Discussing Sustainable Electronic Recycling with Best Buy’s Robert Miller

January 23, 2015

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He began with the company 8 years ago at Best Buy’s mobile phone division as the Chief Financial Officer, working to build the Carphone Warehouse Europe joint venture, a well as the Best Buy Connectivity group. Previously, Mr. Miller worked as an investment banker in the retail industry in Manhattan, NY. He is a graduate of Ohio Wesleyan University. In 2013, Mr. Miller became leader of Best Buy’s Inventory Optimization department which focuses on forecasting the best product placement for return prevention and mark-downs for new electronic inventory as well as for returns and products collected for electronics recycling. The division hopes to increase consumer awareness about connecting real customer demand for reused electronics with the company’s growing inventory. This month, Mr. Miller helped Best Buy announce the company has successfully reached the huge goal of collecting 1 billion pounds of electronics for recycling. The company has pledged to collect 2 billion pounds of electronics by the year 2020. JOHN SHEGERIAN: Welcome to another edition of Green is Good. We’re so honored to have with us today Robert Miller. He’s the SVP, the Senior Vice President in charge of Inventory Optimization. Welcome to Green is Good, Robert. ROBERT MILLER: Thank you so much, John. JOHN SHEGERIAN: Hey, Robert, before we get talking about what we’re doing at the special edition of Green is Good today on Best Buy’s campus here in Minneapolis, I want to talk a little bit about the Robert Miller journey and Robert Miller story. Talk a little bit about leading up to joining Best Buy, what you did before, and how’d you come into Best Buy and what did you do leading up to your position now as SVP of Inventory Optimization? ROBERT MILLER: Sure, my pleasure. I joined Best Buy about eight years ago. Before that, I lived in Manhattan. I was an investment banker in the retail industry doing mergers and acquisitions at a few different banks. Frankly, it came to the point where my wife and I were deciding whether or not we were going to raise our family in the city or not, and we decided as much as we love New York, that we wouldn’t mind being in more of a suburban atmosphere. I’d been covering retailers, Best Buy was actually one of our clients. I didn’t work on that account specifically, but I knew a bunch of people at Best Buy through that relationship. I got a call from Best Buy. They were looking at hiring someone to come in and run their internal investment and acquisition group, and I love the retail industry. I love Best Buy and perfect timing in terms of my wife and I wanting to leave the city. One of those fortunate phone calls, and it led to me joining in early 2007. I came in and joined to run this internal group. One of the first things that we started working on was, frankly, partnering with Carphone Warehouse, which is one of Europe’s largest retailers of mobile phones, a real expert in the business. Best Buy, at the time, cell phones weren’t nearly as clearly popular as they are today. Best Buy knew we had to get into it. It’s a very different business model. Best Buy had struggled before in trying to get into cell phones and just couldn’t figure it out. It’s complex in very different ways. So we were looking at partnership to help bring that expertise to Best Buy. We started spending a lot of time with Carphone, and ultimately ended up acquiring 50% of Carphone while forming a joint venture here in the U.S. to grow the cell phone business. We kind of had a partnership with Carphone that was both in Europe and here in the United States. By working on that partnership, I got very close to Best Buy’s mobile phone business, and a couple of the leaders there one day asked me if I wanted to join and be the Chief Financial Officer for Best Buy’s mobile phone business. It was a chance to leave the advisory side of the business and join more of an operational role within Best Buy. It was good for my career, and phones are fascinating. Then I joined Best Buy Mobile, running finance and business development for what, again, was effectively a joint venture with Carphone Warehouse. That business just did phenomenally well. It was a wonderful group of leaders, certainly the customers were adopting smart phones at a rapid case. Best Buy had some really nice different shaded components to our offering, and the business went great. The team was motivated and it was a very innovative culture within a giant corporation. Actually, it did so well, that as a company we started to look at how can that culture and that spirit of innovation and acting differently, how can we apply that much larger across Best Buy, not just in cell phones, but in other categories? So we looked at other related mobility categories, like laptops and tablets and MP3 players. We really, as a company, combined anything that was of a connectivity or a mobility nature into one division of the U.S., and the other division handled all the products for the home, your traditional stereo equipment and TV set. So we really had a home group and a connectivity group, and then I became the CFO of that connectivity group. We folded internally our phone business into a much larger business, which is about half of Best Buy’s U.S. business. I maintained that same type of finance and strategy role for all the connectivity work. About a year ago, we now had a lot of new leaders, Hubert Joly and Sharon McCollam, our new CEO and CFO respectively, and a lot of new leaders were naturally taking a look at what does it take to transform Best Buy and where do we have opportunities to go after, where do we have some duplicative functions, etc. The reality was as much as it did make some sense to have a very home-focused part of the company and a very connectivity-focused, it by definition was a bit duplicative. As we were looking at whether that was the optimal structure or not, while also looking at where are there parts of the business that, frankly, we haven’t focused enough attention on. Again, this was about a year ago. We started to look at all the merchandise or all the inventory Best Buy has that is not brand new, certainly all of our recycling product that comes to us by taking care of our customers, all the product that we get by way of trade-in, where we actually go out and buy from customers their older products, all of the returns that we handle when customers don’t want to keep the product they purchased, when things break. Because we’re such a large retailer, we have a lot of that product. While all of that product has value, and there are customers for all of it, we hadn’t really built our business to focus as much as we probably should have on what do you do with all that merchandise, who are the customers, and which channels should you sell it. The more we talked, the more we said we really need to bring together parts of the company that play roles in managing this type of inventory, and we need to think about it as a real business, not as a nice to have or not as a necessary evil, but something that we need to be, frankly, a lot louder about and prouder about and treat it as the proper business that it is. So we formed inventory optimization, which really is a collection of groups that focus on where should we put new merchandise to begin with, very detailed forecasting work because the more you put the product in the right place at the right time, the more you can prevent the return to begin with, the more you can prevent markdowns if you don’t put too much in one store when you should have put more in another store. The more you can stem the problem, if you will, upfront, that’s a lot of math and partnership with our vendors, etc. My team helps figure out as best we can how to optimize where all the product goes. When products do come back by way of returns or trade-in or recycling, by all means, let’s treat that as the proper business, and let’s make better decisions and let’s route that more effectively around the U.S. and let’s figure out what should be sold in stores versus on website versus in third party sites. Let’s optimize all of that because the reality is there’s a tremendous amount of value. We put together a lot of really smart people to think and act very differently in an aligned structure. Best Buy just hadn’t really thought of that before. I’d say in the first 10-11 months we’ve been together, there’s nothing but excitement around how impactful that’s going to be to the company, how impactful it’s going to be to our customers, etc. That’s the inventory optimization team that wasn’t even around a year ago, and now, as you’ve seen today, there’s nothing but excitement around all elements of that work because it matters to our customers and it matters to our business model. JOHN SHEGERIAN: It sounds like, really, what you’re doing is you’re aggregating the data that you have available to you and then you’re helping the company make better decisions based on the predictive analytics with the numbers that are literally in front of you. So you’re really doing big data work right here. ROBERT MILLER: Yeah, it’s a lot of data and it’s a lot of, frankly, a cultural change. Best Buy probably takes care of customers with all the latest technology, and we have amazing services and accessories. We sell a lot of brand new stuff that people want. That’s our bread and butter, but the reality is customers also like gently touched items. Maybe for yourself, a brand new laptop is perfect for you, but for your nine-year-old daughter, actually a three-year-old laptop is perfect. We want to make sure we’re taking care of customers, regardless of brand or price point or conditionality. We have a lot of really great stuff that we know customers want, but we just haven’t done a good enough job of showcasing that. We’re leveraging a lot of data, but it’s also just trying to connect the real customer demand that’s out there with the reality that we have the supply, we just never really told that story. We’ve never marketed and made it easy to find and easy to buy. That’s why you see a lot of changes in our stores, changes in our website. We’re trying to help customers understand how valuable this product is and we’re going to make it easy to find and easy to buy. That’s what we do on the new products, so why not apply the same merchandising principles and practices to the non-new product? That’s what we’re trying to do. JOHN SHEGERIAN: For our listeners who just joined us, we’re honored to have with us today Robert Miller. He’s the Senior Vice President of Inventory Optimization here at Best Buy. This is a special Best Buy edition from Best Buy’s campus here in Minneapolis, Minnesota. Best Buy had a big announcement today, and actually, Robert, you did an amazing job. You were the Master of Ceremonies. Can you share with our listeners what the big announcement was today and why it was so important to Best Buy, not only looking backwards, but more importantly, looking forwards? ROBERT MILLER: Five years ago or so as a company, we decided to formalize a lot of grassroots efforts across the country that were all tied to recycling. We knew how important recycling was. We wanted to play a role, but we hadn’t really formalized how to make all of that work. Five years ago, we decided to get very big and very serious about recycling. As part of that, we said we’re going to collect, on behalf of our customers, a billion pounds by the end of 2014 of consumer electronics and appliances. To be honest, at the time, we knew there was that much customer need. We didn’t know how we would operationalize that. We didn’t know how we’d go about doing it, but we knew it was important. So we set in motion a huge goal years ago, and over the last five years, we have really gotten behind this and gotten stores really focused on connecting with their local communities and their local customers and telling that recycling story and helping customers understand all the great things we can do for them. Not surprisingly, it has grown at high rates. In June, we actually hit the billion pounds. That was six months ahead of when we actually said we’d do it. Then we took a couple of months, frankly, internally, to get ready for a big party because the billion pounds is not just a staggering amount of product. John, as you said, one, it gives us a chance to pause and reflect on what we did and really recognize some incredible partners, John, you and your company being a critical partner. We work with a lot of external experts. We have a lot of passionate internal leaders. You don’t collect a billion pounds and do it in the most responsible way without a lot of very focused people and partnerships. We wanted to make sure today we really paused and gave proper recognition for the amazing work that so many people have done. Then we also wanted to, frankly, talk about and think about what an indicator of future success that first billion pounds was. The reality is customers don’t know how to transition out of a lot of the older products they have. They want newer items and new technology gets more amazing every day, but we know from talking to customers, they are confused about how to go about recycling. Isn’t it a hassle? Doesn’t it cost me a lot of money? A lot of things that are Best Buy are not true. We are here to serve in a very fast, free, and convenient manner because it’s important, as the largest electronics chain, to step up to the plate on that. We ourselves are a manufacturer. We have a large exclusive brand business, so we certainly have obligations that we want to meet because we’re a manufacturer. We know it’s the right thing for the planet, the community, the environment, but it’s also just good business sense. We want to win customers. We want to demonstrate the myriad of services that we offer them, and we know how different we are here, and we know how much customers care. The first billion is enormous and we celebrated it today with a lot of fanfare. We were honored to have our governor here, the governor of Minnesota, Mark Dayton, was here. Our CEO, Hubert Joly, was here. As you said, I had the chance to talk a little bit as well. It’s a celebration of an enormous feat, and really, it’s a celebration of where we’re headed. JOHN SHEGERIAN: Let’s step back. For our listeners out there that have not yet had the wonderful opportunity to come into a Best Buy to recycle, explain how the program works, how easy it is, how it makes the customer service, how it’s so seamless and can be part of the customer service offerings that you guys give. ROBERT MILLER: Absolutely. If you walk into any store, right at the front, we have a variety of recycling kiosks. They’re little bins for smaller items, cell phones, cables, things like that. You literally can drop those right in the bin, and behind the scenes when those bins fill up, we manage that in the most responsible way and move those products to our partners like ERI, and we recycle those. For the larger items, TVs, printers, computers, things that don’t fit into a kiosk, if you just come in the store a little bit further, right at the front of our store, usually you walk in and turn right, right at the customer service counter, we will happily accept the recycled item right there. Really, what we do, is we then take possession of the item and we move that to the back of the store, and then bundle those items up and prepare to ship them from store to distribution center, so then we can start the process. From an in-store experience, small items are very simple and bigger items are very simple. Again, we’re here to take care of customers and we know it can be an inconvenience to transition out of an older good, and we try to make sure that that’s not an inconvenience at Best Buy. For the larger purchases, we have a lot of customers that buy big TVs from us, and we have a huge appliance business. A lot of times, customers want the brand new products delivered to their homes. When we’re coming to your home to deliver a new big TV or a new appliance, while we’re there, we also offer haul away services, where we will take your older appliance, your older TV, free of charge. And then again, same thing, from the truck we’ll take that to the distribution centers. We will palletize all that product and start to move it through the various networks. Whether you are coming into a store and shopping with us in the store, whether or not we’re ultimately coming to your home to deliver a brand new item, the point is we want to be there to help you when it comes to recycling. JOHN SHEGERIAN: Let’s just go back a little bit even more. Best Buy, Robert, was one of the pioneers in retailing to do electronics take back. Is it safe to say millions of people every year come into Best Buys across the United States to recycle their old electronics? ROBERT MILLER: Absolutely. It’s millions of people. Today our CEO made reference to on average, over the last five years, we’ve taken more than 20 million individual units. In the more recent year, that 20 million is more like 35 million, just because we’re growing quickly. It’s a ton of individual items. It’s a ton of weight across the entire gamut of electronics and appliances, which, again, demonstrates the customer need that people aren’t sure where to take things. Obviously, we don’t want people just throwing things away, so we put our hand up in the air and say we’re here to help. I think we have. We’ve pioneered it, we are very big at it, and we intend to be a lot bigger. JOHN SHEGERIAN: And you’ve set the standard, number one, and today was the landmark day. Another 2 billion pounds by 2020. ROBERT MILLER: Another 2 billion pounds. JOHN SHEGERIAN: Talk a little bit about how recycling will be integrated into your growth strategy to continue Best Buy’s tremendous run that you’re on right now. ROBERT MILLER: If you think about major appliances and TVs, you think about big, bulky items, and the inherent challenges with transitioning out of those, especially in the old tube TV model, where those items are heavy and difficult to move. Not enough people yet know that Best Buy is big in recycling. The awareness is actually relatively low that we are as big as we are. One, we’re going to change that through marketing, through public relations, through shows like this. We want the word to be out that we have this incredible program. It’s an always on, everyday proposition, what I’ve described, in terms of the capability we have and the offering doesn’t change by the day. It’s what we always do for our customers. We need to tell that story more succinctly and loudly. That’s one foundational thing. Then when it comes to more people understanding what we do, we want to connect better to the amazing new technology, but the thing that might be in the way or the item that’s sitting in the space where you’d like to put the new 4K TV is, in fact, an old 200 lb. tube TV. Why don’t we remove that burdensome TV for you, handle it in the most responsible way, and replace that with an amazing new TV and connect those transactions? Yes, we’re doing a lot of things that are completely right for our communities and the planet around us, but we’re also really helping you buy the item that you really want to buy, but you’re not quite sure how to connect those two. I think by telling our story and helping people understand what we do, while we also tell a story about all the amazing new technology we have and all the services we offer and all the things that make our value proposition so great, I think we will grow materially because of that need and because of just helping customers understand that we’re not just amazing at the new product, we’re amazing at the old product too. JOHN SHEGERIAN: Today you announced from the stage, Robert, a new sustainability showcase here at the headquarters. Can you talk a little bit about, at a macro level, how sustainability is really cultural and a DNA issue here at Best Buy, and what are the other things you’re doing besides recycling, which is, of course, amazing and you’ve become the platinum standard in recycling, what are the things you’re doing in sustainability and why showcase it here because it’s so important at Best Buy? ROBERT MILLER: I think from a customer perspective, certainly, recycling is front and center in terms of something that people can get their heads around and, certainly, meeting the goal is why we made such a big deal today about recycling. In the larger sense, sustainability is foundational to Best Buy. We run 1,500 stores or so. Running those in a more energy-efficient way and reducing carbon footprint, all of that, is detailed work underway to continue to materially change how efficiently and effectively we run our locations. We are not only a manufacturer, as I touched on. We certainly work with all the largest manufacturers in the world, and that brings up opportunities around responsible supply chain and packaging solutions and how do we all make sure that in our desire to protect products as they’re being shipped, the fundamental packaging and boxing solutions are also all products that can be recycled once the customer opens up and takes out the item. Whether it’s packaging or supply chain or carbon footprint and a bunch of related pieces, that’s all, again, part and parcel to a true vision we have of playing a bigger role. Again, we know it helps all constituents involved. The beauty of sustainability and recycling is it really does help everybody. It helps our customers and our communities, it helps our vendor partners, it helps us as a business model, it helps our shareholders. Everybody wins when we get after this, so trying to tell that story and continuing to make real changes, I think is shy we’re so excited and why we devoted so much time today to talk about something that maybe in the past would not have gotten as much publicity. We really connected to who we are as a company and our focus on transforming. JOHN SHEGERIAN: And you even have a name for it internally, called Renew Blue. ROBERT MILLER: Yeah, a couple years ago, when Hubert, as our new CEO then, was really looking at the type of work we needed to do to really change the company. Obviously, we talk a lot about our blue shirts, our field facing employees, and the color blue is naturally all over our company. So we’ve talked about we’re going to renew blue. We’re going to renew our incredible company. We know we have, over the years, not taken care of customer as well as we wanted. Our cost structure got a little bit out of line, so we’re doing a lot of internal and external initiatives that all roll up into a big strategic endeavor that we label Renew Blue. As Hubert talked about today, this is part of that. A real pillar of renewing blue is being very cognizant about the role we play in the greater world, and within all of that sustainability work, this is a very powerful pillar of that work because, again, it matters so much to our customers and our communities that we proudly serve. JOHN SHEGERIAN: That’s great. Robert, we thank you for your time today. We know how busy you were, and you did, again, such an amazing job making this big announcement today. We know the future of recycling at Best Buy is bright and Best Buy’s future is bright. We thank you for making the world a better place. Robert Miller, you are truly living proof that green is good.

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