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Best Buy sharpens its focus on e-commerce growth
Best Buy wants to focus more on e-retail as the chain moves to close 50 stores.
Topics: 2011 financials, Best Buy, Brian Dunn, China, Connected Stores, consumer electronics, e-commerce business model, e-commerce financials, e-commerce growth, financials, Five Star, Geek Squad, international e-commerce, m-commerce, Minneapolis, mobile commerce, Q4 financials, retail chains, San Antonio, Starbucks, Stephen Gillett, store design, Top 500
Best Buy Co. plans to cut 400 jobs, close 50 stores, cut $800 million in expenses, launch a new, multichannel-focused retail store design in San Antonio, TX, and Minneapolis, and open 100 stand-alone stores to sell mobile phones and services. Meanwhile, Best Buy forecasts its domestic online sales will increase by 15% in fiscal 2013 and reach $4 billion by fiscal 2016.
The electronics retailer is restructuring itself amid a $1.2 billion loss for fiscal 2012.
“These changes will also help lower our overall cost structure,” says Brian J. Dunn, Best Buy CEO. “We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices, which will help drive revenue.”
Best Buy’s push to diversify its business model, close some stores and emphasize more e-commerce development comes at a stage when web sales are growing at a healthy pace for the chain retailer.
For the fiscal year ended March 3, Best Buy, No. 11 in the Internet Retailer Top 500 Guide reported:
- An increase in e-commerce sales of about 18% to $2.95 billion in 2012 from $2.50 billion in 2011.
- Total sales increased 1.9% to $50.70 billion from $49.74 billion.
- Comparable-store sales declined 1.7%.
- Net loss was $1.23 billion compared with net income of $1.27 billion in 2011.
- The web accounted for 5.8% of total sales, the same as in the prior year.
Best Buy doesn’t break out quarterly web sales, but for the fourth quarter did report:
- Total sales increased 3.4% to $16.63 billion from $16.08 billion in Q4 2011.
- Comparable-store sales declined 2.2%
- Net loss was $1.69 billion compared with net income of $651 million in Q4 2011.
Earlier this month Best Buy hired Stephen Gillett as president of Best Buy Digital and Global Business Services, a newly created position. Previously, Gillett headed up the Starbucks division that enabled consumers to pay for purchases at the coffee chain’s retail locations using their smartphones. He also led the redesign and expansion last summer of Starbucks’ e-retail site, Starbucksstore.com.
The Best Buy in-store multichannel sales revamp is expected to be complete before the holiday sales season this year at stores in San Antonio and Minneapolis. Called Connected Stores, they are being remodeled with an increased emphasis on how consumers use smartphones, tablets and other digital devices, and employee training.
Best Buy expects sales in China to reach $4 billion by fiscal 2016 as it aims to open 400 to 500 Five Star stores there by then. Five Star is the company’s Chinese brand. Currently, there are 204 Five Star stores in China, Best Buy says.
In addition to China sales and online growth projections, Best Buy’s domestic services business, including its Geek Squad technology support, is forecast to grow sales by 10% in fiscal 2013.
Melinda Driscoll, digital analytics senior manager, Best Buy Co. Inc., will speak this June at the Internet Retailer Conference & Exhibition 2012 in Chicago in a session titled “The new age of analytics: Creating a data strategy that leads to increased sales.” The IRCE $200 early-bird discount expires March 31.