Best Buy 2012: Turning Stores into a Weapon Against Amazon
Situation
It is 2012, and Best Buy looks doomed. The big-box electronics retailer is being hollowed out by a phenomenon with a name: showrooming. Customers come into Best Buy's stores to see and touch the products — get hands-on with the TV, ask the staff questions — and then buy the same item from Amazon for less, often on their phones in the aisle. Best Buy's hundreds of expensive stores have become Amazon's free showrooms.
Sales are sliding. The stock has collapsed. A prior leadership scandal has rocked the company, founder Richard Schulze has floated taking it private, and the ghost of Circuit City — the rival electronics chain that liquidated in 2009 — hangs over every conversation. The market consensus is that Best Buy is the next to die.
Into this walks new CEO Hubert Joly in the fall of 2012. The standard turnaround playbook for a struggling big-box retailer is obvious: shrink. Close stores, slash headcount, cut costs to the bone, and retreat from physical retail because Amazon has clearly won. But Joly sees the stores differently — not as the disease, but possibly the cure.
The decision moment
It is late 2012. Joly must choose how to save Best Buy.
Three paths:
- Shrink to survive (the Circuit City playbook). Close stores, cut staff, slash costs aggressively, and accept that big-box electronics retail is dying. Manage the decline and protect cash. Wall Street expects this.
- Turn the stores into a weapon (Renew Blue). Kill showrooming by price-matching Amazon in-store; convert the store network into ship-from-store fulfillment hubs for online orders; rent prime floor space to vendors as "stores within a store" (Apple, Samsung, Microsoft); and invest in employees and experience rather than gut them. Bet that physical presence is an asset Amazon can't replicate.
- Go digital-first. Pour resources into building a pure e-commerce business to fight Amazon head-on online, deprioritize stores, and try to out-Amazon Amazon on its own turf.
You are Hubert Joly.
Key datapoints (for reference)
| Metric | Value |
|---|---|
| New CEO | Hubert Joly, appointed August 2012 |
| Core threat | "Showrooming" — browse in-store, buy on Amazon |
| Cautionary precedent | Circuit City liquidated, 2009 |
| Strategy | "Renew Blue" |
| Key move #1 | Price-match major online competitors in-store |
| Key move #2 | Ship-from-store (stores as fulfillment hubs) |
| Key move #3 | Vendor "store-within-a-store" (Apple, Samsung, Microsoft) |
| Cost savings | "Renew Blue" savings reached ~$1B+ |
| Revenue FY2013 → FY2019 | ~$40.6B → ~$42.3B; operating margin from negative toward ~4–5% |
| Customer satisfaction | Rose from ~68% (2012) toward 80%+ |
Frameworks invoked
- Turnaround (Stabilize then Grow). Joly's first job was to stop the bleeding — match prices, cut waste, restore confidence — before investing in growth. Sequence matters: stabilize, then build.
- Omnichannel Retail. Instead of "stores vs. online," Joly fused them: stores became fulfillment centers, pickup points, and showrooms that also closed the sale. The physical and digital channels reinforced each other rather than competing.
- Competitive Response. Showrooming worked because customers assumed Amazon was always cheaper. Price-matching removed the reason to leave — neutralizing the disruptor's single biggest weapon directly, rather than fleeing from it.
- Asset Reframing. The stores were seen as Best Buy's fatal liability. Joly reframed them as a unique asset: fast last-mile fulfillment, hands-on experience, expert help, and valuable real estate vendors would pay to occupy — things a pure online player couldn't match.
Discussion questions
- Everyone saw the stores as the problem; Joly saw them as the solution. How do you tell when a "liability" is actually a misused asset?
- Price-matching Amazon meant deliberately sacrificing margin on every matched sale. Why might giving up that margin be the profitable move overall?
- The obvious turnaround move was to cut staff. Joly invested in employees instead. When does cutting costs accelerate a death spiral rather than prevent one?
- Vendors paid for "store-within-a-store" space, turning floor space into a revenue stream. How does that change the economics of running physical stores?
- Best Buy survived where Circuit City died. How much was strategy versus timing, leadership, or luck — and how would you separate them?
The real outcome (revealed at session end)
2012–2013: Joly launches "Renew Blue." Best Buy starts price-matching Amazon and other online sellers in-store — removing the entire incentive to showroom. It turns its stores into ship-from-store fulfillment hubs, dramatically speeding online delivery. It rents premium floor space to vendors like Apple, Samsung, and Microsoft as branded mini-stores, turning the sales floor into a revenue source. And rather than gutting the workforce, Joly invests in his "Blue Shirt" employees and the customer experience.
It works. Best Buy stabilizes, cuts over a billion dollars in costs, grows revenue and margins, and lifts customer satisfaction. The stock recovers spectacularly, and Best Buy becomes one of the most celebrated retail turnarounds of the era — the big-box chain that didn't become Circuit City.
The lesson: When a disruptor's advantage seems unbeatable, don't retreat from it — neutralize it. Best Buy killed showrooming by matching prices, then weaponized the very stores everyone said were obsolete, turning them into fulfillment hubs and vendor showrooms. The asset that looked like the company's death sentence became the thing Amazon couldn't copy. And the turnaround ran on investing in people and experience, not just cutting.
Sources
- Hubert Joly, The Heart of Business: Leadership Principles for the Next Era of Capitalism (2021).
- McKinsey, "Transformation and resilience: An interview with Best Buy's Hubert Joly."
- Best Buy Co. SEC filings and "Renew Blue" investor materials (2012–2019).
- Harvard Business Review coverage of the Best Buy turnaround.