You don't 0:16:29.600 --> 0:16:32.320 get money from sales you don't make, so you have 0:16:32.400 --> 0:16:34.520 the incentive to try and get that sale to close. 0:16:35.360 --> 0:16:37.400 Best Buy, by the way, at the time, was also 0:16:37.440 --> 0:16:41.040 working on commission sales. They just didn't use the distributed 0:16:41.120 --> 0:16:43.840 cash register model that Circuit City did, which I mean 0:16:43.960 --> 0:16:47.800 means you still might have pushy salesman. But you can 0:16:47.800 --> 0:16:49.800 also be like, no, I'm going to help myself. You 0:16:49.840 --> 0:16:53.800 also have here that best Buy had lower priced items 0:16:54.240 --> 0:16:58.640 in low margin products like near the door. They still 0:16:58.640 --> 0:17:02.000 do today. Yeah, the whole it was let's get people inside. 0:17:02.160 --> 0:17:04.800 That's the important thing. Get them inside, and even if 0:17:04.800 --> 0:17:07.680 they just buy these low profit margin items, you still 0:17:07.680 --> 0:17:09.880 are making the same And because they were a big 0:17:09.920 --> 0:17:12.480 box store, it was successful for them, unlike Radio Shack, 0:17:12.560 --> 0:17:15.160 who tried to put in more random objects into their 0:17:15.200 --> 0:17:17.720 store and it didn't quite fly. Yeah. It never felt 0:17:17.760 --> 0:17:21.719 like the Radio Shack approach had a coherent strategy to it, 0:17:21.760 --> 0:17:25.560 and best Buy had a much more coherent approach. And 0:17:25.760 --> 0:17:28.879 uh yeah. So while other companies were kind of struggling 0:17:28.880 --> 0:17:31.720 with this transition, best Buy at the time was doing 0:17:31.760 --> 0:17:35.400 pretty well. It had differentiated itself enough from Circuit City 0:17:35.480 --> 0:17:37.360 so that the experience of going into a best Buy 0:17:37.440 --> 0:17:40.639 was much more casual. You could see all the stock there, 0:17:41.200 --> 0:17:43.600 you could you know, you could ask questions. But there 0:17:43.600 --> 0:17:45.840 weren't nearly as many sales people on the floor of 0:17:45.840 --> 0:17:48.399 the best Buy as there were at a typical Circuit City. 0:17:48.520 --> 0:17:51.440 So that was what was setting things apart. But this 0:17:51.560 --> 0:17:54.560 was just the very beginning of best Buy, and we 0:17:54.600 --> 0:18:00.200 haven't gotten into how the company would grow exponentially over 0:18:00.200 --> 0:18:03.040 the next few years or what would happen when the 0:18:03.080 --> 0:18:06.080 retail apocalypse sets in. We will talk about that, but 0:18:06.280 --> 0:18:12.840 first we're going to take this quick break, Okay, So 0:18:12.840 --> 0:18:14.720 so Ariel, you know what we could do. We could 0:18:14.800 --> 0:18:18.000 go year by year of everything the best Buy ever did. 0:18:18.119 --> 0:18:20.439 That sounds tedious, Jonathan, it does, and that's why I 0:18:20.440 --> 0:18:23.800 didn't put it in the notes. So really, let's just 0:18:23.840 --> 0:18:26.000 give the super short version of what was going on 0:18:26.600 --> 0:18:30.359 in best Buy joined the New York Stock Exchange. It 0:18:30.680 --> 0:18:34.200 had previously traded as Sound of Music on the NASDAC. 0:18:34.600 --> 0:18:36.840 So now it's moving up in the world of business. 0:18:37.040 --> 0:18:40.840 In nine they stopped doing commission sales, right. Yeah, this 0:18:40.920 --> 0:18:43.640 is where they got rid of commissions entirely. Uh. This 0:18:43.720 --> 0:18:46.600 is also where they would make sure the entire stock 0:18:46.800 --> 0:18:49.680 of the store was on the showroom floor, so they 0:18:50.000 --> 0:18:52.560 they very rarely had very much in a stock room 0:18:52.560 --> 0:18:55.480 in the back. It was essentially convert the entire floor 0:18:55.520 --> 0:18:58.360 space into the showroom. Yes, this was, by the way, 0:18:58.400 --> 0:19:02.439 called their concept too. Yeah, this was where they the 0:19:02.480 --> 0:19:05.240 original superstore was Concept one. This was concept too that 0:19:05.320 --> 0:19:08.760 rolled out, and again they were like they were looking 0:19:08.800 --> 0:19:12.719 at how to maximize the space for the customer and 0:19:12.840 --> 0:19:18.480 to they eliminated even more salespersons, like yeah, because again 0:19:18.520 --> 0:19:24.160 it it put things on the customers, uh kind of scheduled. 0:19:24.359 --> 0:19:27.080 If they had questions, they could ask salespeople about things, 0:19:27.520 --> 0:19:31.400 but they weren't feeling pressured into buying stuff, which I'm 0:19:31.440 --> 0:19:35.040 sure made some companies unhappy. Absolutely it did, because it 0:19:35.080 --> 0:19:38.840 meant that their products weren't being pushed by salespeople super hard. 0:19:38.920 --> 0:19:42.119 So if your whirlpool or your Maytag or you're one 0:19:42.160 --> 0:19:46.120 of these big companies like Sony, you want the salesperson 0:19:46.200 --> 0:19:49.840 to steer people towards your products so that they are 0:19:49.880 --> 0:19:52.000 more likely to buy them, because obviously that's all you 0:19:52.040 --> 0:19:56.000 make your money. And without the commission sales people, that 0:19:56.080 --> 0:19:59.680 was the fear was customers wouldn't go to these big 0:19:59.680 --> 0:20:03.720 ticket items as frequently, and so some of these companies said, well, 0:20:03.720 --> 0:20:06.639 we're just going to take our refrigerators and washers and 0:20:06.680 --> 0:20:10.280 dryers and we're gonna go home fully on them. Yeah, 0:20:10.400 --> 0:20:13.200 it didn't last long because the concept two stores ended 0:20:13.280 --> 0:20:16.119 up being immensely popular and it turns out that if 0:20:16.160 --> 0:20:18.679 everyone's going there, that's where you got to put your stuff. 0:20:19.000 --> 0:20:22.359 So the companies came I won't say crawling back, but 0:20:22.440 --> 0:20:25.520 they did come back. We also got the yellow tag 0:20:25.560 --> 0:20:28.160 Wogo around this time. Yep. That's when Best Buy would 0:20:28.240 --> 0:20:32.439 adopt that, and the company hit a billion dollars in 0:20:32.480 --> 0:20:39.080 sales revenues in and by it was only behind Circuit 0:20:39.160 --> 0:20:41.840 City in the electronic retail market. And remember a Circuit 0:20:41.880 --> 0:20:46.720 City had been doing all electronics for longer and had 0:20:46.760 --> 0:20:50.280 been more entrenched in that particular market. So this is 0:20:50.280 --> 0:20:53.040 pretty good. Yeah, Now they weren't content just to stick 0:20:53.080 --> 0:20:55.000 with that and and write it out as long as possible, 0:20:55.000 --> 0:20:58.879 because we got the Concept three store, yes, which is 0:20:59.560 --> 0:21:02.520 Concept two but more bigger. As I wrote, Yeah, this 0:21:02.680 --> 0:21:05.600 was where they introduced demonstration areas. If you ever went 0:21:05.640 --> 0:21:07.479 to a Best Buy where they had like the theater 0:21:07.640 --> 0:21:10.200 room where you could sit down and listen to your 0:21:10.200 --> 0:21:14.960 ears get assaulted by whatever usually was the matrix, I 0:21:14.960 --> 0:21:18.080 think that was almost always on h Yeah, that was 0:21:18.119 --> 0:21:23.200 that was those concepts, and then beyond that you would 0:21:23.200 --> 0:21:26.959 get Concept four stores in they were slightly smaller than 0:21:27.000 --> 0:21:29.919 Concept three stores, and they also put cash registers throughout 0:21:29.920 --> 0:21:32.200 the stores, kind of like Circuit City did to distribute 0:21:32.200 --> 0:21:34.320 the points of sale, but you could still bring your 0:21:34.400 --> 0:21:37.120 items to that cash register. Yes, yes, so you could 0:21:37.160 --> 0:21:41.520 have a cash register dedicated for a particular section of 0:21:41.600 --> 0:21:44.119 the best buy. So for example, if you were shopping music, 0:21:44.240 --> 0:21:46.560 or you were shopping you know, camera accessories. I think 0:21:46.560 --> 0:21:48.399 you still sort of can if like if you go 0:21:48.440 --> 0:21:50.600 and you buy a phone. Yeah, it all depends on 0:21:50.680 --> 0:21:54.159 the best Buy and it depends on which blayout it follows, 0:21:54.160 --> 0:21:56.520 but yes, you still can do that. And and during 0:21:56.520 --> 0:21:58.960 this time they were also opening up new locations in 0:21:59.040 --> 0:22:03.840 various markets, including international, uh partially through I read one 0:22:03.920 --> 0:22:07.800 article it says that partnership with Microsoft helped them expand internationally. 0:22:07.880 --> 0:22:10.280 Some Yeah, that was a big deal, was their their 0:22:11.040 --> 0:22:13.240 partnership with Microsoft. That was also seen as a big 0:22:13.280 --> 0:22:16.160 deal just in the industry in general, because here's Microsoft. 0:22:16.160 --> 0:22:19.120 It's just an enormous company making a deal with a retailer. 0:22:19.160 --> 0:22:20.960 I mean that was that was a big deal. That 0:22:21.040 --> 0:22:23.840 was a big Yeah. And then they also bought Magnolia 0:22:23.920 --> 0:22:25.240 Hi Fi. So now you could sit and have your 0:22:25.280 --> 0:22:27.480 ears assaulted by the Matrix, but you couldn't see what 0:22:27.600 --> 0:22:29.639 was assaulting your ears because it all looked like rocks 0:22:30.119 --> 0:22:35.760 or tables. Okay, we're going to ignore that. Best Buy then, 0:22:35.960 --> 0:22:38.480 in two thousand and one had one of its what 0:22:38.520 --> 0:22:41.280 people would in retrospect would call missteps. They bought a 0:22:41.320 --> 0:22:45.119 company called music Land Stores Corporation. And this was a 0:22:45.119 --> 0:22:49.840 company that had several different retail stores under its ownership 0:22:49.920 --> 0:22:52.399 that would operate typically in malls. So there are a 0:22:52.440 --> 0:22:54.800