Best Buy (BBY, Financial) has been sailing through troubled waters since the beginning of this year. In addition to its internal problems, the electronics retailer has to face tough competition from its peers such as Amazon.com. But, management has taken various initiatives to turn around its present situation and bring the company back on track. It has given space to smartphone companies like Sony, Apple, Samsung etc. to sell their items.
Apart from increasing sales, Best Buy has also taken various initiatives to reduce its costs, such as the introduction of the Renew Blue program. Let us have closer look at Best Buy’s performance and whether the company is good for investment or not.
Best Buy's initiatives
There are three reasons that have contributed to the weak performance of the company -- drop in retail traffic, incremental investments in structural and promotional pricing, and the negative impact of its new credit card agreement. Also, there has been an increase in the warranty costs related to its product, while its rates on service plans have decreased. But, its cost-cutting program combined with an impressive growth of 25% in its online business in 2013 indicate that the company is moving in the right direction.
To improve performance, management has taken concrete steps such as enhancing the customer experience. Renew Blue program is another such step in this direction, which includes accelerating online growth, improving the multi-channel customer experience, and lowering costs to increase supply chain efficiency. In addition, Best Buy is also trying to strengthen its position by enhancing store space optimization and merchandising.
Key moves
Keeping in mind the changing trend of shoppers, Best Buy has upgraded its website to improve the experience of online customers. Some of the changes it made include adding a new search engine, offering relevant recommendations, and product and price information to help customers find products they wish to purchase.
Best Buy has a solid supply chain network and going forward, it will act as one of the primary growth drivers for the company. Its strategically-located distribution centers have enabled the retailer to introduce a feature such as ship-from-store.
This is an excellent feature as it will enhance its delivery time at a lower cost. Consequently, it has extended this facility to all 1,400 of its locations, along with eight distribution centers. In fact, the results are already visible as its delivery time has been slashed by two days.
Talking about its in-store initiatives, the retailer has been working to add profitable product categories such as mobile phones and tablets. As a result, it has entered into partnerships with various companies, which includes Sony, Samsung and other big names in the mobile device industry.
Conclusion
Best Buy is moving on the right track and the company is shoring up its supply chain with profitable items such as smartphones. Also, the company has seen rapid growth in its online business. Considering these factors, it seems that Best Buy will bounce back from its poor performance and give some handsome return to the investors. Hence, Best Buy seems to be a good investment option.
