How many times have we heard from retailers that ‘customer-focus’ and improving the ‘shopping experience’ is top of mind for senior executives down to sales floor workers? Best Buy (NYSE:BBY) continues to wrestle with these issues and more as we learn how bad things got during the recent holiday shopping season when customer’s online orders went unfulfilled, often just days before Christmas. Best Buy experienced what can only be called ‘dysfunction’ in late November thru mid-December when happy, cheerful – dare we say merry – online shoppers invested time, energy and money researching products, placing orders and paying for them online at Best Buy. It wasn’t until later shoppers received an email stating that due to a ‘situation’ that the retailer would not be able to deliver the goods for Christmas, or ever for that matter. USA Today reported that customers were offered gift cards to assuage the anger and disappointment, but many took to the blogosphere to vent and some were eager to share their experience, in detail.
Big Box Means Big Problems
Best Buy has encountered difficulties before with inventory shortages or problems managing returns and exchanges, but nothing could have prepared them for the firestorm of criticism that rained down on them following the pre-Christmas debacle. It didn’t help that in the midst of the online order cancellation fiasco that Best Buy financials took a pounding in the media and this was reflected in share price as well. The retailer has been facing comparisons as of late to that business school case study of ‘retailing gone bad’ also known as the failure of Circuit City some years ago. To be fair, Best Buy does account for nearly one third of all electronic sales in the U.S. and while it’s easy, if not convenient to point to their missteps, in hindsight might they not have put more effort into managing online sales and inventory management? If not, wouldn’t it have made more sense to tell customers sooner, rather than later that the products they ordered and paid for would not be delivered?
A Failure To Communicate
Retail experts fault Best Buy for their unwillingness to communicate openly and in a timely manner with customers. They say that this failure doomed the retailer to suffer the consequences of infuriated customers and suspicious media inquiries as to why the retailer accepted orders and payments, but was unable to deliver products. Best Buy had a great opportunity with record-level Black Friday sales and improving consumer spending that set the stage for a healthy increase in sales versus one year ago. Those expectations were dashed as news leaked out of the now widely-known problem with online order cancellations from Best Buy’s side.
Is The Worst Yet To Come?
The word bankruptcy has been mentioned in the same breath as Best Buy, as it has with other retailers this holiday shopping season. Notwithstanding the comparison to Circuit City, the company is facing stiff competition from smaller boutique electronics retailers and of course, Walmart (NYSE:WMT), Target (NYSET:TGT) and Costco (NASDAQ:COST) all of whom managed to succeed at meeting or exceeding customer’s expectations during the holiday season. Heavy discounting may ultimately take their toll on profits, but the product actually rolled out the door of each of these retailers. Online retailers like Amazon (NASDAQ:AMZN) continue to take revenue from Best Buy and many brick and mortar retailers who find that Amazon buyers use retail stores as research tools to ‘test drive’ in-person the products before buying them online via Amazon. Whatever the reason, whatever the cause, Best Buy must re-engage with their customers before they find themselves as simply another retailer looking at how best to monetize their real estate holdings. Sound familiar Sears?