Best Buy’s eCommerce Strategy, What You Need to Know
Best Buy is the seventh largest eCommerce retailer in the United States ahead of retailers like Costco and Wayfair.
Last year about a third of Best Buy’s sales came from eCommerce a big jump from 2019 when Best Buy’s online sales had a 19% share. If you are curious about what Best Buy is doing to have a strong eCommerce business then consider these elements of its strategy.
1. Stores continue to play a critical role. Stores are a critical part of any retailer’s eCommerce strategy since customers often start shopping in a store and then order online or they elect to pick up their purchases in store. the role of Best Buy’s stores are only increasing in importance. “We are building all of our experiences around meeting these needs as we move from being a big box retailer with a strong omni channel presence to an omni channel retailer with a large store footprint for support and fulfillment,” says Corie Barry Best Buy’s CEO. “Fundamentally, when you're looking for help and want to be inspired, the best experience will always be in our stores, talking to one of our amazing employees.”
Back in 2020 Best Buy highlighted the important link between stores and eCommerce. “Our stores played a pivotal role in the fulfillment of these sales [in the fourth quarter of 2020] as almost two-thirds of our online revenue was either picked up in-store or curbside, shipped from a store or delivered by a store employee. The percent of online sales picked up by customers at our stores was 48%, representing a 90% increase in volume,” said Barry on Best Buy’s fourth quarter 2020 earnings call.
2. Remodel stores for the future. Best Buy is also making its backrooms larger because 80% of the skus on its floor only sell one or less items each weak. “We will decrease the selling square footage and adjust the assortment and merchandising strategy in many of our stores,” said Barry. “’The shift in digital sales and the resulting lower in-store revenue, in addition to a much larger percent of high ASP appliances sales, has pressured our operating model and working capital. For context, roughly 80% of the SKUs we display on our sales floor sell one or fewer per week. In these core medium-sized stores, some of the selling square footage will be shifted into larger backrooms.”
“So, the total square footage of these stores is not expected to change materially. Our stores have multiple purposes now, and a larger back room provides better support for other capabilities like our high rate of in-store pickup of online orders. In addition, we see significant opportunity to leverage these larger store warehouses and our supply chain expertise to help our vendor community fulfill a larger portion of their direct-to-consumer channel,” said Barry.
Many elements of Best Buy’s strategy foreshadow moves other retailers are likely to make. For example, the United States has the highest amount of retail square footage per person in the world. That means that while stores are critical many retailers still have too many of them or the ones they do have may need to be downsized. With the popularity of eCommerce and the ability to pre-shop it is simply not necessary to have as many large stores whether they are Best Buy locations or department stores.
“With that big of a digital shift happening in that short of a period of time [during the pandemic], we’ve been doing everything we can to adjust to the new reality,” says Barry. In line with this shift in direction Best Buy has a closed a number of stores and made room for more flexible part time employees to support its online business. “As we have said before, customer shopping behavior will be permanently changed in a way that is even more digital,” said a Best Buy spokesman. “Our workforce will need to evolve to meet the evolving needs of customers while providing more flexible opportunities for our people.”
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