Best Buy (NYSE:BBY) Finally Getting Back on Track


The Consumer electronics manufacturing retail giant has finally decided to pick up Steam for its services. The things are finally becoming right for the Best Buy (NYSE:BBY) after two long years of its turnaround strategy. The CEO Hubert Jolly initiated the turnaround strategy for the company after its faltering sales and performance which finally worked increasing the third quarter sales by 3.2% in the domestic market.

The sales have increased even with an overall decline in the consumer electronics market. The company is performing way better than the expectations of the analysts. However the company has yet to face some new challenges as well regarding its online sales, which comprise of an important ratio of the company’s overall business portfolio sales. The latest gains have relieved the management and the investors in particular which had lost almost all hope for any returns in this quarter.

The multibillionaire Amazon (NASDAQ:AMZN) might still be ruling the online retailing market but Best Buy (NYSE:BBY) has also decided to catch up and compete. This is what Best Buy (NYSE:BBY) did to make things right. The company planned and then initiated its new pricing strategy in which it lowered its prices to compete more effectively and grow its roots into the market. Next it slashed those relative costs without effecting the customers experience negatively.

Finally it worked on its online services to become a true one channel retailer. Best Buy (NYSE:BBY) lowered its prices by adopting the match pricing strategy. Although the gross margins were effected to some extent but the company has become more competitive than before. The gross margin fell from 23.1% to 22.7% in the third quarter in 2013. This doesn’t look much serious but for a company like Best Buy (NYSE:BBY) which makes $42billion each year, such margins account for almost $420million.

As a remedy for the decreasing gross margins the Best Buy (NYSE:BBY) has adopted the cost cutting strategy as well and have been decreasing their costs pretty effectively. The company after implementing the turnaround strategy, has successfully been able to cut costs of almost $965million this year. Although these are big numbers however since the company also has been investing in other sectors like e-commerce so the overall effect remained the same.

However the company has still been able to bring a slightly positive change to its declining margins problem. However in adopting all these new strategies, getting rid of unnecessary management and improving the supply chains the company had to spend a lot as well. The company also spent a lot of money on training new and competitive employees for the job and improving its delivery processes. The company also improved its R&D department to further enhance its services.

The company’s online sales in the third quarter rose to 21.6% from a previous of 15.1% of the third quarter of 2013. The turnaround strategy is turning out to be one of the best things which happened with Best Buy (NYSE:BBY) in the past 3 years.