Best Buy Enters the Patio Furniture Market: Diversification of Offerings
New Showroom and Offerings
Charlotte and Raleigh are among the 11 cities where Best Buy will debut its new store concept offering patio furniture. The showroom will be branded under Best Buy’s newly acquired outdoor living brand, Yardbird, and will feature a range of products from outdoor dining sets and lounge seating to fire tables and accessories, such as umbrellas. According to The Charlotte Observer, a Yardbird showroom is set to open next week in Charlotte, while its Raleigh counterpart will follow in early summer.
The Power of Corporate Diversification
Best Buy’s move to expand its offerings into an entirely new market is a good example of corporate diversification. The strategy is a common one for companies seeking new or more profitable business opportunities, reducing the company’s dependence on a single industry or market. Best Buy’s venture into the patio furniture realm is indicative of the sense of urgency in companies to diversify in today’s highly competitive market.
Journey to Enhancing the Overall Living Space
In a recent exclusive interview with The Charlotte Observer, Blake Hampton, vice president at Best Buy, identified that the brand’s journey is toward improving customer’s living space. Hampton also mentioned Best Buy’s new store model as a pilot strategy in the Charlotte market for Yardbird showrooms. The company’s display hub in Charlotte-North Lake is also being used to encourage customers to learn more about the brands and their products.
Sustainability Focus
One aspect of Yardbird’s furniture line is sustainability. Hampton highlighted Yardbird’s focus on reducing packaging materials, the use of rust-proof aluminum, recycled plastics, and water-resistant fabric. The cost per item, which varies by collection, ranges from less than $500 for an Adirondack chair to over $2,000 for an entire dining or lounge set. This pricing range represents an affordable alternative for customers who consider themselves environmentally conscious.
What to Expect at Yardbird
The Yardbird showroom in South Park, Charlotte, stretches over an area of about 10,000 square feet, allowing customers to use an in-house designer to create the look of their desired patio furniture and to see how it fits into their homes physically. Commenting on this element, Hampton states, “Those types of experiences would be hard to do within a Best Buy store.”
Editorial: Best Buy: Innovation or Overfishing?
Corporations have a unique characteristic of being able to shape markets and significantly influence the business environment they are interested in entering. While the decision made by Best Buy to move into the patio furniture market may seem beneficial for the brand, it poses a risk to the external innovation capability of that market. The management at Best Buy must ensure that its expansion does not encroach upon established players’ market share or become a disadvantage to smaller specialty stores that primarily sell patio furniture. The danger is that new entrants are likely to offer quality products at lower prices, which will ultimately drive competitors out of business.
Risk or Necessity?
Given Best Buy’s enormous profits coming from the sales of electronic devices, the company’s management might not see diversification as necessary for survival, but rather as an opportunity for sustainable growth. However, while diversification may bring long-term benefits for the company, there are considerable risks associated with entering a completely new market. If Best Buy is not careful, the brand could end up spreading itself too thin, and it might end up losing its competitive edge in the market. Furthermore, entry into a completely new realm requires considerable investment in resources such as labor, materials, and equipment.
Advice: Ponder Before You Leap
The decision to expand business offerings into an entirely new market should not be taken lightly, as it has the potential to attract high uncertainty and risks. Best Buy’s venture offers several useful lessons for other companies who contemplate entering an entirely different market. Firstly, it is crucial to evaluate whether the expansion’s benefits outweigh the risks. Secondly, analyze whether there will be any synergies between the new and existing business lines. Lastly, consider the impact of the new venture on other competitors in that market.
In conclusion, while there are several factors to consider before branching out into new markets, companies such as Best Buy should undoubtedly continue to explore other options for diversification. However, it must be done in a way that stimulates innovation rather than increase competition and hasten the market’s trend towards monopolization.
<< photo by Skylar Kang >>
