Best Buy Hit Hard By Promotional Holiday Season
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
While online sales increased, company could do more to boost conversion in its “ultimate showroom”
Best Buy is yet another retailer to join the ranks of those hit hard by the promotional atmosphere of this most recent holiday season. The retailer reports that sales for the nine weeks that ended Jan. 4 were roughly $11.5 billion, down from $11.8 billion during the holiday period last year. According to the company’s CEO Hubert Joly, the company’s performance this holiday was impacted primarily by excessive promotions and by slowing smartphone sales. Joly says, “In both channels, the promotional intensity that began with Black Friday continued throughout the period, which led us and our competitors to answer one question — do we make the incremental investment necessary to be price competitive and defend our market share?” And, of course, the answer was yes, but it came at a “higher-than-expected cost,” the retailer said.
The company was also hit with the industry-wide decline in smartphone sales, the New York Times says. According to Best Buy CFO Sharon McCollam, “There was not as much newness” this year, which could have helped create more buzz. Though, these sales are also slowing because roughly 60 percent of American cellphone owners have smartphones, which makes it difficult for both manufacturers and retailers to make profits off of them. This market, as the NT Times says, is at the mercy of a company coming up with some new, hot product, such as wearable computers.
Revenue for best buy was also affected by slow traffic and limited supplies of products including the Xbox One, PlayStation 4 game consoles, as well as a shortage of some higher-end phones.
However, the retailer did have one bit of good news: comparable online sales during the holiday period were up by 23.5 percent and brought in $1.32 billion in revenue. This should be good news, considering the company has long-term goals of growing its online channel and providing customers with a multi-channel experience. As part of its goal to reach people in any way they should demand, the company recently rolled out its ship-from-store initiative.
The company even decided to embrace the notion of showrooming, despite the threats Amazon and other internet retailers have posed for the company. Its holiday ad campaign was called “Your Ultimate Showroom,” and it hoped to emphasize the fact that people could come into stores to research and interact with the technology. However, as Ad Age says, the company still has a ways to go to truly convert browsers into buyers. Social media analytics company Crimson Hexagon examined Twitter and Facebook data about Best Buy from Oct. 21 to Dec. 12. Most consumers seemed pleased by the showrooming campaign, however there was still data showing that, at the end of the day, Amazon got the cash benefit. Jehan Hamedi, global market development manager at Crimson Hexagon, says, “[Consumers are] telling us that Best Buy is where they go to look at merchandise and then they go buy it online later.” The answer to this is for Best Buy to make the customer’s experience more interactive to increase conversion rates. Hamedi says consumer expectations for the company have little to do with experimenting with the products. Rather, “It’s more about social gratification — having fun. You go with your friends and they are your pre-purchasing sounding boards. It’s a destination.”
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