“The list of reasons that Best Buy’s board should fire CEO Brian Dunn just got longer," writes Douglas A. McIntyre of 24/7 Wall St. Why? "A number of orders made by customers from BestBuy.com will not be delivered by Christmas. And, Best Buy told some of the customers about the problem in only the last day or so.”
It’s true, Best Buy only now alerted some customers that it will not be able to fill their online orders, just days before Christmas, and that even some of the orders have been cancelled completely.
The largest U.S. specialty electronics retailer said late Wednesday that:
Due to overwhelming demand of hot product offerings on BestBuy.com during the November and December time period, we have encountered a situation that has affected redemption of some of our customers’ online orders. We are very sorry for the inconvenience this has caused and we have notified the affected customers.
The Minneapolis company declined Thursday to specify exactly how many orders are affected or which products are out of stock.
The shortages are a black eye for Best Buy, which has beefed up its online campaign to fight off intense competition from online retailers and discount stores. And the holiday season is crucial for retailers like Best Buy because it can make up to 40 percent of annual sales.
Some glitches should not be a surprise with such a massive surge in online shopping this year, analysts said, but there is a risk of a backlash.
"It is a hiccup for the company," said Morningstar analyst R.J. Hottovy. "They were kind of behind the curve building out their online channel. They've done a good job investing in it, but if you make a lot of rapid changes, inevitably there are going to be growing pains."
Hopefully, for Best Buy's sake, the canceled orders won't make a big difference for Best Buy's holiday sales this year, but it may lead to more customers looking elsewhere in the future, he said.
"The risk is any consumers affected by canceled orders will be willing to explore other alternatives for online shopping in years to come," Hottovy said.
Online sales are up 15 percent to $32 billion so far this holiday season, while total sales are up just 2.5 percent.
Even though online sales are a huge boon for retailer, the shift has already created some problems. Discount retailer Target Corp's site crashed in September because of overwhelming demand for Missoni for Target, a limited designer line of clothing, home goods and accessories.
Best Buy benefited when its now-defunct rival Circuit City went out of business more than a year ago, but its suffering as Americans hold off on big ticket items and search for deals online and at discounters.
In order to compete, Best Buy has expanded its online offerings, cut back on square footage in the U.S. by closing stores and sought to expand internationally.
However, despite these efforts, in its most recent third quarter ending Nov. 26, Best Buy said its net income fell 29 percent as it cut prices in popular categories such as tablets and TVs to drive sales and traffic during the holiday season.
This has left some analysts wondering , "What the hell happened?"
"Best Buy has been one of the most poorly run large companies in America for a number of quarters," writes McIntyre. "Wall St. was deeply disappointed recently when the retailer posted a 22 percent drop in earnings to $.42 for the quarter that ended on November 26. Best Buy said same-store sales in the next fiscal year will drop 3 percent."
What do they think an appropriate remedy would be for Best Buy's multiple financial problems? They believe that the majority of the mega-retailers woes stem from the company's CEO.
"Dunn says he 'loves' Best Buy. If so, he should do his investors and customers a favor and leave."
The Associated Press contributed to this report.