Best Buy is Thinking Out of the Box — Literally

Big changes may be in store for Best Buy’s flagship locations.

By Alan Wolf, YSN

Best Buy avoided the fate of Circuit City by turning lemons into lemonade.

Once written off as a retail dinosaur in the age of e-commerce, the CE and appliance chain took what was once considered its death sentence — superfluous box stores with massive overhead — and turned them into final-mile assets.

Over the past decade, management has given its approximately 1,000 flagship locations double duty by serving both as showrooms and local pickup and shipping points for online orders.

Now, under current CEO Corie Barry, and amid the dramatic shift to digital shopping in the COVID economy, the company is taking its clicks-and-bricks strategy to a whole new level.

As Barry told analysts last week during a third-quarter earnings call, Best Buy enlisted 250 stores last September to participate in a “ship-from-store” pilot program. “These locations are positioned to ship out significantly more volume and utilize dedicated labor aimed at fulfilling orders originating online,” she said.

Indeed, the 250 stores, along with an additional 90 locations that are joining the pilot this holiday season, are expected to ship more than 70 percent of all store-fulfilled orders during the current quarter, allowing for next-day delivery of items purchased as late as 8:00 p.m.

To further shift the primary role of stores from showrooms to distribution hubs, the retailer is also trialing a new store format that radically reallocates floor space from sales to fulfillment. In four test stores in Minneapolis, shoppable square footage was cut from 27,000 square feet to about 15,000 square feet, along with a sharp reduction in SKU count. Although primary categories would still be represented, only the most popular items will remain in the showroom, with the freed up real estate added to staging areas for curbside pickup and ship-from-store transactions.

“Normally, we would not remodel any stores this close to the holiday season,” Barry acknowledged, “but we feel it’s imperative to move quickly to gain the learnings about how the store format may complement our omnichannel strategy within a particular market.”

Besides trading floor space, Barry also hinted at potential reductions in footprint and store count. “Our stores will look different over time in terms of function, size and possible even quantity,” she shared, “but they remain incredibly valuable and a cornerstone of our strategy.”

Lemonade from lemons indeed.