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Will Online Sales Initiatives Help Best Buy in 1Q16?

Sharon Bailey

Earnings Preview: Will Best Buy Be a Good Buy in 1Q16?

(Continued from Prior Part)

US online sales

According to a May 15 release by the US Department of Commerce, online sales increased by 14.5% to $80.3 billion in 1Q15 on a year-over-year seasonally adjusted basis. Total US retail sales were up 1.6% in the same period. US online sales accounted for 7% of total retail sales in the first quarter of 2015 compared to 6.2% in the first quarter of 2014.

Best Buy increases online sales

As a percentage of total revenue, online sales by Best Buy (BBY) increased to 9.8% in fiscal 2015 ending January 31, 2015. This is up from 8.7% in fiscal 2014 and 7.5% in fiscal 2013. Comparable online sales grew by 16.7% in fiscal 2015.

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Best Buy constitutes ~0.9% and 0.1% of the portfolio holdings of the SPDR S&P Retail ETF (XRT) and the iShares Core S&P 500 ETF (IVV), respectively.

Traditional retailers like Best Buy and GameStop (GME) are trying to enhance their online channels to better compete with large online players like Amazon (AMZN). Convenience, pricing, and aggressive promotional activities are attracting more and more consumers to online shopping.

Initiatives to enhance online business

Best Buy’s initiatives to boost its online sales include its In-Store Pickup option, which allows consumers to make an online purchase and pick up the merchandise from a store. Also, the company’s ship-from-store selection allows inventory to be shipped from any store, improving product availability and ensuring faster delivery.

Here a several other initiatives Best Buy has launched:

  • enhanced online visibility of returned, opened-box inventory

  • installment billing options made available on the online platform

  • new consumer tactics such as the wedding registry and wish list

  • strengthened e-commerce technology platforms

In April 2015, Best Buy announced that its consumers can now use Apple Pay (AAPL) to make purchases using the Best Buy app. The company also plans to accept Apple Pay at its US stores later this year.

Continue to Next Part

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