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01/20/2021

Best Buy’s CEO Shares Biggest COVID-19 Disruptions

From RIS News, Jan. 15:

Obviously, the ongoing health crisis has thrown retail for a loop. While small mom and pops and mall-based retailers have been hit hard by the pandemic and may never regain their pre-COVID swagger, some retailers have been able to capitalize on the disruption.

Grocers, home goods, building supplies, and electronics have all enjoyed a COVID-induced rally. And while this boost in sales has certainly been welcome, it has not been without challenges.  

At CES 2021, Best Buy CEO Corie Barry and Fortune Media CEO Alan Murray sat down to discuss how Best Buy has pivoted its operations and its plans to continue to meet changing consumer behavior post-pandemic.

The conversation started with Barry laying out the three biggest changes Best Buy witnessed when the pandemic first hit in March 2020 that are still impacting operations today:

  1. Technology became instantly more vital for everyone. Suddenly children were learning from home and a large portion of the population was working remotely — triggering a need for home computing equipment and accessories.
  2. The way retailers were able to provide those products instantly changed. Customers were leveraging digital shopping tools at an unprecedented rate and new fulfillment options like curbside pickup were becoming table stakes.
  3. Employees needed to work differently. Prior to the pandemic they had very structured jobs and responsibilities. New operational structures, think curbside pickup, requires a more flexible workforce.

“All of this happened overnight,” Barry said. “Each of these things has remained true since those early hours when we switched our operating model. In fact, they have only grown in terms of importance.”

During the early days of the pandemic Best Buy closed its stores and was operating on a delivery and curbside pickup model, but as the restrictions on in-store shopping began to ease in late spring/early summer Best Buy reopened its doors. Once in-store shopping commenced the retailer observed a change in consumer behavior, beyond the obvious effects of social distancing mandates.  

“When we opened our stores back up, we immediately saw business ramp up at levels we had never seen before,” Barry said. “Unfortunately, some of the key product areas especially around working and learning from home, but also cooking and entertaining from home, we just could not keep the gear in stock. For example, nobody knew there'd be a run on webcams. Suddenly it became the hottest item. It was definitely a challenge to make sure we had all the products people needed.”  

In addition to the surge in in-demand products, the retailer also noticed that those customers that ventured into their physical stores did so with a purpose. They were there not only to make a purchase or browse the latest tech, they were there to interact with the Best Buy sales staff and benefit from their deep product knowledge. While sales associates were always a vital part of the Best Buy experience, they became even more important as in-store shoppers craved expert advice at greatly increased levels.

Thanks to Best Buy’s ongoing commitment to its omnichannel transformation it had the infrastructure in place to implement a full e-commerce model, but stores were still vital to its success. As of Q3 2020, online sales had increase nearly 175% year-over-year, but 40% of online purchases were still being picked up in-store, or at the curb.

Even before the pandemic Best Buy had “assumed digital penetration was going to increase,” Barry said. “We needed to double down on our fulfillment mechanisms and put the customer in control. What we thought might take three to five years to penetrate happened overnight.

“One of the greatest things was all of the supply chain investments we have been putting in place for literally four years. We flexed all of those up to meet that large-scale demand. But we also put the customer in control [of how they wanted the order fulfilled.] It did not matter to us. We just need to agnostically meet that customer wherever they are. That is going to be the future of retailing. I don’t think people will revert back to their 2019 behaviors.”

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