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Best Buy Shrinking Some Store Footprints To Focus On Order Fulfillment

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Best Buy Shrinking Some Store Footprints To Focus On Order Fulfillment

Best Buy (NYSE: BBY) will trial smaller retail sales floors in a few markets as it looks to maximize space for e-commerce order fulfillment, Bloomberg reported Wednesday morning. Best Buy first announced the move during its November 2020 earnings call.

According to the latest report, store shopping space will shrink from 27,000 square feet to approximately 15,000 square feet in the locations, with the remainder used for preparing online orders for either in-store pickup or delivery.

The news comes one day before the company is expected to announce its Q4 2020 and full-year earnings. Seeking Alpha is expecting earnings per share (EPS) of $3.45 on revenue of $17.12 billion. The company reported $2.06 EPS in Q3, which beat analysts' expectation, on $11.85 billion in revenue. Best Buy reported a 174% increase in e-commerce orders in Q3 year-over-year. Online sales represented 35% of total sales in Q3.

On the Q3 earnings call, CEO Corie Sue Barry said, "Customers continue to shop and interact with us differently than pre-pandemic." Barry noted customer behavior has been changed because of COVID-19.

"Customer shopping behavior will be permanently changed in a way that is even more digital and puts customers entirely in control to shop how they want," Barry said. "Our strategy is to embrace that reality and to lead, not follow. It is too early to know exactly how much of our sales and customer shopping activity will be via digital channels over time. But as a result of the pandemic, we expect it will be higher than it has been historically."

Barry also noted that the workforce "will need to evolve in a way that meets the needs of customers while providing more flexible opportunities for our people."

Best Buy began piloting 250 ship-from-store hub locations in September and expected to add 90 additional locations for the holiday. The pilot stores were chosen based on available warehouse space and labor availability to fill online orders.

The move to reduce store square footage began in Q3 with the announcement of four Minneapolis locations serving as a test.

"The product assortment on the sales floor will still include the primary categories these locations had before the remodel, but the merchandised SKU count will be reduced, focusing on the most popular items. The remodels will result in incremental space for staging product for in-store pickup and to support ship-from-store transactions as well as provide the ability to stage inventory for items that may not be on the sales floor," Barry said.

Best Buy raised the starting wage across the business to $15 per hour in Q3 2020, but earlier this month, The Wall Street Journal reported that it was reducing jobs and hours for an unspecified number of employees.

Click for more FreightWaves articles by Brian Straight.

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