Online sales were the lone bright spot for Best Buy during the holidays
January 16, 2014 03:39 PM
Strong sales numbers on BestBuy.com provided the lone piece of good news for Best Buy Co. Inc. during the holiday season. While the multichannel retailer’s e-commerce site generated $1.32 billion in sales, a 23.5% gain compared to a year earlier, Best Buy’s overall sales fell 2.6%.
BestBuy.com’s growth was driven by an increase in traffic to the site, as well as shoppers spending more per purchase, the retailer says. Both those gains were helped by the retailer bolstering its ship-from-store capability, which lets the retailer fulfill online orders from store stock, Best Buy says.
But holiday shoppers’ focus on price hurt its overall sales, said Hubert Joly, the retailer’s president and CEO, today during a conference call with analysts. While the retailer was ready to be competitive on price—during its third quarter earnings call its executives highlighted its price-match guarantee and plan to encourage consumers to use Best Buy stores as showrooms for merchandise, taking the risk they might buy online for less—that approach ultimately hurt its bottom line.
“It was imperative to live up to our customer promises—and one of those promises is to offer customer competitive prices,” he said. “This investment in pricing did come with a higher-than-expected cost.” He noted that the retailer expects its fourth quarter net loss will be 1.75% to 1.85% more than last year, when it reported a $409 million loss.
The holiday season's results reinforced Joly’s plans to grow and enhance both BestBuy.com, as well as its multichannel experience, he said. Best Buy plans to “enhance our marketing approach and effectiveness," he said. In particular, it aims to personalize its on-site experience and marketing messages. That's required a significant investment in revamping its databases' capablities so that it can, for example, send personalized e-mail messages to the more than 50 million consumers on its e-mail list.
“We were out-competed from an online marketing standpoint because of our systems’ capabilities related to personalization,” said Sharon McCollam, the retailer's executive vice president and chief financial officer. She said that next year the retailer's investments will position Best Buy to better compete.
By doing a better job of marketing, Best Buy will be better prepared to face challenges from online "giants" like Amazon.com Inc., she said.
For the nine-week holiday period ended Jan. 5, Best Buy reported:
• Total revenue of $11.45 billion, down 2.6% from $11.75 billion.
• Online sales of $1.32 billion, up 23.5% from a year earlier (Best Buy did not provide a revised comparable 2012 figure; last year it said it had $1.1 billion in online sales during the holidays).
• Domestic revenue of $9.75 billion, down 1.6% from $9.91 billion.
• International revenue of $1.70 billion, down 8.1% from $1.85 billion.
• Comparable-store sales fell 0.8%.
Best Buy is No. 11 in Internet Retailer’s 2013 Top 500 Guide.