Best Buy reported that digital sales accounted for 31 percent of domestic revenue of $8.8 billion in the first quarter, which is consistent with the previous two years and twice as high as before the pandemic. This shows that its investment in digital transformation plans is paying off.
Best Buy is targeting revenue of $43.8 billion to $45.2 billion for FY24, anticipating a decline of 3 percent to 6 percent. Best Buy does not reveal its target from e-commerce sales.
The main concern for the top management at Best Buy is the decline in operating income as a % of revenue to 3.3 percent in Q1 fiscal 2024 from 4.3 percent in Q1 fiscal 2023. Best Buy’s digital transformation plans are yet to assist the retail chain to enhance its operating income.
Best Buy’s digital transformation plans are spearheaded by Brian Tilzer, the chief digital, analytics and technology officer. Brian Tilzer is responsible for IT and digital spending at Best Buy to create a seamless and superior multichannel customer experience in support of the company’s Best Buy 2020 growth strategy. He also leads Best Buy’s enterprise data and analytics capability.
Best Buy is committed to leveraging existing and emerging technologies to enhance customer and employee experiences across all channels while driving operational efficiencies and improved margins.
Best Buy has implemented generative AI that summarizes the main points and follow-ups from each call to streamline the customer care process. Previously, agents took manual notes during customer interactions, but this new capability allows them to focus entirely on the customer while reducing the time between calls. This not only lowers costs but also boosts agent satisfaction. This technology provides valuable insights into areas where we can improve the customer experience.
In another initiative, Best Buy is piloting a virtual reality training and simulation experience for in-home consultants and designers. This program is expected to reduce the cost of developing and certifying in-home sales team while enhancing the specialized selling skills of consultants and designers, particularly those who are new to the role. Furthermore, these tools are readily available for reference during customer visits or training sessions at the store.
Creating an enhanced digital experience is one of the top priorities for Best Buy tech team. “If you visit our website and intend to make a large quantity purchase, we will guide you to the appropriate digital channels that can assist you in making those scaled purchases,” Best Buy CEO Corie Barry said in its earnings report.
“We are finding numerous digital methods to understand our customers better and target them accordingly, such as identifying potential small business owners for tailored outreach rather than employing standard customer targeting.”
Best Buy is adapting its omnichannel capabilities to maintain a leading position in the increasingly digital age and evolving retail landscape.
Best Buy’s store portfolio aims to provide customers with unique experiences and multichannel fulfillment, while also enhancing cost and capital efficiency.
Best Buy is on track to implement the store plans announced in March for fiscal year 2024. These plans include closing 20 to 30 large format stores, remodeling eight Experience Stores, and opening 10 outlet stores, the retail major said.
Furthermore, Buy Online, Pickup in Store sales remained steady at slightly over 40 percent. The fact that nearly 60 percent of packages were delivered within two days highlights the significance and convenience of in-store pickup option for customers.
Looking ahead, Best Buy anticipates that membership program will contribute approximately 25 basis points of year-over-year operating income rate expansion for the enterprise in fiscal year 2024.
Best Buy said the primary goal of membership program is to foster increased customer engagement and capture a greater share of their spending. Best Buy believes that its members are actively engaging with the retail major, shifting their tech purchases to Best Buy, and making more purchases across various categories compared to non-members. Additionally, members consistently rate their experience higher.
Net Promoter Scores from total tech members are significantly higher than those from non-members. Best Buy has gained insights from members, particularly regarding the varying benefits they value in relation to their technology needs.
Best Buy has observed an increase in the online conversion rate for products priced under $35, while customer enrollments have remained stable. Furthermore, the financial impact of these developments has surpassed our initial projections. Introducing My Best Buy Plus, a new membership plan designed for value-conscious customers seeking enhanced access.
Rajani Baburajan
