• by Sarah Mahoney  @mahoney_sarah, July 16, 2009

When it comes to the future of consumer electronics, Best Buy says individual gadgets don't mean as much as marketers think they do. Instead, "we see tremendous opportunity around how those devices work with each other, and with content people already own," says Shari Ballard, EVP/retail channel management for the Minneapolis-based chain. "People are trying to do things with their technology products, not just acquire them."

Addressing investors attending the Oppenheimer Consumer, Gaming, Lodging & Leisure Conference, she said Best Buy plans to capitalize on the tremendous gap that exists between the potential of electronics, versus the limited way consumers currently use them.

"With a handheld phone, for example, you probably use 20 to 30% of the capacity," she says. "We think one of the reasons we exist on the planet is to help people find connected digital solutions that work with their individual needs."

Right now, she says, the company is looking at many ways it can bring those connections to the center of the store, in formats that are easy for consumers to see and touch. "There is major work to do in helping customers see what today is mostly invisible. Now, we describe these products with a lot of hand motions and 'imagine this.' We need a physical way for people to interact with invisible solutions."

For retailers, she says, the struggle is to both construct value propositions that appeal to consumers at the same time as building the back-end capabilities that can deliver them. "In part, that is what we are doing with Napster," she says, "building both streaming and downloading capabilities in CDs, movies and gaming."

Part of that process of innovation, she says, is thinking more in terms of individual stores, rather than chainwide initiatives. For example, she says, as part of its efforts to reinvigorate stores that are older than 10 years, which she calls the Achilles heel of many chains, Best Buy rethought the focus of one Atlanta store that is now in a predominantly Korean neighborhood.

"While that wasn't true when the store opened, by shifting services and product mix, we've increased sales there by $2 million a year. It's easy to dismiss those stores as some vague kind of 'power to the people' stuff, but we've got beautiful examples of how well this works," she says. "It's the way we are learning where we have pockets of customer needs."