Best Buy fires 5,000 employees by shifting focus to online sales

Best Buy says it cut its workforce by 21,000 last year as the pandemic accelerated the company’s transition to online sales. Most of these losses were due to attrition – including workers who were on leave during last year’s pandemic and chose not to return to work. But Best Buy says it has formally laid off 5,000 workers in recent weeks. The company now has about 102,000 workers – including employees at its retail stores and corporate headquarters.

Often, a company fires workers because it is experiencing difficulties. The past year has certainly been a challenging period for some physical companies. This week, for example, electronics giant Fry closed all of its stores.

But that does not seem to be the situation at Best Buy, which withstood the pandemic very well. In the last quarter, same-store sales at Best Buy physical stores increased 12% compared to the previous year. Meanwhile, online sales have increased by an impressive 89%.

As a result, online sales accounted for 43 percent of Best Buy’s total fourth-quarter sales, which ends January 31. That’s an increase of 25 percent in 2019 and 22 percent in 2018. And Best Buy believes that this change will be mostly permanent, with 40% of sales coming from the Internet in the new fiscal year.

Best Buy is reducing its physical presence in retail

Best Buy says its recent changes are an effort to adjust to this new market reality. Traditional stores are not leaving, but they are becoming less important. Best Buy says it closes about 20 stores a year for the past two years and expects to speed up the process next year. Best Buy has 450 stores (out of around 1,000) whose rentals will expire in the next three years. The company says it always rigorously evaluates a store before renewing its rental, but in the future, the company will have “higher limits for renewing rentals”. In other words, underperforming stores will be closed more quickly than in the past.

This will mean fewer workers in general and, in particular, fewer full-time workers. As it has laid off 5,000 full-time workers, Best Buy is planning to add 2,000 new part-time jobs.

Best Buy is also working to increase the flexibility of its workforce, training workers to perform a combination of face-to-face and online jobs. For example, during a slow shift, appropriately trained workers can answer customer calls on Best Buy’s national hotlines.

Best Buy plans to reconfigure stores to devote less space to showrooms at the front of the store and more space for storage and shipping at the back. Store employees will be able to spend time helping customers face to face and some time packing orders online.

Some parts of Best Buy’s business are growing

All of this in the context of a generally optimistic financial picture for the company. In a call with investors on Thursday, Best Buy executives reported that the pandemic has increased demand for various categories of products that Best Buy has. For example, the company has struggled to keep game consoles on store shelves because “there was simply not enough inventory to meet demand”.

Remote workers have been spending heavily on a variety of products to work from home, from “high-tech chairs to monitors and desks.” Best Buy says that printing products are perpetually in short supply.

Best Buy also claims that home theater and personal fitness equipment is selling quickly, as more people exercise and watch movies at home. Kitchen appliances have also been selling well.

In addition, Best Buy believes that spending increases are unlikely to slow in 2021. While many workers struggled financially during the pandemic, many white collar workers saw their savings rise because they kept their jobs, but were unable to spend as much on meals. in restaurants, travel or other luxuries. Therefore, Best Buy expects strong sales of luxury gadgets to continue until 2021.