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Best Buy grew web sales faster than Amazon and Wal-Mart last year

March 1, 2017 03:18 PM
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Best Buy Co. Inc.’s online sales grew at a faster clip than the U.S. e-retail industry average in 2016, and they outperformed online leaders Amazon.com Inc. and Wal-Mart Stores Inc.

Best Buy’s web sales grew 20.8% for the fiscal year ended Jan. 28 and totaled $4.85 billion. The average growth in U.S. e-retail was 15.6%, per estimates released by the U.S. Commerce Department last month, while Amazon’s product sales clocked 19.4% growth and Wal-Mart’s e-commerce sales grew 15.5% globally.  

Best Buy, No. 12 in the Internet Retailer 2016 Top 500 Guide, says it generated $2.3 billion online in the fiscal fourth quarter, which for Best Buy encompasses November, December and January. That’s up 17.9% from $1.95 billion a year earlier.

Best Buy needs to have a powerful Q4. Among the 30 publicly traded retailers that release their online sales performance figures, Best Buy generates the greatest percentage of its online revenue in the fourth quarter: 47.4% in the most recent Q4 and 48.6% for the November 2015-January 2016 period. In comparison, Amazon’s Q4 product revenue accounted for 32.4% of total product revenue for the year. Amazon is No. 1 in the Top 500; Wal-Mart is No. 4.

While online sales grew for Best Buy, total domestic revenue fell 1.4% in Q4 and was flat for the full year. Web sales accounted for 18.6% of Q4 domestic revenue and 13.4% of total domestic revenue for the year. A year ago, web sales accounted for 15.6% in Q4, and 11.0% for the full year.

“Our strong bottom-line performance in the fourth quarter was driven by a disciplined promotional strategy, continued optimization of merchandise margins and strong expense management,” says Hubert Joly, CEO of Best Buy.

Best Buy put its Black Friday ad online Nov. 10 to give shoppers a preview of what they could expect, and shoppers could get the Black Friday deals online on Thanksgiving. The retail chain, for the second consecutive year, also offered free shipping on all online orders regardless of purchase size.

Best Buy has taken other steps to improve its competitiveness online. For instance, in the span of two years, it cut by half the average time that elapsed from an order being placed on BestBuy.com to delivery, according to Slice Intelligence data. Delivery, as of April 2016, takes 3.3 days, on average. It also offers same-day delivery in 13 metropolitan markets through last-mile delivery service Deliv.

It was Best Buy’s arrangement with Deliv that earned Best Buy the gold medal when Internet Retailer recently put 30 e-retailers to the test. Best Buy, via Deliv, delivered our order of an ink jet replacement cartridge to our office in downtown Chicago four hours after we placed the order. Best Buy did not charge for the extra-fast delivery service. (Find more results from our test in Click, Ship & Return, an IR Research report.)

For the three months ending Jan. 28, Best Buy reported:

  • Total revenue of $13.48 billion, down 1.0% from $13.62 billion the same period a year ago.
  • Online sales of $2.30 billion, which Best Buy says is up 17.5% from a year ago. Best Buy did not disclose today what online sales were a year ago, but reported the $1.95 billion figure in a prior earnings release. Using that figure, Internet Retailer calculates growth of 17.9%.
  • Domestic revenue, which includes web sales, totaled $12.34 billion, down 1.4% from $12.51 billion.
  • Web sales accounted for 18.6% of total domestic revenue in the quarter, up three percentage points from 15.6% a year earlier.
  • International revenue totaled $1.14 billion, up 1.8% from $1.12 billion a year ago.
  • Domestic comparable-store sales, which factor in web sales, declined 0.9%.
  • Net income of $607 million, up 26.7% from $479 million.

For the 2017 fiscal year ended Jan. 28, Best Buy reported:

  • Total revenue of $39.40 billion down 0.3% from $39.53 billion in fiscal 2016.
  • Net income of $1.23 billion, up 37.1% from $897 million.
  • Best Buy did not report a full-year dollar total for online sales, however, based on previous company reports, Internet Retailer calculates Best Buy generated about $4.85 billion online during the 2017 fiscal year, up 20.9% from $4.01 billion online during the 2016 fiscal year. Best Buy reported a comparable online sales change of 20.8%.
  • Web sales in fiscal 2017 accounted for 13.4% of domestic revenue and 12.3% of total revenue. In fiscal 2016 web sales accounted for 11.0% of domestic revenue and 10.1% of total revenue.
 

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