Best Buy Beefing Up Web, Downsizing Stores

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Minneapolis - Best Buy is rebalancing its channel strategy to address market share gains by online retailers, including

In the process, the company is dramatically expanding its online-only assortment, where it is promising more competitive pricing, and is shrinking the footprint of some of its big-box stores as they come off lease.

It also has not ruled out the possibility of closing some of its larger locations.

In an earnings call this morning to discuss the chain's fourth-quarter results, CEO Brian Dunn stressed the importance of maintaining a brick-and-mortar presence to differentiate Best Buy from online-only competitors. Stores allow in-person consultations with sales personnel, provide a convenient pickup option for e-commerce orders, and will give the company a competitive advantage should tax policy favoring e-tail-only merchants change.

Nonetheless, he acknowledged, "We are very carefully looking at our square-footage requirements" and are "redefining the optimal big-box store size," while co-Americas president Shari Ballard pointed to "opportunity in smaller-format stores."

Meanwhile, Best Buy is reallocating space and labor in its big-box stores to three low market-share categories where it sees the greatest opportunities for growth: mobile, gaming and appliances. According to co-Americas president Mike Vitelli, mobile departments will receive more accessory SKUs, gaming areas will benefit from the rollout of trade-in and pre-order services, and majap departments will begin incorporating processes gleaned from its eight in-store Pacific Sales concept shops on the West Coast.

Room for the department expansions will come from declining categories like CDs, whose floor space is being cut by half.

In addition to improved space utilization, the changes to Best Buy's business model will also help attract new customers, the executives said.

Elsewhere, chief financial officer Jim Muehlbauer said the company is as yet unaware of any impact on its business from the events in Japan, although it is still too early for vendors to fully assess the situation.

Dunn added that Best Buy will continue to support its Japanese vendors "to the best of our ability," and expressed heartfelt sympathy for both them and the people of Japan.


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