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BEST BUY CO. INC., A MINNEAPOLIS-based retailer, may be eying new ways to compete with Wal-Mart Stores Inc., including its financial services.
But it is edging into that part of its rival's territory in a very careful and targeted way. "Wal-Mart is a challenging model for us from a retailer perspective," Mark Williams, Best Buy president of financial services, said during a speech recently at SourceMedia Inc.'s Financial Services Marketing Symposium.
"I want to bring consumers into my stores, but I just don't think MoneyCenters fit with my brand."
The retailers' executives have called its MoneyCenters, which sell its popular prepaid MoneyCards and offer other financial products and services, such as walk-in bill payment and funds transfers, "one of the most profitable parts" of its stores. Such "alternative" products and services are especially popular among its customers lacking traditional banking relationships.
Williams said in an interview after his speech that, while Best Buy plans to expand its own prepaid offerings in 2010 to appeal to underbanked consumers, "we don't want to do it as a 'me-too' or something that doesn't fit into our brand experience." Matching Wal-Mart product for product might not be in the cards, but Williams, who joined Best Buy last November after a career at General Electric Co.'s GE Money and MasterCard Inc., has spent the past year finding ways to carefully expand the retailer's financial services offerings.
He also is creating new financial products for the youth market, such as a mobile "fully youth-focused bank" geared to consumers ages 14 to 18 who "are junkies when it comes to Best Buy."
Such products are increasingly necessary now, as the value of traditional private-label cards wanes, Williams said. Many customers who once would have been approved for store cards no longer qualify, and some consumers even are choosing not to apply instead of risk being turned down, he said.
But that is a missed opportunity for the retailer, as customers who use a "branded" Best Buy card or financial product spend $100 more on average than those without, according to Williams. "We don't think outside that box" of private-label and cobranded credit cards, he said during the speech. "The paradigm shifted in our industry. ... We're leaving $300 to $400 million on the table every year." ATM
