April 14, 2011, 3:31 PM

Best Buy plans to double its e-commerce business

The retail chain projects hitting $4 billion in web sales within five years.

Lead Photo

Mobile business also is set to grow.

Best Buy Co. Inc. plans to double its annual web sales to $4 billion within five years, while reducing bricks-and-mortar store square footage in the next three to five years. The retail chain also plans to open more stores selling mobile phones and service plans.

CEO Brian Dunn and other executives laid out the electronics and appliances chain retailer’s growth plan today at a presentation to Wall Street analysts at company headquarters in Richfield, MN.

Best Buy will expand its multichannel strategy based on what it has learned about the way shoppers want to engage with the company, Best Buy executive vice president Shari Ballard told analysts. “There’s a new definition of convenience: the ability to interact with a company on your terms,” Ballard said.

The company plans to expand on domestic e-commerce success, she said, noting that 60% of Best Buy store purchases are researched online and 40% of online purchases are picked up in stores.

The strategic plan comes on the heels of the company’s flat sales results. Best Buy, No. 10 in the Internet Retailer Top 500 Guide, has seen overall sales stagnate over the past year while web sales grew.

For the year ended Feb. 26, Best Buy reported:

  • 2011 web sales of $2.5 billion, up by 14% from $2.2 billion in 2010.
  • Total sales were $50.3 billion, a 1% increase from about $49.7 billion.
  • Comparable-store sales were down 1.8% year over year.

2012 projections, from Best Buy’s year-end earnings filing with the U.S. Securities and Exchange Commission, show more of the same with total revenue of $51 billion to $52.5 billion, an increase of 1% to 4%. Comparable-store sales are expected to be flat to a 3% decline.

New strategies presented today include:

  • Significantly expanding Best Buy’s online presence in the United States, with a goal of doubling the current $2 billion online business within five years. Growth will come from more introducing a broader selection of merchandise as well as adding more related services and digital content, the retailer says.
  • Increasing Best Buy Mobile as part of its multichannel approach to an estimated total of 600 to 800 stand-alone stores in the U.S. within five years. Best Buy currently has about 250 mobile stores that sell mobile phones and network service.
  • Investing in Five-Star, the company’s Chinese brand. Best Buy expects to grow to 400 to 500 Five-Star stores in the next five years. The company believes it can more than double its revenues in China to $4 billion in that time.
  • Improving store productivity, such as by adding technology experts to the sales floor and deploying touch screen monitors with product information. The plan includes a 10% reduction in U.S. resulting square-footage over the next three to five years, resulting in expected annual savings of $70 million to $80 million. The retailer didn’t provide any remaining details such as when and how many stores may have a reduced floor plan.

Best Buy will focus on two product areas, Dunn told analysts, including tablets and mobile phones, two markets that the company is targeting for more market share. IPad tablets, from Apple Inc., No. 4 in the Top 500 Guide, have been good to Best Buy, Dunn said, but as more manufacturers bring their tablets to market the more choices shoppers will have and the better Best Buy can take advantage of shopper interest.

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