How the Geek Squad Could Be Best Buy’s Secret Weapon

6 minute read

The first to fall under the Amazon steamroller were the bookstores. Then fell the music retailers like Tower Records, back when most people listened to music on CDs. Along the way, the big electronics chains began to find themselves struggling too. Doing business in one of Amazon’s core markets has long been a serious work hazard.

One big retail chain has been holding its own in the age of Amazon. It’s not the Good Guys. It’s not CompUSA. It’s not Radio Shack – each of these are either on the tarp or on the ropes. But Best Buy has seen its stock rise 174% since early 2012, more than three times the performance of the S&P 500.

Back in 2012, Best Buy was looking especially vulnerable. Not only were its brick-and-mortar stores seen as liabilities in an era of e-commerce, but many customers were visiting them simply for “showrooming” – that is, trying out TVs and other gadgets at the store before going home and ordering them from Amazon. It didn’t help that Best Buy’s customer service had a bad reputation. And even worse was the news that company’s CEO resigned amid charges of improper conduct.

To fix things, Best Buy hired Hubert Joly, a veteran of the media and travel industry known as a turnaround artist. “Best Buy had an all-you-can-eat menu of challenges – operational challenges, leadership challenges, shareholder challenges,” Joly says. “It was one of the things that attracted me. I felt there was enough here to turn the situation around.”

Joly set out to cut expenses while improving staffer training. But the question remained of what to do about Amazon, and here Joly made some bold and creative moves. To combat showrooming, Best Buy vowed to match Amazon’s prices, giving its sales staff a decent shot of closing sales before customers could get back to their laptops. With price matching, Joly says, “once people came into our stores, they were ours to lose.”

But what about all those brick-and-mortar stores, which are often seen as liabilities in the era of e-commerce? Joly realized they could actually be turned into assets. For one thing, gadget makers needed a place to let users try out their goods, so Best Buy partnered with them to create mini-stores inside its retail space. Companies from Apple to Sony now have such setups inside Best Buy locations.

More ingeniously, Joly turned each Best Buy store into a fulfillment center, capable of shipping online orders in hours rather than days. After all, 70% of the U.S. population lives within 15 minutes of a Best Buy store. “That gives us a huge advantage in terms of direct-to-customer shipments,” Joly says. The tactic is gaining traction. Last quarter, Best Buy’s online sales grew by 24% year-over-year.

Joly not only pulled Best Buy back from the brink, he turned the company into a viable competitor in the cutthroat retail industry. But such is the intense competition of the space that no turnaround can rest on its laurels for long. Especially during a period when smartphone sales are tapering off, when TV prices are being commoditized, and when there doesn’t seem to be another must-have device on the horizon.

Best Buy’s share price has flatlined over the past year. Despite the rise in online sales, its same-store sales were flat last quarter, although better than the 2% decline the company had expected. Analysts who had championed the stock have been growing more cautious.

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Citigroup, Deutsche Bank and Credit Suisse have downgraded the stock from buy to hold. Some expressed unease around the departure of CFO Sharon McCollam, a key player in Best Buy’s turnaround and an executive Joly has called his co-pilot. McCollam’s successor is Corie Barry, a 16-year veteran of the company that Wall Street is welcoming as a promising successor. “One of the things I give Sharon credit for is how she has picked and groomed Barry going forward,” Joly says.

The bigger question remains: what new strategic moves can Best Buy make to generate growth? The Wall Street downgrades reflect skepticism on that front. But Joly says he has a plan. And again, the answer is one you were probably not expecting: the Geek Squad, Best Buy’s answer to Apple’s Genius Bar — only these geniuses will drive to your home.

This spring, Best Buy upgraded its “Geekmobiles” from VW Bugs to Priuses. The move echoes Joly’s ambitions for its customer-support staff, which, true to the Joly playbook, has turned what was once a potential liability for Best Buy into one of its most promising assets.

“Technology continues to innovate,” Joly says. “But there is a growing gap between what the technology can do and our ability to understand it. And that can be overwhelming.” Joly envisions the Geek Squad doing for consumers what an Accenture consultant does for companies. Or, for that matter, what Pottery Barn does for interior design. Connected home not connecting? Home theater not performing? Home security cameras beyond your ken? The Geek Squad will sort it out.

“The best place to have these conversations is inside your home,” Joly says. “It doesn’t need to be a big problem, but we want to build a relationship over time. So if you want help with not just an individual product but a whole system, of if you want ongoing maintenance, we can do that.” To the degree that the Internet of Things and the connected home moves from the early adopters to a more mainstream market, Best Buy sees this in-home advisor business growing more essential.

Importantly, this is something Amazon isn’t so well positioned to try. And if Best Buy can turn its Prius-powered Geek Squad into an IT department inside enough homes, it can secure another area of steady growth. And another bulwark against Amazon. “It’s not a zero-sum game. There will be several winners, and I intend for us to be one of them,” Joly says. “We have a unique set of cards to play.”

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