Another retailer struggles in the new retail environment.
Last week, US-based electronics store, Best Buy reported a 9.6% decline in
overall quarterly revenue while online sales improved 7.1% to $498m. Cost
cutting was heard loud and clear during the recent earnings call. Among its
efforts included selling the rest of its stake in Best Buy Europe back to
Carphone Warehouse Group PLC. Indeed, many financial analysts applauded this
and other cost cutting measures the company is undertaking.
The supply chain appeared to also be a highlight. Among the
many initiatives in this area include reducing its vendor-base as well as
reducing and shortening truck trips by consolidating freight and re-allocating
inventory so that shipments are sent from the distribution center nearest their
destinations.
A pilot is underway in over 50 locations in which stores
serve as fulfillment centers for online orders. An interesting statistic was
thrown out in which Best Buy fails to close 2% to 4% of online shoppers because
the item they want is out of stock on BestBuy.com even though it may be
available in nearby stores. This
fulfillment by stores concept is occurring in many other retail stores
including Macy’s and WalMart. A good use of physical stores, if done correctly,
that will increase competitiveness with pure-plays such as Amazon and Ebay.
Finally, reverse logistics was identified as a top priority
for Best Buy. According to the company’s Chief Financial Officer (CFO), the
handling of returns “received virtually no attention as the company grew” and
has resulted in $400m in losses each year. Although the CFO noted outdated
returns processes, over the years, the company has undertaken numerous projects
in this area surrounding returns, repair, warranty management and recycling.
Indeed, reverse logistics may be the game-changer for brick
and mortar retailers competing in the new multichannel retail environment. With
the returns rate still hovering in the double-digits for many products,
managing this process alone will improve the customer experience. One must
remember, the customer is now in the driver’s seat in this multichannel environment
and to retain as well as attract customers, the retailer must offer a complete and
seamless customer experience across its entire offering. Not only is reverse logistics a plus for improving customer relations but also to minimize costs as well as generate possible new revenue streams.
Best Buy has experienced several bumps and hiccups along its
way in establishing a multichannel offering however, it appears the company may
finally be heading in the right direction. Will it be successful? The jury is
still out. It has underinvested in the online channel and is looking to remedy
this. Still, its store-fronts are in prime locations and could be successful if
it successfully links these locations with its online presence.
