The permanent price strategy would be quite important for Target as well, given that its customer base primarily consists of lower income groups who are still hesitating to open their wallets.
The company has already received a beating in the first quarter, with a 29% drop in first quarter earnings to $498 million and 1% drop in revenue to $16.71 billion, mostly on account of poor weather. Target will need to gather its forces if it has to satisfy analysts, who are expecting a 2.2% increase in annual sales.
Boosting e-commerce
Best Buy Co., Inc. (NYSE:BBY) has, so far, not leveraged the full potential of its e-commerce platform. Years of under-performing investments have created a big gap in this area. To remedy the situation, management is deploying sophisticated search engine marketing tools, increasing its investment in paid search results. It is also increasing affiliate marketing and improving product recommendation capability.
The results have started trickling in and domestic online sales were up 16% during the first quarter. The company currently ranks as the 10th largest e-commerce retailer in the U.S., and the current improvements pave the way for huge future returns.
Best Buy is trying to create an omnichannel retail experience for its customers through consistent presence in mobile, tablet, and web platforms. The company has also added ship-from-store capability for fulfilling online orders because it was often losing out on account of the online merchandise being out of stock at distribution centers.
What else?
Best Buy Co., Inc. (NYSE:BBY) is looking at all possible avenues to increase its operating efficiency. It has divested its 50% stake in Best Buy Europe to its joint venture partner, Carphone Warehouse, for about $775 million. This will allow it to concentrate on its core North American operations, improve ROIC, and the cash will come in handy for its growth initiatives.
Additionally, the company is negotiating rent agreements, closing unprofitable stores, and lowering its SG&A expenses. It is targeting $400 million in savings by optimizing SG&A expenses alone, and has already achieved $295 million of this.
Conclusion
Best Buy has done well to identify its loose ends and has made strategic decisions to tie them up. The new tie-ups with big brands, competitive pricing, and e-commerce thrust are likely to attract more sales, while cost-reduction and other optimization plans will provide support to the bottom-line. These strategies may take some time to yield full benefits, but when they do there could be a dramatic paradigm shift.
The brick-and-mortar versus e-commerce battle wages on, with Best Buy Co., Inc. (NYSE:BBY) caught in the middle. After what might have been its most tumultuous year in history, there are now even more unanswered questions about the future for the big-box electronics retailer.
The article Give This Electronics Retailer a Chance originally appeared on Fool.com and is written by Eshna De.
Eshna De has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Eshna is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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