Founder & Chairman Emeritus, Best Buy
Delivering the Goods: An Interview with Best Buy and EIX Founder Dick Schulze.
Dick Schulze, the founder of Best Buy and @EIX, shares his experiences as an entrepreneur and innovator, including how he ...
About Richard Schulze
Richard M. Schulze, founder and chairman emeritus of Best Buy, has focused his recent public appearances on the 10th anniversary of Entrepreneur & Innovation Exchange (EIX.org) and FamilyBusiness.org, two online publications funded by his family foundation. In an April 2024 interview, Schulze discussed the growth of the platforms from 2,000 to 12 million users, describing them as vetted resources for entrepreneurs and family businesses. He stated that his mission is to help more entrepreneurs succeed, which he said creates jobs and benefits communities. Schulze also highlighted e-Fest, an entrepreneurship competition, as a celebration of entrepreneurs from across the country. In a December 2024 discussion on family business, Schulze argued that family businesses are important because they have already overcome initial challenges and have a reputation and place in the community. He emphasized that change is constant and that businesses must evolve with the next generation of customers. He credited Best Buy's on-the-floor employees for helping him understand customer needs and noted that during Best Buy's expansion, 576 competitors in the industry failed because they would not change to stay in tune with their customers. In earlier media appearances, Schulze commented on the supply chain and inflation, stating in 2021 that the average American worker had been underpaid and that workers need to be paid more, while also noting that Best Buy had gotten ahead of the curve on holiday inventory.
Transcript (50 segments)
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Jim Weatherbe0:01
Hello, I'm Jim Weatherbe with Entrepreneur Innovation and Exchange (EIX), and we have a wonderful interview to share with you with Dick Schulze, the founder of Best Buy. So Dick, thanks for taking time to be with us today and share some of your wisdom for people interested in succeeding as entrepreneurs.
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Richard Schulze0:26
Thanks Jim, and good morning. It's great to be with you.
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Jim Weatherbe0:33
You know, most entrepreneurs show some telltale signs early on that give people a clue this might be an entrepreneur. Do you have any experiences in your youth that, as you look back, you can think, 'Well, that was a telltale sign'?
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Richard Schulze0:39
Thanks, obviously for me I didn't recognize it at the time, but I had a high level of interest in attempting to earn my own money and control much of what I wanted to do. So at age 11, I told my parents I wanted a paper route. I would accept the responsibility of morning, evening, and Sunday distribution here in Minnesota. That was a bit ambitious at 11. My mother said she wasn't sure that was the best thing for me, but I said at 11 I don't know what else I can do to begin that journey. My dad told me I needed to pay 20% of what I earned into the household, so I knew I was into a revenue sharing plan early in my career. For literally four years, from age 11 until I was almost 15, I pedaled papers. I got up at 5:30 or 6 o'clock and developed a strategy after the first year to help enhance my earnings. I knew Christmas was a time for generosity, so between Thanksgiving and Christmas I made a conscious effort to put every newspaper inside the door every day, morning, evening, and Sunday. When it came time to collect the week before Christmas, the generosity showed itself meaningfully, and I was able to triple my income. At that point, I bought a car when I was 15, just based on my ability to go that extra distance at an early age. So it started with a paper route, formulating ways to enhance my service and increase earnings.
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Jim Weatherbe2:32
When you say 'pedaling,' you were actually pedaling on a bicycle?
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Richard Schulze2:38
In the summertime, not in winter. But in the summer I did because I could get there faster. I had hills to deal with. My mother and father would put the Sunday paper in the trunk of the car when it was below zero, and I'd run back and forth from the car to the houses I was servicing. That's how I got things done on time, with some assistance.
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Jim Weatherbe3:03
So that extra effort to put the newspaper behind the door, even under extreme temperatures, was because it was Christmas time, right? But generosity poured forth, earnings tripled, and you felt real good about it.
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Richard Schulze3:16
I did. My dad too, because he stood up for his 20% and what could I say? That was the revenue sharing plan, and I paid into the household at an early age.
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Jim Weatherbe3:28
Another perspective is that you were taking initiative for the customer in the hopes of a return, which is kind of unusual for youth today—'give me something first and then I'll think about it.'
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Richard Schulze3:40
Good point. It worked out well for me and taught me that customer service was pretty important. People would pay a little extra if they got a little extra service in return. So that sunk in. That was maybe a first step. When I got into high school, I sorted packages after school for one of the large national chains. My parents said by the time I got to high school I should be in a position to support myself well. I worked hourly sorting packages at night after school, then got home and did homework until midnight, got up early, and hitchhiked to school about four and a half miles away. It taught me a lot about responsibility and accountability. Then I worked as a stock boy at a supermarket in St. Paul. I was always thinking about ways to improve what we did at the store. An assistant manager asked me to arrange the loading and unloading of product stock that came in daily from the distribution center. I chased all over the store putting things in different aisles. One day I suggested we could organize the incoming products so I could stay in one aisle, reducing time. I was told not to rearrange their process because they'd been doing it a long time and it always worked, so just do my job. I continued until I encountered him again and said, 'With all due respect, this isn't working. I think we can do it a lot better.' He said they were happy with things as they were and didn't want to change. I said, 'If you don't want to try it, then I guess I'm in the wrong job.' He said maybe I was. So I handed him my apron and moved on.
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Jim Weatherbe6:54
That sets up the next question. At some point you made a decision that you wanted to be an entrepreneur. A lot of people become entrepreneurs because they want to be their own boss, realizing they're working for someone who doesn't allow them to improve things. Did that experience lead to that?
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Richard Schulze7:06
It really did. It followed me in the way I acted and behaved going forward, probably except for my military service where everything was by the numbers. The disciplines were great, and I made good friends, but when it came to the world where I could make a difference and I believed I added value, it was a case of acting on it and not being afraid to take the action in the best interest of myself and my family. After the service, I reached a point where I was the major revenue producer in the firm I worked for, and when I didn't get the response I felt was appropriate for my contribution, I finally said I'm a whole lot better off taking control of my own destiny. I wanted to be in control, and I felt I could do that within a company that would appreciate what value I added. When that didn't happen, I resigned from the family business, much to my mother's shock and my father's disappointment. I needed to control my destiny, and that's when I broke away and started my first retail initiative, Sound of Music, focused on selling component audio products to young males 18 to 25 who loved music loud and clear. I was going to find a way to start a company and grow in a niche, which has blossomed into Best Buy today because we listened carefully to customers and weren't afraid to make changes.
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Jim Weatherbe9:32
It sounds like there were some defining moments. You had a sense of P&L from your paper route—you bought your papers, had a margin, had to give 20% to the family budget. Then you had a boss who wouldn't listen, and you had the experience of understanding the value you added but not being rewarded. A lot of people say if you want to be financially rewarded, you have to go into business for yourself. Can you give us some history of your own businesses, starting with Sound of Music?
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Richard Schulze10:27
It started with one store in St. Paul. Because I had been a manufacturer's representative, I was well-versed and connected to many competitors. I knew at least two were struggling—one financially, one physically. With long-standing relationships with manufacturers, I approached these retailers about acquiring them. I didn't have any money, so I had to leverage relationships. Because I was trusted by suppliers whose products I represented, I worked out arrangements to acquire their companies within the first 90 days of being in business, only on the premise that manufacturers would give me extended credit and I would pay off what those competitors owed over time.
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Jim Weatherbe11:37
How old were you then?
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Richard Schulze11:37
26.
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Jim Weatherbe11:40
So you did a good job building credibility and had relationships. They say it's not what you know, it's who you know.
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Richard Schulze11:47
Yes, and I was grateful for their confidence and trust. Within the first 90 days we opened in August, by Christmas we had three stores. Our own store in St. Paul was in a unique little corner surrounded by four private colleges, so we had that young male audience. Then we acquired the campus store at the University of Minnesota and a downtown Minneapolis store.
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Jim Weatherbe12:22
How did you get credit for inventory and buildings to set up stores?
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Richard Schulze12:28
The stores came with the companies, so they already had leases and locations. I met with the landlords and worked out how I would pay the rent that hadn't been paid. I essentially leveraged cash flow. I openly made people aware that I would probably take money from Peter to give to Paul, but then Paul would step up and I'd pay Peter. It was about balancing cash flow from the three locations. We worked closely with the team about the importance of generating revenue, servicing customers, and creating cash flow to meet obligations. For me, maintaining credibility meant walking the talk—if I made a commitment, I acted on it. Sound of Music grew over 12 to 15 years focusing on selling audio components to young customers, mostly male. Then the light went on. We were making a little money, treating our people well, but not growing top line as needed. That's when I bumped heads with Zeke Landers, a long-standing regional retailer in Virginia. He came with ideas to think more broadly. We focused on couples, married people, female consumers, took on video products, added software, music, and movies. That stimulated traffic and made the business more successful, leading to the evolution from Sound of Music to Best Buy.
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Jim Weatherbe14:56
So Zeke Landers was a mentor. Was that important to have a mentor at a young age?
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Richard Schulze15:04
I can't say enough about how important it is to have someone who's been there and done that to give reference, inspiration, and guidance about decision making and to help find opportunities. I learned a lot about how to diversify product offerings, track different demographics, and make the store environment more exciting. I thank Zeke for opening the door to different things we could sell.
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Jim Weatherbe15:35
Could we talk about some defining moments along the journey? The tornado seemed to be a learning experience.
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Richard Schulze15:48
Thank you for bringing that up. Sometimes ideas for new ways to think about business come from occurrences that change your thinking. We lost our Roseville store, our single largest volume and most profitable store. No lives were lost, but major damage. We quickly assembled employees to organize a tornado sale under a tent, offering damaged products at sacrificial prices because we negotiated terms with insurance companies. By the weekend, we had a huge sale that shut down traffic in St. Paul. Employees from other stores helped, and even wives and children were helping. I looked at this and thought, 'If we could package this into a new store, think what we could do.' That sparked the idea for Best Buy: get the customer in control, create added value, stack it high and let it fly. Wholesale clubs like Price Club, Sam's Club, and Costco were coming on the scene, and people gravitated toward value. I couldn't imagine why we couldn't make that work for electronics. The economic difference between Sound of Music and Best Buy was a factor of 10. That spawned our distribution from regional to national.
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Jim Weatherbe19:07
There are two significant aspects: the tornado is rare in Minnesota, so the morbid curiosity brought people out, and you held the sale at the site of damage. Also, after the tornado, with rain and no roof, you got every employee to help save inventory. What was it about your leadership that made everyone show up?
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Richard Schulze19:50
It was about our culture of inclusion and empowerment. People knew their input was respected and listened to, maybe not always acted on, but they had a voice. That's where I learned that listening to new ideas makes a company stronger. Employees knew the company had a setback, and when the cry went out for help, they came in force. The police were checking IDs to ensure only Best Buy employees entered. Even I had to show my ID. Brad Anderson, Allen Lenzmeier, and many others rolled up their sleeves and worked into the evening to protect products. It was making lemonade out of a lemon.
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Jim Weatherbe21:20
To go from an 8,000-square-foot Sound of Music store to the big box store you envisioned required different capitalization.
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Richard Schulze21:32
I didn't even think about it. I was leveraging solid relationships with suppliers. I showed them the financial returns possible with a higher profile selling strategy. I asked for more dating and time to pay. They said let's see if it works in a day-to-day environment. They offered expanded credit. In the first year, the first Best Buy store generated more revenue than the entire Sound of Music chain combined. We had people parking everywhere, and police were ticketing customers. We issued credits for parking tickets, but it was over the top.
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Jim Weatherbe23:32
In terms of lining up suppliers at the Las Vegas Consumer Electronics Show, there's a famous story of Plan A and Plan B.
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Richard Schulze23:50
Yes. Moving from Sound of Music to Best Buy added many new products—photography, appliances, home office, personal computers—all low margin. I had to convince our traditional audio/video manufacturers to supply capital to buy product from other people. Many in our company thought I was crazy. I told them we needed access to those products. We got a small credit line from a floor plan company, but I had to put my house up. I was betting the ranch. My wife believed in me, and if we didn't go there, the handwriting was on the wall. National chains were starting, so it was go big or go home. The manufacturers said it was an unusual request, and they couldn't commit without discussion. I told them our plan and history: if they weren't there for us, our only alternative would be financial reorganization. I asked for their support, committing that they'd get paid, but longer than usual. If we didn't make this work, it would narrow down to a lose-lose. They bought it. Credit managers said yes, and we moved from 60-day pay to six-month pay. It was about honesty, trust, passion, and perseverance.
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Jim Weatherbe29:30
There was a significant change in the business model that goes back to the tornado sale. The normal model was the commission salesperson with a tie, in a display room with inventory in back. The tornado sale made it grab and go. You shifted to the blue shirt who helps customers find what they want quickly.
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Richard Schulze30:19
It was about how we merchandised the store, having back stock on the floor so customers could see we were in stock, changing displays to enhance signing and product information. Salespeople were told to explain differences and features, find out the customer's real need, and match the product, not worrying about profitability. This spawned the difference in shopping experience. Customers found the same products and brands they trusted, compelling prices, and could help themselves. It was a 10-minute experience: find the product, ask questions, run to the cashier, and out the door.
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Jim Weatherbe31:47
What would you say has been the most valuable lesson you've learned along the way?
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Richard Schulze31:52
It begins and ends with the customer. The customer needs to be in the crosshairs of how we think about our business. Stay focused on customer needs at all times. Don't worry about profitability first; get what the customer wants on the floor, integrated into sales policies and procedures. Make the customer the sole purpose around which you make decisions.
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Jim Weatherbe32:09
That goes all the way back to your paper route strategy.
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Richard Schulze32:11
Exactly, it's all about the customer.
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Jim Weatherbe32:35
What advice would you give to students or someone thinking about entrepreneurship?
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Richard Schulze32:41
I was born with DNA that said I can make a difference. The entrepreneurial spirit and empowerment are catalysts for opportunity and success. But people in strong companies can also develop an entrepreneurial capability. You can make a difference wherever you are. Approach your job with a mindset that you can make it better. If the company isn't receptive and it falls on deaf ears, that's the trigger to consider starting your own company. The strength of the U.S. economy benefits from new companies creating success and hiring employees.
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Jim Weatherbe35:58
All jobs are created by entrepreneurs. If you want a job and can't find one, you can become an entrepreneur.
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Richard Schulze36:09
Exactly, that's how people should think about it.
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Jim Weatherbe36:14
Best Buy has had ups and downs, and many companies like Circuit City are footnotes. Listening to people to change the company is critical.
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Richard Schulze36:47
Stay so close to the customer that you're in sync with their needs. Go to the contact points where customers engage employees. I love having breakfast with cashiers because they're the last contact. If the experience wasn't right, customers will tell the cashier. So talk to them. I'm more interested in what we're not doing well and what we can do better. Problems happen in supply chain, advertising, technical service. Address them together. Stay close to the people connected to customers, and you'll never go wrong.
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Jim Weatherbe38:35
I've seen you come into stores and everyone runs toward you. There's no hierarchy in board meetings. That lesson from Red Owl never left.
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Richard Schulze39:12
I attribute that to the culture of empowerment. If you genuinely listen to people, they have an affinity toward that kind of capability. I started where they are—on the floor selling, merchandising, laying out ads with my wife at the dining room table. The technology has evolved, but it's exciting as long as you accept change and adapt to what's best for the customer.
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Jim Weatherbe40:24
In closing, do you have a favorite motto or quote?
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Richard Schulze40:31
I'm a type A personality who enjoys making things happen. I say, 'If you're not the lead dog, the view never changes.' I like fresh air, bright sky. Leadership is extremely important, and hard work shouldn't be feared, but working smart makes it more effective. People need as much education as possible and to open themselves to new ways of doing things. Working smart is as important as working hard. When those things come together and your view matters, it's a fun place to work.
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Jim Weatherbe42:02
Let's go back to the paper route. You had a young man come to your door collecting. Can you share how that led to a free education?
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Richard Schulze42:16
It was a great moment. A young man named Chris came to collect. It was cold, and he didn't know how much I owed. I invited him in and explained that as a paper boy, you need to know your customers and how much they owe. I took him through my story of the Thanksgiving-to-Christmas strategy and how I bought my car. About 30 to 40 minutes later, I paid him and gave a tip. Eight to ten years later, at a fundraiser, a gentleman said, 'You may not remember, but my son Chris was a paper boy, and you took him in and helped him. That meant so much that we bought stock in your company. We made $34,000 on that investment and sent Chris to college.' It was gratifying—a form of giving back that matters wherever it happens.
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Jim Weatherbe46:25
You've given back so much, supporting education, and to EIX today because many students will learn from your lessons. Special thanks for your time.
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Richard Schulze46:45
Thank you, Jim. It's a pleasure to be with you. This is what the EIX library is about—learning from other people's experiences. A good thing is to learn from others' success and mistakes so you don't have to make them all yourself. Signing off for EIX, Jim Weatherbe.