Best Buy aims to boost investments in customer experience, IT, marketing

Best Buy's fiscal 2016 master plan is designed to navigate shifting consumer preferences as well as more effectively compete in a brutal retail market.

Best Buy outlined its plans to further reinvent itself for its upcoming fiscal year as it emerges as the equivalent of a retail shape shifter to stay relevant.

The company reported solid fourth quarter results as sales of televisions and mobile phones offset material declines in tablets. The shifting technology product landscape is always a challenge for Best Buy, which has limited visibility into what products are going to be a hit.

For instance, tablets were a big deal a few years ago and now sales are plunging for Best Buy. Since 2012, Best Buy has been retooling to better compete online and in-store against Amazon.

So far, Best Buy's annual pivots have played out well. Best Buy's fourth quarter earnings of $1.48 a share on revenue of $14.2 billion, up 1.3. percent from a year ago, were better than expected. The company also said it would up payouts to shareholders. Online revenue in the U.S. was $1.72 billion, up 9.7 percent from a year ago.

But the Best Buy narrative really revolves around where it's going over what it has accomplished. To survive, Best Buy has to invest in reinvention annually. That reality is why Best Buy has expanded into home theater and home appliance design stores.

Best Buy said it will invest and incremental $100 million to $120 million in fiscal 2016, or 17 cents a share to 21 cents a share in earnings, to continue its ongoing reinvention efforts. The three buckets for this investment include:

  • Customer experience initiatives for online and brick-and-mortar;
  • Information technology;
  • Marketing.

Overall, Best Buy plans to spend $650 million to $700 million on capital spending, up from $550 million in fiscal 2015.

Best Buy's master plan for the fiscal year ahead goes like this:

  • Focus on the ultra high definition TV buying cycle and add 20 Magnolia Design Centers.
  • Expand in categories where rivals can't easily go such as large appliances and mobile phones with the expansion of installment sales online.
  • Grow the connected home offerings as well as health and wearables with a multichannel sales approach.
  • Expand private label product assortments.
  • Grow secondary market efforts to improve margins on returns and damaged goods.
  • Capture customers via life events such as moving and a wedding gift registry.
  • Bolster personalization and customer marketing and dynamically serve landing pages online. Marketing spend will become digital.
  • Invest in mobile. CEO Hubert Joly said:
We will also be continuing the transformation of our e-commerce technology platform and accelerating the transformation of our mobile customer experience which we will support through our new technology development center in Seattle. Similar to general industry trends our traffic for mobile phones is growing much faster than traditional desktop traffic and we are increasing our mobile investments accordingly. It is imperative that we engage mobile customers with improved and streamlined access to essential rich product information during the discovery, research and checkout processes.
  • Expand training and incentives for in-store associates.
  • Integrate Geek Squad services with BestBuy.com.
  • Continue to enhance the supply chain, home delivery and ship-to-store offerings. Best Buy plans to replace its warehouse management system.

Will these efforts work? Probably. Obituaries for Best Buy have been repeatedly written in recent years, but the company has proven to be relatively agile.

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