Best Buy Co. Inc. (BBY) operates over 1,200 retail stores generating over $39.4 billion in annual revenues selling and servicing consumer electronic products worldwide. The company acquired several businesses on its path to becoming the largest click-and-mortar electronics retailer in the United States. The company has strategically embedded acquisitions into its business model to expand in several complementary niche categories. Here are the top three companies owned by Best Buy.
Geek Squad was originally started by Robert Stephens in 1994. The company offered residential and commercial on-site computer repair services. The company theme was to operate like a government intelligence agency like the Federal Bureau of Investigations by assigning title of "agent" to employees. Managers and specialists were assigned higher-level titles including special agent, covert agent, deputy of covert operations, deputy field marshal, deputy of counterintelligence, and counterintelligence agent. Best Buy acquired Geek Squad on Oct. 24, 2002, and named Robert Stephens to continue to run the operations as a subsidiary.
The company offers on-site, in-site, and internet-based technical support, installation and repair services around-the-clock. The company has expanded its services beyond just computers and now offers services for applications, home connections and installations, appliances, cellphones, cameras, home theaters, wearable technology, and video gaming. The company offers 24/7 yearly support. The Geek Squad acquisition has become a key revenue driver from expanded product installation, repair, and support services beyond just computers.
Magnolia Hi-Fi, Inc.
Best Buy purchased Magnolia Hi-Fi Inc. for $87 million on Dec. 18, 2000, and assumed $598 million in debt for a total acquisition cost of $685 million. Seattle-based Magnolia Hi-Fi operated 13 retail audio and video store locations with approximately $100 million in annual sales in 1999. Best Buy originally planned to keep the Magnolia retail stores as an independent high-end luxury brand. The stores had a loyal following of eccentric customers who would regularly spend up to $5,000 on a MartinLogic speaker or up to $9,000 on McIntosh amplifiers. However, the physical locations were eventually closed down and integrated directly into Best Buy showrooms.
Best Buy acquired Pacific Sales Kitchen and Bath Centers Inc. for $410 million in January 2006. The purchase included 14 stores located in Southern California. Like Magnolia Hi-Fi, this brand also caters to high-end customers willing to pay top dollar for customized service and expensive brand-name products. Best Buy maintained segregating the subsidiary as a high-end brand with its stand-alone showrooms while integrating the in-store structure for the east coast locations.
Pacific Sales specializes in offering upscale high-end, brand-name kitchen and home appliances to consumers, builders, and professional contractors throughout 28 separate locations — all in California. There are also 176 in-store locations which are branded as Pacific Kitchen and Home Inside, and the company had plans to open 27 more in 2017, according to its 2016 annual report.
Vertical Integration of Companies
Best Buy decided to absorb and integrate Magnolia directly into its own Best Buy showrooms and vertically integrate the product lines and support. Pacific Kitchen and Home Inside has been integrated into Best Buy showrooms with support, repair and installation services provided by Geek Squad. With these acquisitions, the company reaches all levels of consumers, offering basic CD players to premium high-end custom-designed home theaters. Best Buy has expanded Geek Squad offerings to include home-theater and automation, appliances, mobile and automotive product installation, repair, product protection, and support services. This model enables Best Buy to expand additional revenues beyond just product sales.