Best Buy Contracts Its Brick-And-Mortar, Fry's Folds As Electronics Retail Takes A Sucker Punch
Electronics retailer Best Buy is shedding workers and planning to close more of its physical locations in the near future, though the company hasn't specified how many.
Word of Best Buy's less-physical, more-online strategy came during its earnings call on Thursday, when the company reported increased revenue compared with last year, driven by much higher online sales.
Best Buy online sales grew almost 90% in Q4 to a record $6.7B as customers eschewed going to retail locations but stayed home and ordered gizmos from the company. Online sales now make up 43% of the company's total U.S. sales. Concurrently, its physical footprint is shrinking and has been even since before the coronavirus pandemic.
“We have closed approximately 20 large-format locations each of the past two years and expect to close a higher number this year,” Best Buy CEO Corie Barry said during the earnings call. “We have also been reducing the length of our average lease term, which will continue to provide us flexibility.”
The Minneapolis-based company has about 450 leases coming up for renewal over the next three years, The Wall Street Journal reports. The company employed about 102,000 workers at the close of its last fiscal year, a decrease from about 123,000 a year earlier.
The company's de-emphasis of physical stores parallels trends in wider sales for the electronics sector. Physical electronics stores represented one of only a few categories to see a drop in sales in January compared with the pre-pandemic January 2020, for a loss of 3.5%, according to the Census Bureau.
Also on Thursday, a smaller electronics retailer threw in the towel altogether. Fry's Electronics, which has been in business for about 35 years, suddenly closed all of its 31 locations in nine states, with about half in its home state of California.
The company cited the pandemic as the cause of its demise, though it is also the case that Fry's has been losing sales to online retailers like Amazon and rival chains like Best Buy for years, The Real Deal reports.
Not quite everyone is edging away from brick-and-mortar electronics locations, however. Target Corp. announced a deal Thursday with Apple to open "mini" Apple shops in 17 Target stores, with plans for more locations later this year.
Though Target locations already sell Apple merchandise, the move will double the tech giant's footprint inside each store, CNBC reports.
The "Apple experience" will draw customers in, which then drives traffic, Target Chief Growth Officer Christina Hennington told CNBC.