Best Buy Highlights: Geared Up to Drive Online Sales

February 3rd, 2012 by Trefis Team
-9.53%
Downside
99.06
Market
89.62
Trefis
BBY: Best Buy Co logo
BBY
Best Buy Co

The year 2011 was eventful for Best Buy (NYSE:BBY), the world’s largest consumer electronics retailer, which made significant efforts to rebuild its internal IT team to grow online sales. It also announced plans to hire 200 professionals to support this effort. Best Buy is trying hard to compete with online retailers like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) given the much wider product offerings they offer customers. Best Buy also competes with general retailers like Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) as well as other specialty retailers like Radio Shack (NYSE:RSH) and GameStop (NYSE:GME).

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Online and Technology Related Initiatives

  • In November 2011, Best Buy acquired mindSHIFT, a Massachusetts-based cloud service provider for $167 million. This acquisition will give Best Buy access to the growing MSP market for small and midsize companies, which is worth $40 billion. [1] This was a major development for Best Buy last year, and the company is expected to build synergies between mindSHIFT and the Best Buy Geek Squad.
  • It also launched a third-party market place to offer products online from other sellers in exchange for a cut from the proceeds. Third-party sellers including Buy.com, Mambate, SF Planet, ANT Online, BeachAudio.com and Wayfair have signed up for the platform.

International Frontiers

  • Best Buy is also looking to expand internationally. According to reports, it is in talks to acquire a 51% stake in Next Retail, Videocon Industries’ multi-brand consumer durables retail venture in India. In November last year, the Indian government allowed overseas companies to own as much as 51% of retailers selling more than one brand. We believe this acquisition, if it materializes, will provide Best Buy a large-scale presence in India.
  • Best Buy and Carphone Warehouse plan to launch a mobile phone venture with Best Buy’s Chinese partner Five Star. They plan to roll out out a specialist mobile phone outlet within Five Star’s existing stores in China. [2]
  • Best Buy closed all of its 11 stores in the U.K. which were part of Best Buy Europe, a JV with Carphone Warehouse.
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Sell offs

  • In October, Best Buy sold its digital music unit Napster to Rhapsody International. It struggled to grow Naspter’s subscriber base since the acquisition in 2008. We consider this a good move and should allow Best Buy to focus on its core competencies.

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Notes:
  1. Best Buy Buys Into Cloud With mindSHIFT, Forbes, November 7, 2011 [↩]
  2. Best Buy, Carphone target China’s mobile market, Yahoo News, November 7, 2011 [↩]