Black Friday: Coffee and Doughnuts With Best Buy

I love Black Friday. I don't buy anything on the day after Thanksgiving, but as a student of retail I can't resist the action on the biggest sales day of the year.

And while shoppers suffer temporary insanity at retailers across the country from Target (NYSE: TGT  ) to J.C. Penney (NYSE: JCP  ) , there's nowhere the action gets more intense than at Best Buy (NYSE: BBY  ) .

Last week I had the chance to chat with a senior VP from Best Buy's field operations -- they're the people who run the store side of the business -- and hear his views of Black Friday from the trenches of a Best Buy store. His message was clear -- at Best Buy the day is all about bringing the store to life for the customer.

The preparation
For a Best Buy store manager, Black Friday really begins about eight weeks in advance. At that point each store's product layouts will be determined, staff levels are locked in (on average 100 employees per store, including seasonal workers), and details for the one-day sales are finalized.

Two weeks before Black Friday the stores hold a special weekend sale for Reward Zone customers, sort of a dry run to iron out the kinks and generate excitement among frequent customers. By this time the seasonal employees are hired, and everyone is cross-trained to handle many departments, using wireless headsets to pounce on service bottlenecks.

Coffee? Tea? Doughnut?
Black Friday starts at 3 a.m. for a Best Buy manager, who serves coffee and doughnuts to customers who have been camped out for several hours. Doors open at 5 a.m., with the team of employees giving a rousing cheer to the frantic shoppers.

For the next 17 hours it's pure retail theater. How does a store manager survive the day? The official line is: They learn to have fun with it, one customer at a time. The inside scoop is that a good pair of comfortable shoes makes all the difference.

The hottest items
What will be the hottest items in consumer electronics this season? At Best Buy an early read points to flat panel TVs, notebook computers, portable GPS systems, anything from the Apple (Nasdaq: AAPL  ) iPod line, and gaming systems like the Nintendo Wii.

Selling strategy
As you can expect, the company is tight-lipped about selling strategies. This is likely to be the most competitive holiday season in years, with Wal-Mart (NYSE: WMT  ) initiating slash-and-burn pricing earlier than usual. But the Reward Zone sale was judged a success, and Best Buy knows it has the products on the top of everyone's list.

The company is introducing new twists this year. Customers will now have a uniform length of time to return products that extends through January; product return time frames had been item specific.

Best Buy is also experimenting with an online pickup guarantee. If you buy an item on the website and choose to pick it up at the store, the company will guarantee you will have to wait only one minute to be handed the item, or you get $10 off the price. There are some caveats -- the clock starts ticking when you get to the front of the line at the service desk (which could take a while on Black Friday), and large items like TVs are five minutes.

But overall, this year Best Buy is emphasizing customer service and a superior in-store experience over price as a differentiator. I like the strategy. After having beaten competitors like Circuit City (NYSE: CC  ) into distant also-rans, Best Buy wants to show it is the place to go for value -- which means, in consumer electronics, the retailer has to supply a strong combination of product, price, and service.

Fourth-quarter outlook
The company was hesitant to talk about holiday financial expectations with Q3 earnings not yet released (they're scheduled for Dec. 18). My view is we'll see the glass half full or half empty, based on what is most important.

On the half-full side, Best Buy will do a ton of business this holiday season and gain market share. This will give the company momentum going into next year. Fourth-quarter comp sales will probably be around 5% -- they did 5.9% last year but have been running down approximately a point through the first six months of this year. Most retailers would be thrilled with 5% comps during this uncertain holiday season.

The half-empty scenario is based on earnings expectations. The street is expecting 29% EPS growth in Q3, and 15% in Q4. This is priced into the stock, we presume, and looks like a tall order to me, especially when you consider the company grew EPS 20% in Q4 last year.

But as of today the holiday shopping season has barely begun, so grab some coffee and doughnuts (compliments of Best Buy), and enjoy the ride.

For more views on Best Buy, read:


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