Best Buy takes on fitness with expanded 40-store rollout

The blue-shirts and technology geeks of Best Buy are coming to fitness.

Known for its customer service, staff training and support team called the “Geek Squad,” Best Buy (NYSE: BBY) has expanded a recent five-store test of a health and fitness department with equipment, accessories and electronics to 40 stores. For now, those are in eight states, including Arizona, Colorado, Iowa, Maryland, Massachusetts, Nebraska, New Mexico and Texas.

Best Buy’s interpretation of “fitness,” however, goes beyond equipment such as treadmills and ellipticals. The assortment also includes swimming, yoga, Pilates and conditioning accessories, plus health and fitness monitoring equipment such as scales and blood pressure monitors, as well as electronics such as watches, GPS devices, headphones, pedometers and MP3 accessories. All of that segues smoothly into its own consumer electronics, including TVs, computers, DVD players, monitors and other equipment someone may need to set up a home health and fitness area.

Brands included at this point, per the statement issued Nov. 11 by Best Buy (www.bestbuy.com), are Lifespan, ProForm, Reebok, Timex, Polar, Garmin, Sportline, GoFit, FINIS and Gaiam.

Although Best Buy has not yet committed to a full-chain expansion, the stores so far included in the larger-scale test are showcasing the fitness section in “prime real estate,” Paul Goldberg, vice president of sales for GoFit, told SNEWS®. He noted consumers won’t have to search to find the area in a store as Best Buy has positioned it on major passage aisles, arranging product mid-store as well as on end caps and kiosks. A Best Buy statement said that more than 30 feet of space was organized by activities such as walking, yoga or swimming, although not all locations have large equipment at this point. But the stores that do have the equipment, so far from Lifespan, Reebok and ProForm, have it also positioned where it can’t be missed next to major aisles.

“Consumers will see health and fitness right in their face,” Goldberg said. “It’s clear this category is meaningful to Best Buy. They are invested.”

Development

At the 2008 Health & Fitness Business Expo, representatives from Best Buy apparently cruised the show floor, cold-calling on brands, apparently having done their homework, brands told SNEWS. Soon afterward, the Minneapolis-based company began testing fitness in five stores of more than 1,040 Best Buy stores in the United States. (The company has more than 2,870 stores outside of the United States, including Europe, Canada, China and Mexico, per its latest SEC 10Q filing.) Executives then made the commitment to this larger 40-store expansion. Most of the equipment was in place in stores by mid-October, when training by the brands represented began, SNEWS was told.

Click here to see the fitness section on the Best Buy website.

The first full-page newspaper ads with the equipment will run Nov. 15 in Best Buy’s thick, weekly ad booklet, although smaller-scale advertising has run in the targeted areas in the last two weeks, Goldberg said. Best Buy was not available for comment.

“We’re constantly looking for the most innovative solutions to address our customer’s lifestyle needs,” Steve Trier, Best Buy senior director of customer research and development, said in a statement. “Customers expect quality, selection and service from Best Buy, and with health and fitness, we’re matching the right combination of gear with experienced BlueShirts and Geek Squad to help them manage and stay motivated by their fitness routines.”

Training and lifestyle

Brands SNEWS spoke to mentioned how well-trained the staff and the Best Buy “geeks” are. Plus, as compared to other mass and sporting goods locations with fitness gear, somebody with the training will be on hand during all hours.

“Best Buy’s training system is the best of any company I’ve worked with,” Goldberg said. “They truly will have people who understand the category, in the department, every hour the store is open.”

With Best Buy’s consumer electronics and its service squad of “geeks,” the store can also integrate the fitness product with its offerings in TVs and other applicable electronics. The environment, therefore, becomes one encompassing the entire fitness lifestyle as well as the entire setup of a space at a home. Staff, known as “BlueShirts” because of the blue shirts they wear on the floor, will be available for guidance showing customers how to use the equipment, how it interacts with other electronics, and how it can help a user get fit and monitor progress.

In September 2009, Best Buy reported net earnings of $158 million, or $0.37 per diluted share, for its fiscal second quarter ended on Aug. 29, 2009. Net earnings declined by 22 percent compared with $202 million, or $0.48 per diluted share, for the prior-year period. The company’s domestic segment’s fiscal second-quarter revenue totaled $8.3 billion, an increase of nearly 2 percent versus the prior-year period. Revenue growth from the net addition of 104 stores in the past 12 months was partially offset by a comparable store sales decline of 3.1 percent. Traffic in the fiscal second-quarter increased slightly over the prior-year period but was offset by a slight reduction in the average ticket.

–Therese Iknoian

SNEWS® View: The rollout at Best Buy is something SNEWS began tracking more than two years ago, but the public company was hush-hush about it all. On its face, it may seem a daunting competitor to specialty and independents but frankly also to other sporting goods or mass stores. The largest threat may actually be to Sears. But we think this is an opportunity for all. Best Buy will expose a demographic of consumers to fitness that may not already be exposed to it, and although the company is known to do well in its staff training and service, there is still a level of equipment that will not be represented at the Best Buy stores. If consumers decide they want another step up, perhaps some personal training, or additional accessories and equipment not at Best Buy, other retail businesses will be able to step in—if they are positioned to do that. We think the prime retail space now will be that small spot in the same center as a Best Buy store.

–SNEWS® View