Best Buy's 2-Year Site Rebuild: Will It Have A Target On Its Back?

Best Buy (NYSE:BBY), the poster child for showrooming, has just discovered that its E-Commerce sites have big problems. On a March 1 earnings call, CEO Hubert Joly said the chain's multiple websites are unintegrated, effectively making multichannel retailing impossible. Best Buy's solution: patching up the current sites with improvements that will start showing up in April and launching a completely new E-Commerce platform in "a couple of years."

Joly didn't mention that the website problems date from Best Buy's long outsourcing arrangement with Accenture, which the retailer is quietly unwinding. But an all-new online platform that will take years to develop after a long period of outsourcing—what could go wrong with that plan? Oh, right—ask Target (NYSE:TGT).

On the earnings call, Joly made it a point to identify the E-Commerce site as a priority for the troubled chain—though without mentioning Amazon (NASDAQ:AMZN), which some retail analysts have suggested should rescue Best Buy just to use its stores as showrooms, because that's what many see as Best Buy's function anyway.

"We're focused on growing online as well as expanding the profitability of online," Joly said. "This deals with the interaction with the customers; it deals with search; it deals with assortments; it deals with integration. One of the surprises has been the fact that we have these multiple sites—BestBuy.com, MyRewardsZone.com, GeekSquad.com—that have not been integrated and so the customer experience, talking about multichannel even multi-websites, it was not integrated. We're addressing that with the existing infrastructure."

Those short-term fixes should all be in place by Black Friday, and they will include dynamically generated product recommendations, a new search engine, product pages that look consistent across the Web and mobile, seamless access to rewards programs, and easier ability for customers to extend warranties and add Geek Squad services.

Joly added, "In parallel to this, we will have a project to reconstruct, to redevelop, a new platform, and as you would expect, that takes longer. We expect this to probably take a couple of years, roughly speaking, which is why we don't want to wait a couple of years and we'll have this dual track."

That sounds like a good plan on the surface, and neither Joly nor new CFO Sharon McCollam, who also oversees IT, offered up more detail on the multiyear new-platform product. But it's troublingly similar to the plan that brought Target.com to its knees in 2011.

Remember? Target outsourced its E-Commerce operation to Amazon in 2002, then announced in 2009 it would end the deal and take Target.com back in-house starting in 2011. The new Amazon-less E-Commerce site launched on schedule in August 2011. Nothing worked quite right. Customers were irritated. Three weeks later, Target.com had its first big promotion, for products from fashion designer Missoni. The site collapsed.

Now consider Best Buy. In 2004, the chain hired Robert Willett away from Accenture to be its CIO. Six months later, Willett outsourced Best Buy's IT function to the consulting firm—only 40 of the department's 820 employees remained. Willett's successor, Accenture veteran Neville Roberts, stuck with the program until he departed in 2011—shortly after which Best Buy began to rebuild its internal IT and, more quietly, to extract itself from the Accenture deal.

Two things about that deal jump out. The first is that Accenture essentially promised to eliminate Best Buy's competitive advantage.Two things about that deal jump out. First, Accenture got the deal by promising that it would cut costs by getting rid of customized systems and replacing them with "packaged vanilla solutions." Or as (non-Accenture) consultant Bob Lewis later rephrased the pitch: "In exchange for hefty fees, we'll rip out your sources of competitive advantage and replace them with generic alternatives."

And second, Accenture began the rip-and-generic-replace in 2004. By 2006, Best Buy's slide began. Just when Best Buy needed competitive advantage against Amazon, that's exactly what it didn't have.

Now Best Buy wants to get that advantage back. That's good. What's worrisome is how Joly said he plans to go about it: a big, highly customized, multiyear project being launched only 18 months after Best Buy started rebuilding IT.

Understand, this is nothing like the plain-vanilla systems that Accenture built for Best Buy. That's the whole point—Best Buy already knows how that turns out. To connect up all the websites, provide highly targeted search and do the other things Joly wants, there's going to have to be a certain amount of invention and a lot of experimentation to get it right.

That can be done. But Best Buy hasn't managed a project like that at least since Accenture took over. And building it in isolation and then rolling it out two or three years later to replace the existing collection of Best Buy websites? That sounds like another Target.com disaster in the making.

Big IT projects fail—a lot. Only a few launch cleanly. Many more can be rescued if they have time to get the kinks worked out after they're rolled out. But E-Commerce projects don't get that type of breather. Customers just aren't understanding about things like that.

But big IT projects face another problem: Two years is a long time in corporate time, especially for troubled retailers. CEO Joly may not be around that long. If his successor looks at this project 60 percent of the way in and says, "This project is expensive, we have no guarantee it will do what we want, and we already have websites that work. Tell me why we should keep spending this money," what is anyone in the IT or E-Commerce groups going to be able to say?

The solution to both those problems is the same: Break up the project, design an architecture, build a foundation, then replace one of the existing Best Buy sites with a site that plugs into that foundation. That simultaneously starts real-world testing early and begins delivering ROI fast.

It also gives developers experience with how the new platform works, where workarounds are necessary and what to avoid completely. It eases customers onto the new platform (customers only hate one thing more than an E-Commerce site that works badly, and that's a site that somebody suddenly changed on them). And it gives executives an answer to the "why finish this project?" question.

In short, it eliminates a lot of surprises for everyone. As other Best Buy sites are built and plugged into the platform, more kinks will be worked out. By the time the main E-Commerce site is ready to go live, the risk—and the unpleasant surprises—will have been cut to a minimum.

At a time when Target's problems are still fresh in many people's minds—and when Best Buy may not survive that type of disaster—let's hope that's what Joly has in mind after all.

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