Best Buy 2016 Annual Report Download - page 13

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5
Our Canada and Mexico store operations are similar to those in our Domestic segment.
In March 2015, we decided to consolidate Future Shop and Best Buy stores and websites in Canada under the Best Buy brand.
This resulted in permanently closing 66 Future Shop stores and converting 65 Future Shop stores to the Best Buy brand.
Merchandise and Services
Our Domestic and International segments have offerings in six revenue categories: Consumer Electronics, Computing and
Mobile Phones, Entertainment, Appliances, Services and Other. The key components of each revenue category are as follows:
• Consumer Electronics - home theater, home automation, digital imaging, health and fitness and portable audio;
• Computing and Mobile Phones - computing and peripherals, networking, tablets, mobile phones (including related
mobile network carrier commissions), wearables (including smart watches) and e-readers;
• Entertainment - gaming hardware and software, movies, music, technology toys and other software;
• Appliances - major appliances (for example, refrigeration, dishwashers, ovens, laundry, etc.) and small appliances (for
example, coffee makers, blenders, etc.);
• Services - consultation, design, delivery, installation, set-up, protection plans, repair, technical support and educational
classes; and
• Other - snacks, beverages and other sundry items.
Distribution
Domestic Segment
U.S. Best Buy online merchandise sales are typically either picked up at U.S. Best Buy stores or delivered directly to customers
from a distribution center or retail store. The ship-from-store capability allows us to improve product availability and delivery
times for customers. Most merchandise is shipped directly from manufacturers to our distribution centers or warehouses located
throughout the U.S. In order to meet release dates for certain products, merchandise may be shipped directly to our stores from
suppliers.
International Segment
Our distribution model for Canada and Mexico is similar to that of our Domestic segment model.
Suppliers and Inventory
Our Domestic and International segments purchase merchandise from a variety of suppliers. In fiscal 2016, our 20 largest
suppliers accounted for approximately 75% of the merchandise we purchased, with five suppliers – Apple, Samsung, Hewlett-
Packard, Sony and LG Electronics – representing approximately 51% of total merchandise purchased. We generally do not
have long-term contracts with our major suppliers that require them to continue supplying us with merchandise or any other
terms.
We carefully monitor and manage our inventory levels to match quantities on hand with consumer demand as closely as
possible. Key elements to our inventory management process include the following: continuous monitoring of historical and
projected consumer demand, continuous monitoring and adjustment of inventory receipt levels, agreements with vendors
relating to reimbursement for the cost of markdowns or sales incentives and agreements with vendors relating to return
privileges for certain products.
We also have a global sourcing operation to design, develop, test and contract-manufacture our exclusive brand products.
Store Development
We had approximately 1,200 large-format and 400 small-format stores at the end of fiscal 2016 throughout our Domestic and
International segments. Our stores are a vital component of our omni-channel strategy and represent an important competitive
advantage. In the U.S., we have the ability to ship from all of our Best Buy stores. Customers may also elect to pick up orders
initiated online in any of our stores. In recent years, we have opened vendor store-within-a-store concepts to allow closer
vendor partnership and a better quality customer experience. In fiscal 2017 and beyond, we will continue to look for
opportunities to optimize our store space, renegotiating leases and selectively opening or closing locations to support our
ongoing transformation.