Engineering the Experience for Best Buy’s Magnolia Brand (2008) Boston University School of Management (Fournier and Kampel)
In December 2000, Best Buy acquired a 13–store west coast retailer of high end audio and video products, Magnolia Hi-Fi Inc., for $87M. This purchase set Best Buy on a growth through acquisition path (see Exhibit 1) and began to build the portfolio of brands that the $27.3 billion Minnesota-based company would use to reach and service various segments of the market. Per Best Buy’s highly publicized Customer Centricity Program, the brand allowed the company access to the “Barry’s” and “Jill’s” of the world, two highly promising target segments. Best Buy’s Magnolia acquisition was part of a broader strategy for success in an increasingly polarized and competitive retailing market. A trend in home improvement and office supplies retailing involved the elimination of specialized Mom and Pop stores by large big box retailers that could offer better prices and a wider selection. This same trend had hit the consumer electronics (CE) category where products were becoming commoditized and margins were shrinking. The trend posed both an opportunity and a threat to Best Buy.