A representative gives a thumbs up to a customer after loading a television into a customer’s vehicle for a roadside pickup order at a Best Buy Co. retail store in Hawthorne, Calif. On Friday 27, 2020.
Patrick T. Fallon | AFP | Getty Images
Best Buy CEO Corie Barry said the pandemic has forever changed the way consumers shop – and the retailer is not waiting to adjust.
On Thursday, she set out how the retailer will change its workforce, store fleet and distribution strategy to focus more on e-commerce. The company is laying off thousands of employees and re-qualifying others for digital roles. It tests new stores with a smaller retail space and more space to fulfill online orders. And it is considering reducing the footprint of its nearly 1,000 stores across the country.
“The shopping behavior of customers is permanently changing in an even more digital way, and of course customers have full control over how they want to shop,” she said when speaking to reporters. “We believe that our strategy must take this reality into account and guide it in space and not follow it.”
Online sales in the US increased 89% to $ 6.7 billion for the fourth quarter ended Jan. 30 and represented 43% of total US sales for the three-month period.
Barry said she expects a greater percentage of Best Buy’s total sales to be on its website and app rather than in its stores. Digital sales are expected to represent approximately 40% of total US sales this fiscal year. This equates to 19% two years ago and 5% a decade ago.
Despite this rapid growth, Barry said the company’s inpatient footprint will continue to play a key role. Stores will display products and staff to help customers, but increasingly they will also serve as warehouses where staff pick up and pack e-commerce orders and convenient places for shoppers to quickly make an online purchase in the parking lot can retrieve.
New kind of business
As Best Buy spins, stores may become fewer in number and smaller.
Barry said the company will get shorter leases for its businesses going forward and have a higher bar when they come up for renewal. She said there are about 450 leases up for renewal over the next three years.
Best Buy has closed around 20 large-format stores in each of the past two years – and Barry expects a larger number of stores to close this year.
The consumer electronics retailer, known in the past for its large retail space and eye-catching gadget displays, has redesigned some stores near its headquarters in Minneapolis. The shops were rebuilt in November as part of a pilot project.
“We’re testing our hypothesis that stores may act a bit more as primary fulfillment hubs,” she said.
This is what other retailers like Target are doing to make online ordering more profitable.
At some Best Buy stores, it has almost halved its retail space – from 15,000 to an average of 27,000 square feet, Barry said. The smaller retail space only offers the most popular items, with a wider range that is kept behind the scenes and continues to be available for purchase.
Some stores are also testing a hub for the “Geek Squad,” a team of employees who install and set up technology or carry out repairs.
So far, she said, the company is enjoying how the smaller stores have created more space for picking up online roadside and in-store orders, as well as shipping some e-commerce purchases.
A smaller workforce
The company’s workforce has already shrunk to accommodate the different ways of working.
Best Buy started its last fiscal year with 123,000 employees and ended the year on January 30 with around 102,000 – a decrease of around 21,000, or 17%, Barry said in a conversation with investors and analysts. She said most of that reduction was due to attrition.
Earlier this month, Barry said the company had laid off and laid off approximately 5,000 employees, most of whom were full-time employees. Employees will be hired for around 2,000 part-time positions.
“Decisions like these are never easy or frivolous, but they make us more responsive and flexible as we evolve our operating model in the future to respond to the incredibly rapid change in the way customers want to shop with us.” said she said.
She noted that the company gives rewards to employees in connection with pandemics. Full-time workers get $ 500 and part-time workers get $ 200, including those who lose their jobs. And she added that employees will be trained in new roles, such as providing technical support to customers via video chat.
Some employees have criticized Best Buy for the layoffs – especially at a time when many are already facing other stressors such as finding childcare during virtual learning, coping with illness in their family, or coping with the financial burden of the youngest from Covid caused recession.
A group of them distributed an online petition calling for workers to be paid retrospectively. The petition says that even those who still have jobs at Best Buy are struggling to pay their bills because working hours are reduced.
The right product mix is also important for Best Buy’s future growth. Barry said technology will continue to play a role in people’s lives.
She said the retailer views health as an area of growth as more people use wearables to track workouts at home or use telemedicine to virtually meet a doctor.
The large numbers of people working from home have inspired new products, from high-tech chairs to standing desks, she said. And she added that the technical services are a sales driver and differentiator.
Online and offline, she said, customers look to Best Buy for the same things as searching for products, finding inspiration, and getting tech support.
“We have to be ready to meet all of these needs at all times across all channels,” she said.