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07/01/2013

Best Buy Enables Online Fulfillment from All DCs, Pilots Ship-from-Store

Best Buy is attacking the issue of online out-of-stocks with a two-pronged approach. The retailer has kicked off a 50-store pilot of ship-from-store fulfillment, and it will enable all its distribution centers – not just those previously allocated to e-commerce – to be able to handle digital orders.

"Depending on the months, 2% to 4% of all of our online traffic does not result in a purchase because we do not have the inventory in our distribution centers, and we are telling online shoppers that the item is out of stock," explained Best Buy CEO Hubert Joly at the company's recent shareholders' meeting. "However, an estimated 80% of the time we actually have it in one or more of our retail stores."

He added that with online conversion ratios that are only slightly above 1%, this 2% to 4% out-of-stock ratio represents "a very large number." It is also an important motivator behind Best Buy's ship-from-store pilot program. "For most multi-channel retailers, [ship-from-store] is a very complex IT and operational undertaking, but we actually already have made the majority of the IT investments necessary to move this initiative forward over the next several months," said Joly, adding that if the 50-store pilot is successful, Best Buy will expand it to additional locations.

Best Buy is making other key investments in improving its digital shopping experience across multiple channels and devices. Joly noted that bestbuy.com had 11% year-over-year revenue growth in Q4 of last year, with a 16% increase in comparable online sales. To build on these results and further accelerate its online growth, Best Buy is retiring its 10-year-old onsite search platform and "replacing it with new industry-leading technology that could produce more relevant results based on customer-specific search criteria," said Joly.

"It includes creating a consistent customer experience across mobile, tablet and PC devices, including common navigation and product information," Joly added. "It includes implementing technology enhancements that will make it easier to add Geek Squad services to the shopping cart and adding functionality based on customer browsing behavior that will dynamically recommend products if no items have been added to the shopping cart."

Joly stressed how high the stakes are for Best Buy in the omnichannel arena: "We are not a brick-and-mortar retailer. I want to make this very clear, we are a multi-channel retailer and we want to sell to the customers the way the customer wants to buy," he said. "We also know that for some large number, more than 80% of the purchases of large ticket items, the shopping journey actually starts online. We all research the items online so showrooming starts online. All of these facts are reasons why making our online presence more competitive, more attractive for the customers is an absolute vital priority for the company."

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