Bloomberg News

Best Buy’s Geek Squad Expands to EBay Seeking Customers

October 08, 2012

Best Buy’s Geek Squad Expands to EBay in Push for New Customers

Geek Squad employee Gayle Jessie repairs a controller board in the TV Reclamation area at Geek Squad City in Hillview, Kentucky. Photographer: Ken James/Bloomberg

(Corrects firm’s name in 19th paragraph of story published Oct. 5.)

The Geek Squad is going where no geek has gone before.

Best Buy Co.’s (BBY:US) tech-support service is expanding to EBay Inc. (EBAY:US) and conducting trials at some Target Corp. (TGT:US) stores as the world’s largest consumer-electronics retailer seeks new revenue from fixing computers and tablets.

EBay recently added around-the-clock Geek Squad support with service plans costing $29.99 for three months and $49.99 for six months, said Gregory Boutte, vice president of EBay electronics and motors in North America. Best Buy also is rolling out the Geek Squad at 28 Target Corp. stores in Denver and one in Minneapolis.

The hook-ups with EBay and Target are testament to the enduring appeal of the Geek Squad. In fact, the army of 20,000 black-tied, white-shirted agents is the struggling electronics chain’s best-known brand and the vehicle driving its services push, said George Sherman, senior vice president of Best Buy’s services business group.

Expanding the Geek Squad “fits with their strategy to deliver a connected experience to consumers,” said Stephen Baker, an analyst at NPD Group, a Port Washington, New York- based research firm. “They’re trying to make Geek Squad a ubiquitous, stand-alone brand that stands for great help around your technical problems.”

Customer service is a big part of Best Buy’s plan to revive slumping sales and fend off rivals such as Amazon.com Inc. (AMZN:US) Hubert Joly, who took over as CEO a month ago, is giving employees more training so they can help shoppers connect their gadgets, generating higher fees from service contracts and warranties. Best Buy boosted U.S. revenue (BBY:US) from services 6 percent in the quarter ended Aug. 4 as comparable-store sales sank 3.2 percent, the eighth decline in the past nine quarters.

Closing Stores

The company also is shutting 50 big-box stores and accelerating the opening of smaller shops that sell mobile phones, e-readers and tablets. Those categories increased sales last quarter while television and computer purchases fell.

The strategy still has a ways to go. Analysts project Best Buy’s revenue (BBY:US) will fall 2.9 percent to $49.2 billion this year, while Amazon’s sales are estimated to gain 31 percent to $62.8 billion.

The competition has weighed on Best Buy’s stock. The shares have declined in three of the past four years and now trade at a 78 percent discount to the Standard & Poor’s 500 Retailing Index on a price-to-earnings basis.

Best Buy fell 2 percent to $18.03 at at the close in New York. The shares have tumbled 23 percent this year.

Bicycle Patrol

Geek Squad was founded 18 years ago by Robert Stephens, who rode around Minneapolis on his bicycle, helping people with technology problems. He sold the company to Best Buy in 2002, when he had 65 agents. He still serves as a consultant to the retailer.

Early on the Geek Squad was criticized by Best Buy executives upset that it was recommending and repairing Dell Inc. (DELL:US) computers when the retailer wasn’t yet selling the brand. Stephens, 43, said he found allies in founder and Chairman Richard Schulze and CEO Brad Anderson, who fended off the complaints.

“I was adamant saying that a Geek Squad agent should always be comfortable to recommend what is the best,” Stephens said in an interview. “The minute that gets called into question, Geek Squad is going to lose value and trust.”

The same type of competitive tensions may arise as Geek Squad expands beyond Best Buy, Stephens said.

“Target is probably not interested in having Geek Squad refer business to Best Buy away from Target’s electronics sales,” he said in a telephone interview.

AARP Deal

In April, the Geek Squad began helping members of AARP, an organization for people 50 years and older, with a program costing $169.99 a year. In July, the unit hooked up with Verizon Communications Inc. (VZ:US) to help small and mid-sized businesses.

The Target deal offers Best Buy a way to reach more women. The “vast majority” of the discounter’s female customers don’t regularly visit Best Buy, Sherman said. Target is testing whether the Geek Squad will help its electronics departments, which already offer a trade-in service, said Kristy Welker, a spokeswoman for the Minneapolis-based company.

EBay Deal

Geek Squad support can be bought from EBay, which has about 100 million active customers, even by shoppers who don’t purchase electronics from the online marketplace, Boutte said. Consumers can then get their Geek Squad help online, over the phone and in Best Buy stores, where the retailer hopes to ring up additional sales. The companies wouldn’t disclose how they split fees.

Geek Squad may have annual revenue of about $3 billion, according to Love Goel, CEO of GVG Capital Group, a private- equity firm in Minnetonka, Minnesota. Best Buy wouldn’t disclose the unit’s sales.

Stephens, who stepped down as Best Buy’s chief technology officer in March and moved to San Francisco to invest in tech startups, has offered to help Schulze if he succeeds in taking the retailer private.

“If I were the CEO of Best Buy, I would absolutely try to get back to the magic of what technology can do,” Stephens said. “They took their eye off of the ball. It is not too late.”

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • BBY
    (Best Buy Co Inc)
    • $24.49 USD
    • 0.37
    • 1.51%
  • EBAY
    (eBay Inc)
    • $55.47 USD
    • 0.54
    • 0.97%
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