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Panos Mourdoukoutas
Panos Mourdoukoutas
Articles (109) 

Best Buy Wants to Be More Like Amazon

The company wants to be more of an online retailer and less of a traditional brick-and-mortar one

Best Buy Co. Inc. (NYSE:BBY) wants to be more of an online retailer and less of a traditional brick and mortar one, according to CEO Corie Barry.

"During FY21, we managed through the impacts of the pandemic in a way that allowed us to accelerate many aspects of our strategy in order to thrive in what we believe to be a new and forever changed retail environment that is even more digital and puts customers entirely in control of their shopping experience," she said. "In FY22, we are accelerating investments to build on that momentum and push even faster in our evolution to a digital-first mindset."

Last week, the big big-box retailer reported fourth-quarter earnings that exceeded analyst expectations, but its revenue growth slowed. Comparable sales increased 12.6%, down from the 23% gain in the third quarter.

Over the past three years, Best Buy's sales increased 10% and its Ebitda rose 10.7%, beating Walmart's numbers but still lagging behind Amazon's (NASDAQ:AMZN). Meanwhile, Best Buy is beating both Walmart (NYSE:WMT) and Amazon in a key value metric, economic profit, meaning that it still enjoys a strong competitive advantage and creates plenty of value for its shareholders:


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Best Buy's strong performance in the last three years was a big turnaround from more than a decade ago, when Amazon's arrival in the big-box retail space changed the game. Best Buy's most essential assets—location and scale—turned into liabilities. Customers did their window shopping at Best Buy and their actual shopping at Amazon.com — which offered better deals.

The company's revenue, earnings and shares headed south, causing business strategists and stock analysts to write off the iconic company.

Best Buy then implemented Renew Blue, a strategy that helped it capitalize on the benefits of scale and location by expanding product offerings; and joining forces with Korean electronics giant Samsung (XKRX:005930) and Microsoft (NASDAQ:MSFT) to incorporate the stores-within-stores concept.

Simply put, the Renew Blue strategy allowed the retailer to fend off Amazon's challenge while remaining a traditional brick-and-mortar player.

Now, it seems that Best Buy is abandoning this strategy by expanding more into the online space and less on the brick-and-mortar space, beginning to look like Amazon.

In a statement following the publication of its quarterly results, Barry emphasized the growing importance of online sales and the company's stores' role as fulfillment centers:

"Online sales grew almost 90% to a record $6.7 billion and made up 43% of our total Domestic sales. Our stores played a pivotal role in the fulfillment of these sales, as almost two-thirds of our online revenue was either picked up in-store or curbside, shipped from a store, or delivered by a store employee."

Will Best Buy's new strategy work? It's too early to say.

Disclosure: I own shares of Amazon.

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About the author:

Panos Mourdoukoutas
I’m a Professor of Economics at LIU Post in New York. I also teach at Columbia University. I’ve published several articles in professional journals and magazines, including Forbes, Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance.

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