Best Buy 2005 Annual Report Download - page 24

week, depending on sales volume. Contract carriers ship 20 largest suppliers accounted for over one-half of the
merchandise from the distribution centers to stores. merchandise we purchased, with five suppliers — Sony,
Generally, e-commerce merchandise sales are either Hewlett-Packard, Toshiba, eMachines and Samsung —
picked up at U.S. Best Buy stores or fulfilled directly to representing approximately one-third of total merchandise
customers through our distribution centers. purchased. The loss of or disruption in supply from any
one of these major suppliers could have a material
Magnolia Audio Video adverse effect on our revenue and earnings. We generally
do not have long-term written contracts with our major
Magnolia Audio Video stores’ merchandise is received suppliers. We have no indication that any of our suppliers
and warehoused at either our distribution center in will discontinue selling us merchandise. We have not
Washington, a regional warehouse in California or the experienced significant difficulty in maintaining
U.S. Best Buy distribution center in California. All satisfactory sources of supply, and we generally expect
inventory is bar-coded and scanned to ensure accurate that adequate sources of supply will continue to exist for
tracking. In addition, a computerized inventory the types of merchandise sold in our stores.
replenishment program is used to manage inventory levels
at each store. Merchandise is delivered to stores an We operate global sourcing offices in China in order to
average of three times each week pursuant to an in-house purchase products directly from Asian manufacturers. We
distribution system. expect these offices will allow us to increase our efficiency
and provide us with the capability to offer private-label
International products that fill gaps in our existing product assortment.
In the future, we expect purchases from our global
Our International stores’ merchandise is shipped directly sourcing offices to increase as a percentage of total
from suppliers to our distribution centers in British purchases. We also believe that the expected increase in
Columbia and Ontario. Our International stores are our global sourcing volumes will help drive gross profit
dependent upon the distribution centers for inventory rate improvements by lowering our overall product cost.
storage and shipment of most merchandise. However, in
order to meet release dates for selected products and to Store Development
improve inventory management, certain merchandise is
shipped directly to the stores from manufacturers and The addition of new stores has played, and we believe
distributors. All inventory is bar-coded and scanned to will continue to play, a significant role in our growth and
ensure accurate tracking. In addition, a computerized success. Our store development program has historically
inventory replenishment program is used to manage focused on entering new markets; adding stores within
inventory levels at each store. Our International stores existing markets; and relocating, remodeling and
typically receive product shipments twice a week, with expanding existing stores. During fiscal 2005, we opened
accelerated shipments during periods of high sales 78 new stores, converted 67 existing U.S. Best Buy stores
volume. Contract carriers ship merchandise from the to our customer centricity operating model and relocated
distribution centers to stores. 10 other stores. While a majority of the new stores
opened in fiscal 2005 were in existing markets, some
Suppliers were in new markets, including the opening of Canadian
Best Buy stores in British Columbia and Saskatchewan.
Our strategy depends, in part, upon our ability to offer During fiscal 2005, we closed one U.S. Best Buy store
customers a broad selection of name-brand products and, and two Magnolia Audio Video stores.
therefore, our success is dependent upon satisfactory and
stable supplier relationships. For fiscal 2005, our
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