Omnichannel Boosts Best Buy in Q2 as Nearly One-Third of Sales Are Generated Via App

Best Buy reported better-than-expected second quarter 2023 financial results on Tuesday (Aug. 29), attributing it to the company’s “strong operational execution” and the ability to balance industry sales pressure with strategic investments.

One of the key highlights of the period is the improvement in year-over-year comparable sales. After experiencing a 10% decline in Q1, the consumer electronics retailer managed to reduce the decline to 6.2% in the second quarter.

Commenting on the results in a call with analysts, Best Buy CEO Corie Barry acknowledged that the “industry continues to experience lower consumer demand due to the pandemic pull forward of tech purchases and the shift back into services spend outside the home, like travel and entertainment.” That, in addition to persistent inflation, “has impacted spending decisions for a substantial part of the population,” she added. 

Despite the industry pressure and ongoing uncertain macroeconomic environment, Barry said the retailer was able to strategically manage its promotional plan and remain price competitive in a deal-focused consumer environment, resulting in an increase in its gross profit rate.

“The level of industry promotions and discounts were above last year and often above pre-pandemic fiscal [year] 2022,” she pointed out, adding that consumer purchasing customer behavior has remained relatively consistent across demographics.

Best Buy’s efforts to optimize its operations and leverage technology also seem to be paying off. The company’s inventory levels were down compared to the previous year, and even the year prior, the firm was “not lapping the kind of clearance pressure that other retailers experienced,” Barry remarked. 

Digital assets, including its mobile app, have also played a significant role in driving revenue, with the share of online sales generated through the Best Buy app doubling in the last three years to more than 20% of the company’s online revenue. Overall, digital platforms contributed to almost one-third of the company’s domestic revenue, highlighting Best Buy’s focus on evolving its omnichannel capabilities. 

Another quarter highlight is the official launch of its new three-tiered membership program in June, enticing cost-conscious shoppers with perks like exclusive access to deals and member-only prices, PYMNTS reported. At the time, the company said paid members were engaging with the company more often, purchasing more products and reporting greater satisfaction rates — sentiments Barry reiterated on the Tuesday call. 

Looking ahead, the electronics and appliance retailer plans to close 20 to 30 stores, remodel large format stores, and expand outlet stores from 19 to about 25 as part of its strategy to improve merchandising presentation. 

The decision comes after the company reportedly eliminated hundreds of in-store consultant roles earlier this year, with a company spokesperson telling the Wall Street Journal at the time that move was “to better reflect the changes in customer shopping behavior, as well as how we organize our teams to ensure we continue to provide our expertise, products and services in the best possible way.” 

Additionally, the company expects the consumer electronics industry to stabilize and possibly grow in the coming year despite the challenging and dynamic environment, driven by natural upgrade and replacement cycles as well as the normalization of tech innovation. 

And as the holiday season approaches, Best Buy said it anticipates a more promotional environment albeit a challenging economy. The company remains committed to providing customers with attractive deals and convenience to ensure that continue to receive the best value for their purchases.

Finally, Barry said the retailer is focused on leveraging existing and emerging AI technology to drive better customer and employee experiences across channels, including in areas such as reverse supply chain, large product fulfillment, and omnichannel operations.

“In customer care, our virtual agents are now answering 40% of customer questions via chat, without a human agent and with high satisfaction levels,” she noted.