Can Best Buy’s Focus on Online Business Boost Its Revenue?
Best Buy Stock Is Up 5.9% So Far in 2016: Is There More Upside?
Focus on online business
Best Buy’s (BBY) business has been significantly impacted over the years by the emergence of online players like Amazon (AMZN). To fight growing competition, Best Buy is focusing on enhancing its online business.
In early April, Best Buy announced the expansion of its same-day delivery service to 13 major metro markets across the United States. The company piloted the same-day delivery concept in San Francisco in fall of 2015. Best Buy then expanded the facility to New York in early 2016. The company now offers same-day delivery in Atlanta, Boston, Chicago, Dallas, Houston, Las Vegas, Los Angeles, Miami, Philadelphia, Seattle, and Washington, DC.
Some of the other retailers and department stores that offer same-day delivery for online purchases include Macy’s (M), Target (TGT), and Kohl’s (KSS).
Performance of online business
In fiscal 2016, which ended January 30, 2016, Best Buy’s online sales accounted for 11% of its Domestic Segment revenue, up from 9.8% in fiscal 2015. The Domestic Segment’s comparable online revenue grew 13.5% to over $4 billion in fiscal 2016. The company attributed this growth to higher conversion rates and increased traffic. However, this growth was slower than the 16.7% in fiscal 2015 and 19.8% in fiscal 2014. The iShares S&P 500 Value ETF (IVE) has 0.1% exposure to Best Buy.
Initiatives to grow online business
Best Buy’s initiatives for its online business include building new digital capabilities and enhancing the customer shopping experience on phones and tablets. In 4Q16, Best Buy launched its BlueAssist facility, which allows customers to get live help with products and orders through chat, call, and email by simply shaking their devices. The company also launched the Touch ID login facility in the iPhone and iPad, which allows the user to access his Best Buy account by using his fingerprint, instead of a username and password. Best Buy also launched a Geek Squad app in 2016. The Geek Squad app gives consumers access to the company’s service department, Geek Squad, for tech support and hardware repairs.
We’ll discuss analyst recommendations for Best Buy’s stock in the next part of this series.
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