3 Keys to Best Buy’s Omnichannel Performance
Best Buy’s fiscal fourth-quarter suffered from supply chain and staffing challenges, but its stocks still rose thanks to a bright long-term forecast.
“In Q4, we drove improvement in year-over-year customer satisfaction metrics across almost all areas, particularly for in-store, online and chat experiences,” said Corie Barry, Best Buy CEO, in a statement.
“Q4 sales of $16.4 billion were impacted by more constrained inventory than expected, including some high-demand holiday items, and the temporary reduction in store hours in January due to Omicron-induced staffing challenges,” continued Barry. “We are deliberately investing in our future and furthering our competitive differentiation which, as expected, impacted our Q4 profitability. The biggest areas of investment were our new membership program, technology and Best Buy Health, all core to our future growth potential.”
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Best Buy’s comparable sales growth was 10.4% on top of 9.7% last year, with revenue up $8.1 billion over the past two years. Online sales were at almost 40% of domestic revenue, yet Best Buy reached its fastest holiday delivery times ever, Berry said, shipping products to customer homes more than 25% faster than last year and two years ago.
“In FY23, we are leveraging our position of strength by continuing to invest in our future to deliver growth over the long term,” said Matt Bilunas, Best Buy CFO.
As Best Buy seeks to build upon its strengths, below are three areas where the retailer noted strong omnichannel performance during its Q4 2022 earnings call.
Online sales expanded to 34% of Best Buy’s total domestic revenue and It saw 150% growth in its virtual interaction across video, chat and voice. Additionally, 84% of Best Buy customers use digital channels throughout their shopping journey.
“These virtual opportunities have created new ways for us to offer customers the immediate ability to shop with an expert wherever they are,” said Damien Harmon, Best Buy’s EVP, omnichannel.
Demonstrating true channelless retailing, Best Buy has also seen a 72% uptick in customers using the Best Buy mobile app while inside stores.
“This also creates an opportunity for us to build more digital interactions and technology-related solutions to support their needs,” noted Harmon.
Best Buy is known for providing customers expertise through consultations both inside and outside of stores. The retailer said the number of employees who have the skill sets to complete a consultation has grown by 78% last year. “And with each consultation, we can inspire what’s possible,” noted Harmon.
Customers spend 17% more across their lifetime value, and they purchase more often when engaged for a consultation, he said. “Customers are loving this experience, and we’re seeing strong NPS. When surveyed, 92% of customers say they will likely continue working our expert. And when customers engage with one of our consultations or designers, they shop with Best Buy two times more frequently. So looking ahead, we believe our annual consultations will grow by more than 200% by fiscal ‘25.”
Best Buy’s Virtual Store
Last fall, Best Buy launched a “virtual store,” a physical store in a distribution center with products but no physical customers. The “store” gives customers a way to interact with Best Buy experts via chat, audio, and video, while still seeing demos, displays and physical products.
To date, Best Buy’s virtual store in comparison to historical chat experiences is generating higher close rate, higher sales, and a 20% improvement in customer satisfaction, Harmon revealed.
“Our vendors are extremely excited about it as well,” he said. “We started with 17 vendors on board, and we will end fiscal ‘23 with over 60 vendors investing in our virtual store. This is an investment in us and the belief that we’re creating a totally differentiating experience. We’re expanding our virtual store and adding more categories like appliances and home theater. And we expect our virtual sales interactions to double by fiscal ‘25.”