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Best Buy CFO Cites Historic Change At The Company

A recent supply-chain initiative at Best Buy will be one for the company’s history books, according to chief financial officer Sharon McCollam, and is giving new purpose to the big-box store format.

The retailer’s ship-from-store program, in which showroom inventory is used to fulfill local online orders, “will go down in our history at Best Buy as one of the most important and strategic decisions that we made,” she told analysts yesterday on a fourth-quarter earnings call.

McCollam, previously chief financial officer and COO at Williams Sonoma, said the effort allows the chain to use both its online and retail inventories to serve its e-tail customers, and has helped propel its e-commerce business to more than $4 billion annually, representing more than 15.6 percent of total domestic revenue in Q4.

“What ship-from-store is allowing us to do is be able to on a consistent basis make marketing promises to customers about speed of delivery,” she added. 

The program, championed by president/CEO Hubert Joly, was first piloted in 50 stores in 2013 and has since been expanded to all 1,000-plus locations. Joly noted that it was designed to address Best Buy’s failure to close as many as 4 percent of online customers because the item they wanted was out of stock.

Elsewhere during the call:

* Joly implied that the showrooms had maxed out the opportunity for further vendor shops, and that going forward the chain and its store-in-store partners would focus on providing additional support, services and education for customers;

* McCollam promised another $400 million in cost savings as the company refines certain supply chain and logistical procedures that were essentially jerry-rigged during a period of hyper-growth, when 50 stores and $2 billion in revenue were being added each year; and

* McCollam confirmed that 13 stores were closed last year and well over 100 store leases are expiring, although no widespread shutdowns are expected as “the stores that remain in our portfolio … are performing” and have no geographic overlap.