Best Buy produces record results doing things differently in the pandemic

Discussion
Photo: Getty Images/Elijah-Lovkoff
Aug 26, 2020
George Anderson

Best Buy’s flexible approach during the second quarter led to record online sales during the period and produced a gain in same-store sales, even though during the first six weeks of the period its locations accepted visitors on an appointment-only basis.

The consumer electronics chain saw its U.S. digital business grow 242 percent over the three months ending Aug. 1, a record for Best Buy, and stores open at least a year posted a 5.8 percent gain.

Best Buy benefitted from a number of factors, including people looking for a variety of products to fill their cooking, educational, entertainment and job needs while staying at home. Consumers had money to spend thanks to an influx of stimulus cash from the CARES Act passed in March.

Speaking on the retailer’s earnings call yesterday, CEO Corie Barry was cautious about its outlook while maintaining that lessons learned this year are likely to stay with the company.

“We are leveraging localized data and analytics that allow us to pilot various services like opening stores an hour earlier for consultations only,” she said. “Using data and analytics also allows us to quickly and productively customize operations to the local situation, if necessary.”

Ms. Barry said that her team expects that digital sales will remain historically high going forward and stores will handle more of the load. Currently, Best Buy handles 60 percent of all orders via stores.

“We are starting to evolve the way we use our stores for fulfillment. For example, next month, we will be piloting a ship-from-store hub model to help handle significant volume pre-holiday and year-round. All our stores will still ship out online orders, but approximately 250 locations will be positioned to ship out significantly more volume,” she said.

“These locations were chosen for their space, proximity to carrier partners and ability to support same and next-day delivery. Over time, this should allow us to deliver a more productive fulfillment model.”

Best Buy continues adding to its network of third-party pickup locations for online orders, with more than 16,000 currently in place within five miles of 85 percent of Americans.

The retailer is also testing having associates make same-day deliveries to the homes of customers from 200 stores. “Going forward, we are on a path to develop a flexible workforce model that leverages technology and provides associates the ability to work whenever and wherever they want,” she said.

DISCUSSION QUESTIONS: What is your take on the adaptations Best Buy has made and its second-quarter performance? What makes you most hopeful or concerned about its prospects through the rest of 2020 and beyond?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"As global tech demand soars, Best Buy’s wise moves have invigorated its agility, speed and service. "
"In retail, it never hurts to be on the right side of key consumer trends. Electronics are such a sweet spot."
"Best Buy has methodically made smart, data-driven decisions to optimize its omnichannel capabilities since before the pandemic."

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31 Comments on "Best Buy produces record results doing things differently in the pandemic"


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Art Suriano
Guest

It is evident that before the pandemic, Best Buy was doing many things right. They were a healthy company. The success they have achieved during the pandemic is extraordinary. In the future, I agree with Ms. Barry that digital sales and all sales will continue to be strong because Best Buy continues to find new and better ways to keep their customers happy. They recognize the opportunities that are out there and they are not afraid to take chances to see what may or may not work. That’s how you achieve success. When you’re a leader and not a follower, you can go far — and Best Buy has proven that.

Bob Phibbs
BrainTrust

Certainly great news for retail but like Target, Walmart, et al, let’s not forget that they got a 500 mile per hour tailwind of consumers locked in their homes looking for a diversion which came through electronics.

Steve Montgomery
BrainTrust

I agree. These same companies also benefited from the need for people to buy or upgrade their WFH needs.

Joe Skorupa
Guest

Good point about tailwinds for essential retailers, however electronics are sold everywhere, especially online. I believe the electronics category is the number one category in e-commerce and for Amazon, too (although not its most profitable category). Normally this would not bode well for an electronics retailer. However Best Buy has been investing in omnichannel for years and is very good at it. It has also invested in core systems that enable fast, scalable marketplace adjustments, such as curbside service. These investments have been decisive.

Neil Saunders
BrainTrust

Even before the pandemic, Best Buy was incredibly advanced in multichannel and serviced a lot of online orders via its stores. Having this capability in place during the lockdown allowed them to quickly switch to curbside collection, which proved to be a huge benefit in retaining sales when stores were closed. With online penetration increasing rapidly, Best Buy is doubling down on its investments and is expanding the role stores play in fulfillment – including more shipping of products from shops. This is smart as it will allow Best Buy to cope with spikes in volume over the holiday period and will ensure a higher level of online sales can be delivered profitably by maximizing the productivity of existing infrastructure. All in all, it underlines the importance of physical stores in the wider retail ecosystem.

Paula Rosenblum
BrainTrust

You knew the electronics industry was going to do well in the pandemic. Best Buy’s approach is a winning one.

I expect at some point pent up demand will be satisfied and sales will dip, but these thing are cyclical.

Overall, great job.

Ryan Grogman
BrainTrust

An increased focus on localization, utilizing analytics to make informed decisions around consumer services, leveraging stores as fulfillment centers, and creatively addressing how to get product delivered as quickly as possible: these are all concepts that the industry has been discussing for the past few years and it’s great to see an organization such as Best Buy really put them into execution and have positive results. Even though there may have been heightened demand for certain home products during the start of the pandemic, Best Buy’s use of the appointment-only service was an agile response to consumer fears around shopping in crowded stores and provided an opportunity to allow high-conversion customers into their doors. It’s this kind of innovation that should lend itself well to continued success for Best Buy.

Dave Nixon
BrainTrust

Best Buy has a unique differentiator in that they are ASSOCIATE focused as much as they are CUSTOMER focused. This truly helped them pivot quickly when they needed to. The field was ready and willing to do whatever it took to adapt their stores to the immediate need for implementing new models. They implemented their BOPAS and Concierge Service models in less than 48 hours! Strong leadership, and a clear strategy prior to COVID-19 coupled with a massive demand spike made for a strong performance from Best Buy.

Ricardo Belmar
BrainTrust

That differentiator, their associates, is significantly underrated! FI you needed proof that investing dollars in associates is a long-term win in customer sales, Best Buy is that proof!

Lee Peterson
BrainTrust

Well you gotta love this blueprint (no pun intended). Really well done. It started about five years ago, with the re-focus to online on one side and the “Blue Shirts” on the other. Now it’s fully focused on the consumer and the way they either have to or want to shop. Also the move to dark stores (ship from store hubs) is an excellent, excellent move. All retail, specialty included, should observe and follow IMO. Of course it doesn’t hurt that they deal predominantly with home, but think of this: they were never “essential” and still pulled this off. Very impressive.

Brett Busconi
Guest

Best Buy continues on its path of adaptation. Corie Barry took over for Hubert Joly in 2019 and carried on the type of approaches Joly used to conduct an incredible turn-around there during the back end of his tenure.

I continue to be bullish on Best Buy because they are focused on the right things. Good for them – and they provide a good model for others to learn from.

Dave Bruno
BrainTrust

A thoughtful, comprehensive strategy that included keeping over 80 percent of seasoned sales associates on the payroll even while stores were shuttered positioned Best Buy extremely well to capitalize on the spike in demand for tech. Their store fulfillment model is a great way to leverage physical stores as a competitive weapon against Amazon and keep more associates employed and productive. Incredible work all around. Congratulations to Ms. Barry and the entire organization.

Bob Amster
BrainTrust

Their abilities and their success during the pandemic are tightly coupled and, then again, with the demand created by the pandemic. They are in the right market. When the pandemic and the pent-up demand are over, and the margins continue to challenge this retail sector, it will be necessary to sharpen some other aspect of the business. The most critical aspect then, will be (no secret) customer service and experience.

Lisa Goller
BrainTrust

Tech is the hero of 2020, connecting us to loved ones, work and school. As global tech demand soars, Best Buy’s wise moves have invigorated its agility, speed and service. A fast ship-from-store model, relevant localized assortments and partnerships for competitive e-commerce are paying off. Looking ahead, Best Buy will win during the holidays and this undeniably digital decade.

jbarnes
Guest

Best Buy was deploying winning strategies that were focused on the customer experience before the pandemic. They have been successful leveraging their OMS to improve inventory visibility across their network and have added additional fulfillment methods (curbside) and contactless pickup/payment in order to deal with consumer safety concerns. Having an OMS as a back bone has allowed them to move quickly. However they have also executed operationally to deliver on the promise. It is that blend of technology and operational excellence that will continue to propel them forward and create brand loyalty.

David Weinand
BrainTrust

This story continues to impress. It just confirms that strong leadership can be the way forward in adapting to a consumer that continues to move the goalposts. The strategies are sound and in line with what we’re seeing from leaders in retail – leverage stores for more fulfillment and create touchpoints that match the experience needs of the customer. Bravo.

Gene Detroyer
BrainTrust

The retailers that were already implementing positive changes in their business before COVID-19 were doing well. Not surprisingly, during COVID-19 they did exceptionally well. Isn’t it time we stop trying to project results during COVID-19 as if they are going to continue into the future?

Are the analysts going to write obituaries when Q2 2021 doesn’t match Q2 2020, yet by any other measures Q2 2021 might be just outstanding? Let’s just get real about what is happening out there and why.

Brandon Rael
BrainTrust

Best Buy very proactively made the necessary pivots and transformative steps to be a digitally powered, customer-centric organization with the right physical and digital mix to drive outstanding experiences and meet the surging demands. Their mix of in-store expertise, services, diverse assortments, pricing, promotional strategies, and micro-fulfillment capabilities, make them a premium electronics retailer and a force to be reckoned with.

By focusing solely on the customer experience and meeting their needs regardless of which channel they shop, Best Buy is well-positioned for sustainable growth. In short, their significant digital transformation investments prepared the organization for this moment. They were rebuilt for this moment, and it’s paying dividends.

Mohamed Amer
BrainTrust

In retail, it never hurts to be on the right side of key consumer trends. Electronics are such a sweet spot. The pandemic skewed demand to bases like food and to electronics that made staying at home more tolerable and even enjoyable. Add to that a data-driven culture that is comfortable with experimentation, and you get an agile business model that can quickly adapt to circumstances. The physical store can be a flexible asset. Best Buy’s leadership has tapped into the many ways it can be of value to the consumer and in creating greater efficiencies. Well done!

Brent Biddulph
BrainTrust
Having been one of those customers that made a purchase online with Best Buy during those six weeks of “appointment only” store openings – two things really impressed me. First, during my online search (discovery), Best Buy not only had the best prices, but options that included “open box” items – something they are better than anyone in executing (including Amazon). Second, the curbside pickup experience was something to behold – at least a half dozen Best Buy employees in neon yellow shirts standing outside the storefront, earpieces to communicate with in-store order fillers, cashiers, etc. and immediately engaging every car that pulled up. Scurrying about to grab orders, AND answer consumer questions from their car doors in a highly orchestrated effort to make the best of the situation. For me, a consumer trading with various retail sectors in the early days of COVID-19 – Best Buy was the most impressive response given the circumstances (non-essential designation) they were dealt. Kudos to the executive team for thinking outside the box and making the commitment to… Read more »
Georganne Bender
BrainTrust

Best Buy may have gotten a boost during the pandemic, but the company was already doing a lot of other things right. The most important being its treatment of customers, amplifying service to a new level.

The other centers on its store associates. It’s a pleasure to shop at Best Buy because the associates are friendly, knowledgeable and well trained. They are also plentiful which is unusual these days. When compared to their competition, Best Buy is a stand out.

Cathy Hotka
BrainTrust

Best Buy could have been eclipsed by Amazon or Walmart years ago, but decisive executive leadership provided a roadmap for success. They’re doing a lot of things right.

Jeff Sward
BrainTrust

Best Buy has adapted amazingly well to the new shopping environment. I went to Best Buy last Saturday for a new monitor. I was greeted at the entrance with, “Would you like to shop on your own or will you need help today?” I needed help so I was put into a virtual queue and told, “If you want to head over to the monitor section, somebody will meet you there in just a few minutes.” Two minutes later I was greeted by a very knowledgeable sales person and five minutes after that I was headed for the cash register. Best Buy is executing smart, pragmatic solutions that work beautifully for both them and the customer. Win/win!

Camille P. Schuster, PhD.
BrainTrust

Best Buy has been experimenting and adapting to create consumer-centric processes and services. One result from the continued data collection, analysis, and insight is a good understanding of their consumers. Obviously it has become a habit and they have continued to experiment and adapt through these changing times.

Ryan Mathews
BrainTrust

Best Buy has managed the storm in superb fashion and Corie Barry is correct in being cautious about the future. Many of the items that have sold during the pandemic will take consumers out of the purchase cycle for three to 15 years. It isn’t like folks are going to run out and buy a new refrigerator or laptop every six months. What makes me hopeful? They have demonstrated their flexibility and agility and obviously have a clear thinking CEO and management team. What makes me concerned? In retailing success can sometimes by your enemy because spiking sales in certain categories often is followed by decreased sales in those same categories.

Shep Hyken
BrainTrust

Best Buy gave us the best of both worlds — an online experience (as always) and a VERY safe experience in-store, which helped them keep their customers. When a customer makes an appointment, they are most likely on a mission to make a purchase that requires sales assistance. I’d love to find out if the in-store average purchase increased.

Cynthia Holcomb
BrainTrust

In-store customer service. Best Buy is nailing it! Personally, I have been surprised and then amazed at the high level of product intelligence Best Buy associates render in helping solve an individual customer product need. Twelve months ago, this level of interaction at Best Buy was hit and miss. Great job! Best Buy is the place to go, with hundreds of locations to physically purchase technical products.

Doug Garnett
BrainTrust

Excellent for Best Buy. That said, this is an interesting example of how corporate results are massively affected by accident.

Best Buy appears to be gaining the “too much time at home” benefit which Home Depot and Lowe’s are also seeing. People with time at home are looking to improve their situation so Best Buy experiences good results.

Some of this good result is due to management choices. Most comes from the accident of a pandemic driving demand for electronics at home.

Patricia Vekich Waldron
Staff

While BBYs high-tech products are in high demand from home-bound consumers, they’re also making changes in operations, supply chain, fulfillment and delivery to offer shoppers a quick, convenient and seamless experience. Data and training are at the core of making these operational changes work in the most profitable way.

Verlin Youd
BrainTrust

No surprise that Best Buy results are highly correlated to binge watching, work from home, and school from home. That and for the omnichannel (still don’t like that term) investment reasons cited by many below, Best Buy has been able to take advantage of the situation. I believe that those investments and just as important their willingness to try new things all the time, including ramping up fulfilling online orders through stores, will keep them in positive territory for the rest of the year.

Ricardo Belmar
BrainTrust
Best Buy has methodically made smart, data-driven decisions to optimize its omnichannel capabilities since before the pandemic. This approach has resulted in exceptional short-term benefits to their sales as consumers needed to beef up their work from home capabilities during the pandemic as well as satisfy their entertainment needs during the lockdown months. Each step Best Buy has taken has both improved how they serve their customers today and also established a deeper brand relationship that will continue to pay dividends in the future, post-pandemic. Sure, they gained tremendously as an essential retailer while most stores were closed, but I feel this is offset in their case by online retailers competing with them for the same, undifferentiated electronics products. What sets Best Buy apart is their adaptability to the situation and their ability to help customers make purchase decisions in ways no other online retailer, even Amazon, can duplicate. While you have to assume many of these purchases are not repeatable (most consumers that bought a new laptop for work from home aren’t going to… Read more »
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Braintrust
"As global tech demand soars, Best Buy’s wise moves have invigorated its agility, speed and service. "
"In retail, it never hurts to be on the right side of key consumer trends. Electronics are such a sweet spot."
"Best Buy has methodically made smart, data-driven decisions to optimize its omnichannel capabilities since before the pandemic."

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