Why the #1 Consumer Electronics Retailer Sells on eBay

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Carlson School of Management

Why the #1 Consumer Electronics Retailer Sells on eBay:Augmenting traditional channels at key points in the product lifecycle

Brian HungerfordDirector, Best Buy.comFriday April 8, 2005

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Agenda

> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

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Best Buy Background

> North America's number-one specialty retailerConsumer electronics, personal computers, entertainment software, appliances

> Named Forbes ‘Company of the Year’ (Jan. 2004)

> 7th on Business Week’s annual ranking of best performing companies on the S&P 500 (April 2004)

> Just under $17B market cap> Over 100,000 employees> Over 830 stores (U.S. and Canada)

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Agenda

> About Best Buy> Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

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BestBuy.com

> Established FY 2000> “Our Largest Best

Buy Store”> No. 9 in Internet

Retailer’s “Top 300 Guide”

> Leading online Consumer Electronics destination*

* Source: Netratings/Netview, Feb 05

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Customer Centricity

• Focused,active, younger malecustomer

• Wants latesttechnology &entertainment

• Family manwho wants technology thatimproves hislife

• Practical adopter of technology &entertainment

• Busy suburbanmom who wantsto enrich herchildren’s liveswith technology& entertainment

• Affluent professional

• Wants besttechnology &entertainmentexperience

• Demandsexcellentservice

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Challenges

> Retail stores are primary channel for selling discontinued and end-of-life products

Desire for premium retail floor space to show latest technology.

> Desire to expand customer base in key customer segments

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Agenda

> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

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1998 1999 2000 2001 2002 2003

Global Registered Users(Millions)

> 50 million unique U.S. visitors per month.*

120,000+New Users

Daily

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

125 Million

2004

Why eBay?

* Source: Netratings/Netview, Sept 04

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A Day in the Life of eBay Computers & Electronics

• 92,000 items sold

• 13,200 Cameras & Accessories sold

• 13,000 Cell Phones & Accessories sold

• 7,300 Home AV products sold

• 4,500 Car Electronics products sold

• 3,000 Laptops & Desktops sold

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Best Buy Outlet Store on eBay

> Launched Jan. 2004> New-in-box, but end-

of-life consumer electronics and computers

> Nationwide delivery> Complements retail

and BestBuy.comchannels

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Agenda

> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

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Best Buy Outlet - Benefits

> Faster turnover of end-of-life product

> Less end-of-life product in stores

Sales associates focus on new/high margin itemsStores have a fresher, cleaner look

> Extend Best Buy brand to 125+ million registered eBay users

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Best Buy Outlet - Benefits

> Product selection learnings:

High ASP, low margin products outperform on eBay.Low ASP, high margin products outperform in the retail setting.

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Best Buy Outlet - Benefits

> Customer Satisfaction:

eBay’s feedback score.Fit with Customer Centricity.

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Customer Centricity Surprises

> Expectation of eBay customersMostly price-sensitive bargain huntersWould not fall into desired Customer Segments

> Reality of eBay customersBroadly distributed across all key Customer SegmentsMatch or surpass retail customers in several key Customer Segments

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Who is Buying from Best Buy on eBay?

The eBay channel is a new customer acquisition machine.

IdentifiedCustomers Unidentified (New)

Customers

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Agenda

> About Best Buy> About Best Buy.com> Best Buy on eBay> Measuring Success> Lessons Learned> Q&A

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Lesson Learned / Best Practices

> Corporate "buy-in" is criticalSmall, dedicated team supported by extended cast of internal experts

> MerchandisingAuction space facilitates quick movement of end-of-life productHigh quality product descriptions and content gets it doneHeavily branded

> Customer ServiceTimely customer contactDedicated customer service teamSatisfied customers pay dividends.

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The Future on eBay

> Best Buy OutletServices, other attachments.New, in-market product (primarily as attachments).Market Price Monitoring near end of life-cycle.

> Non-Branded Outlet(s)Open Box and Refurbished Product.

> Technology Trade-InMulti-channel strategy includes eBay.

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Key Partnerships

> ChannelAdvisor

Auction management expertise and software.

> EBay Strategic Alliance

Constantly exploring new strategic opportunities.

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Questions

> Thank You!

Brian HungerfordBrian.Hungerford@bestbuy.com