Same Day Delivery: Best Buy’s Plan to Take On Amazon?

Recently, Best Buy (NYSE:BBY)   announced that it is expanding its test of same-day delivery to 13 major metroplitan markets across the United States. While the company had started this pilot in San Francisco last year, several other cities including New York and Washington D.C. were added later. According to Best Buy, the same day delivery initiative is part of its ongoing commitment to improve the in-store and online shopping experience. While the company’s sales are struggling primarily due to declining volumes in the mobile phones segment, Best Buy is increasing its focus on e-commerce initiatives and omni-channel retailing to increase revenues. We believe growth in online sales will be a key revenue driver for the company as consumer electronics is one of the largest categories for online retailing where competitors such as Amazon are gaining market share. As Best Buy focuses on online initiatives, same day delivery will add to consumer convenience and have a positive impact on the company’s e commerce revenues.

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Consumer Electronics Has The Highest Online Sales In U.S. Retail E commerce

According the eMarketer , computer and consumer electronics revenue from online retail sales in the U.S. will exceed $85 billion in 2016 and grow to over $100 billion in 2018. This is the maximum revenue generated by any product category in U.S. retail e commerce.

Best Buy is the largest consumer electronics retailer in the U.S. and the company is looking is tap into this trend of growing online demand for its products by focusing on its e-commerce segment. The company wants its shoppers to get what they want when and where they want it and the same day delivery initiative is aimed at providing convenient access to everyday items such as printer ink apart from other products.  Its store network will play an important role in the execution of this initiative as the orders will not be executed from a warehouse but from one of the company’s stores. Best Buy estimates that seventy percent of Americans live within 15 minutes of a one of its stores, making same day delivery possible.

In the holiday season last year, Amazon gave huge discounts on consumer electronic products and aggressively marketed them, impacting Best Buy’s revenues negatively. According to a survey by the National Retailer Federation, consumers stated that 46% of their holiday shopping in 2015 would be done online, up from the 44% figure for last year.  As Amazon offered exciting deals during this period and faster delivery options through its Prime Membership program, retailers such as Best Buy, with a limited online presence, bore the brunt. However, Best Buy appears to taking measures to attract online shoppers and provide them with fast delivery options.  Although it might not match Amazon in scale, Best Buy has a fully stored presence in the U.S. that is already well integrated with its website.  We believe that,  in regions where Best Buy is offering low prices, store pick up and same day delivery day, the company should see an uptick in its e-commerce sales.

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