Best Buy Steps Up Staff Cuts, Store Closures

Best Buy is trimming store-level staff and cross-training remaining employees for multiple duties.

By Alan Wolf, YSN

The dramatic shift to online shopping brought about by the pandemic is causing a major overhaul at Best Buy.

In response to changing shopping patterns — which management considers permanent — the company is accelerating its pace of store closings and is cutting additional frontline staff as it sharpens its focus on digital.

According to Best Buy CEO Corrie Barry, the retailer closed about 20 of its box stores in each of the last two years and expects to pick up the pace in 2021. It’s also reducing the length of its leases and is holding stores to a higher bar before renewing them.

Of the retailer’s remaining 956 flagship stores, 450 leases are coming up for renewal in the next three years, she told analysts on a fourth-quarter conference call yesterday.

At the same time, the chain culled its store-level workforce by about 21,000 employees last year, or 17 percent, much of it due to attrition. It trimmed another 3,000 net positions earlier this month, in order to increase the ratio of part-time to full-time employees.

Factoring into Best Buy’s decisions was a 15 percent reduction in store traffic during the just-ended quarter, as e-commerce sales grew nearly 90 percent to a record $6.7 billion. The digital haul represented 43 percent of total U.S. sales, up from 25 percent the year prior, and despite the effect of the pandemic, “We believe much of what we saw last year will be permanent,” Barry said.

The plan, she told investors, is to use select stores as e-commerce fulfillment hubs and cross-train a dwindling employee pool for multiple tasks, such as web chat, virtual sales, remote support and inventory packing. In an update on its big-box initiatives, Barry said 35 percent of Best Buy’s locations handled 70 percent of all ship-from-store volume during the fourth quarter. The company believes it can achieve the same results from a smaller group of stores by converting sales floor space into distribution areas using warehouse-grade packing station equipment and supplies.

The chain is also experimenting with new store layouts and smaller sales floors in a number of locations in its headquarters market of Minneapolis, she said.

“We are refining our operating model in response to the incredibly rapid change in how customers want to shop with us,” she said. “Permanent and structural implications of the pandemic are shaping our strategic priorities.”

As a result, Barry said, Best Buy is moving from “a big-box retailer with a strong omnichannel presence to an omnichannel retailer with a large store footprint for support and fulfillment.”

Elsewhere on the call, CFO Matt Bilunas cited appliances as one of the retailer’s best performers for the fiscal quarter ended Jan. 30, 2021. Comparable sales for the category grew 36 percent year over year, compared to 14 percent the year prior, and appliances now comprise 12 percent of Best Buy’s U.S. revenue mix, up from 10 percent a year ago.

The company still operates 164 big-box and mobile boutique stores in Canada and closed out most of its Mexican operations last month.

Looking ahead, Bilunas predicted a return to a more promotional environment this spring, and Barry pointed to a long-term focus on fitness, telehealth and 5G technologies.