Best Buy lays off 5,000 employees as it focuses on online sales

Best Buy says it slashed its workforce by 21,000 over the past year as the pandemic accelerated the company’s transition to selling online. Most of those losses were due to attrition – including workers who were put on leave during the pandemic last year and then chose not to return to work. But Best Buy says that in the past few weeks it has officially laid off 5,000 workers. The company now has approximately 102,000 employees, including employees in its retail stores and head office.

A company often fires workers because it is in difficulty. The past year has certainly been a difficult time for some brick and mortar companies. This week, for example, electronics giant Fry’s closed all of its stores.

But that doesn’t appear to be the case at Best Buy, which has weathered the pandemic fairly well. In the last quarter, same-store sales of physical Best Buy stores were up 12% from a year earlier. Meanwhile, online sales increased 89%.

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

Best Buy is reducing its physical retail presence

Best Buy says its recent changes are an effort to adapt to this new market reality. Traditional stores are not going away, but they are becoming less important. Best Buy says it has closed about 20 stores a year for the past two years and hopes to speed up the process over the coming year. Best Buy has 450 stores (out of approximately 1,000) whose leases will expire over the next three years. The company says it always rigorously assesses a store before renewing its lease, but that in the future, the company will have “higher thresholds for lease renewals.” In other words, underperforming stores will be closed faster than in the past.

This will mean fewer workers overall and above all, fewer full-time workers. As it laid off 5,000 workers, most of them full-time, Best Buy plans to add 2,000 new part-time jobs.

Best Buy also strives to increase the flexibility of its workforce by training its employees to perform a mix of face-to-face and online jobs. For example, during a slow shift, workers with the appropriate training can take calls from customers at Best Buy’s national hotlines.

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

Parts of Best Buy’s business are booming

All of this against the backdrop of a generally optimistic financial situation for the company. In a call with investors Thursday, Best Buy executives reported that the pandemic had boosted demand for several categories of products that Best Buy was stocking. For example, the company struggled to keep game consoles on store shelves because “there just wasn’t enough inventory to meet demand.”

Remote workers have spent a lot on a range of work-from-home products, from “high-tech chairs to monitors to standing desks”. Best Buy says print products are constantly scarce.

Best Buy also claims that home theater equipment and personal fitness equipment are selling fast as more people exercise and watch movies at home. Kitchen gadgets are also selling well.

Additionally, Best Buy believes the spike in spending is unlikely to decline in 2021. While many workers struggled financially during the pandemic, many white-collar workers saw their savings increase as they kept their jobs but couldn’t spend that much on dining, travel, or other luxuries. Best Buy therefore expects strong sales of luxury gadgets to continue through 2021.