Blog: Supply Chain to the rescue for Best Buy

If anything, this could be the holiday season to make or break Best Buy. Like Target, it enters the holiday season in a good position after reporting stronger than expected quarterly earnings. An amazing turnaround for the company as it’s been a rough road for Best Buy over the past couple of years and in fact, many expected the retailer to head for the retail graveyard as it suffered continuous declines in sales.

Indeed, the electronics retailer which helped take down the once great Circuit City is now facing the threat all other brick & mortar retailers are facing – the internet and specifically, Amazon. To fight back, Best Buy looked at its supply chain. Surprisingly as one of the most recognized retailers, analysts note that the company had quite a bit of “slack” in its supply chain that the company could optimize. And indeed it is doing just that, optimizing its supply chain and so far, the results have been positive. Its supply chain achievements have included returns management, ship from stores and faster shipping times thanks to all distribution centres handling online orders. While the company continues to optimize its supply chain, is it ready for the holiday season?


One of its biggest costs has centered on product returns. According to Best Buy, handling these returns cost the company $400m on average per year. So, one of the solutions to correct this has been to connect store backrooms to its website and sell returns and open box items online. A combination of this service with its ship from store concept has resulted in positive gains for the company.

Faster delivery times

In fact, one of the biggest enhancements to help boost online sales has been its ship from stores service, now available at all 1,400 locations. Best Buy noted its online sales increased almost 22% thanks to this concept and according to the CEO, the capability helped drive over 50% of web sales.

Additionally, interesting data from the company suggested that 2% to 4% of its online traffic did not result in a purchase because of lack of inventory in its distribution centres, but around 80% of the time the stock is available in one or more of its retail outlets. Through a retooling of its inventory management process, Best Buy further enabled all of its distribution centres, including those previously allocated to e-commerce, to handle online orders. This change has resulted in the company delivering goods two days faster than in the past.

“The trip to the stores needs to be extraordinary from a customer experience standpoint” – Best Buy CEO.

And indeed, Best Buy has made great strides in this concept by creating ‘stores with the store,’ reducing the size of the average store and encouraging in-store pickups for online orders. As a result, foot-traffic to stores increased during third quarter.

Holiday Season

Is Best Buy ready for the holiday season? The company is expecting a highly competitive season and as such it is forecasting flat revenue. It has high expectations for its online sales but its website was put to a big test on Black Friday and failed for a period of time – it crashed due to an higher than expected mobile traffic. Mobile – The next hill to tackle for this retailer and fast. In fact on Black Friday, mobile sales accounted for 28% of all online sales, up nearly 30% from a year ago.

Here’s hoping the kinks are worked out and Cyber Monday and the rest of the season proves successful for a company that really needs to shine this season.

Ti’s Global e-commerce Logistics Report

This is the second in a blog series which looks at how retailers are evolving in a new retail environment and forms just one part of the e-commerce evolution. Disruptions are occurring in all industries and supply chains are being redrawn. A detailed analysis of this phenomenon will be available in Ti’s Global e-commerce Logistics report available in January, 2015. For additional information or to register your interest in the report please click here.