Best Buy Readying Magnolia Design Center Expansion

Best Buy will open up to 15 Magnolia Design Centers annually for next several years and sees room for 100 U.S. locations, Magnolia Home Theater Chief Operating Officer Steve Delp told us. The design centers cover about 4,000 square feet inside standard Best Buy stores, in some cases replacing Magnolia Home Theater departments with an operation more oriented toward custom installations, Delp said. The first two locations opened in Costa Mesa, Calif., and Chicago. Four more have since opened in California.

In keeping with a home theater theme, the design centers include a series of vignettes depicting a living room, an outdoor area and a series of high-end audio rooms. Flat-panel TVs are moved to the back and high-end audio components and speakers are brought to the forefront. The design centers, which have a separate installation group, charge about $40,000 on average for custom projects and will be located in high-income areas, Delp said.

"We are very exacting in the way that we open them, train people and deliver on the customer experience, so we don’t have the capacity to open more than 15 per year,” Delp said. “We still fancy ourselves a retailer, but we also do a lot of custom install. The project side of our business is much in line with that of a pure integrator,” whereas the retail side is like a specialty dealer.

The design centers have a separate buying staff for audio, video and furniture, and they carry brands not found in a standard Best Buy store, like D&M Holdings McIntosh and top-end selections from B&W and Martin Logan. A design center also has an Acoustic Innovations home theater outfitted with a Stewart Filmscreen CineCurve screen. Best Buy acquired the former 21-store Magnolia Audio Video chain in 2001 and continues operating six standalone Magnolia locations. There are no immediate plans to convert the standalone outlets -- some of them 10,000 square feet -- to design centers, Delp said.

"Give them credit for keeping the Magnolia concept true to its original form of being a high-end store and creating a great listening and demonstration environment,” said Bob Weissburg, president of D&M Holdings Americas sales and marketing. “It’s not perfect, but they're smart enough to know that it can only get better."

The design centers have sales staff separate from Best Buy’s that spend time working with local architects and builders to gain customers, Delp said. The sales staff also gets referrals from the standard Best Buy store and spends time in the home theater department seeking customers with higher-end needs, he said.

When Delp started building the design center concept within Best Buy three years ago, “a lot brands wouldn’t talk to us,” he said. The high-end vendors’ “number one fear” was being caught in the “turn and churn” sales of a standard Best Buy store, Delp said. “I spent a lot of time building credibility,” he said. “Our role as a retailer is to represent their brand as they want it to be represented to the customer."

Best Buy will keep expansion of the format west of the Mississippi River in 2011, Delp said. Choosing a location to finishing it takes about 26 weeks, construction accounting for about 17 weeks, he said.

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Best Buy also has launched a test of the first Connected World locations, the company said. Eight stores in the Pittsburgh market and six in the Las Vegas area “grand re-opened” last weekend, company officials said. The stores never closed, but they were renovated during the past two months to give more play to Internet-connected products, said Mark Staub, an interactive technology specialist at a Pittsburgh-area location. In the Pittsburgh market, older stores, many opened in the late 1990s, were targeted for the new format, he said. At Staub’s 35,000-square-foot location, about 8,000 square feet was trimmed from the showroom and given over to storage and a hallway, Staub said. The standard race track was replaced by a “runway” that crosses the middle of the store and features three so-called “Experience” new technology tables, whose content will rotate. Among the technologies featured was the Google TV/Android operating system. To make room for the runway, gadget and gizmo and Best Buy Mobile sections were pushed to the side, Staub said. Connection Destination Stations were created to demonstrate LG Electronics, Panasonic, Samsung and Sony Internet-connected Blu-ray players and flat-panel TVs. The number of checkout registers was cut 50-75 percent and Best Buy store staffers were armed with Apple iPod Touch devices to process credit and debit card purchases, company officials said. Employees in the test location also sell across categories, something that is “essential because the products and services in our stores are converging to a point where they need to work together in order to provide the full experience,” Jacob Dahlen, a Best Buy territory finance director in the Mid-Atlantic region, said in a post at BestBuyFinanceBlog.com. Five kiosks were installed to allow customers to check product information, and online orders can by picked up at a dedicated location within the store, Staub said. The store’s high-speed bandwidth was increased to allow for more product demonstrations and give customers free WiFi access, Staub said. “We want to test a new store design to see if a new physical layout will help our blue shirts be able to more effectively and clearly communicate the benefits to our customers of having a truly “connected” home,” Dahlen wrote.