Best Buy 2015 Annual Report Download - page 34

Table of Contents
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We will also expand our programs to capture customers at the time of key life events and build long-term relationships with
them, including our new mover program and our wedding gift registry, which we launched in February 2015.
The second initiative is Marketing, which provides crucial support for our merchandising growth opportunities. In marketing,
we will (1) accelerate our targeted marketing programs by leveraging our customer database to expand personalization beyond
email campaigns; (2) extend the personalization of our targeted email campaigns by dynamically serving relevant landing pages
when customers click through to our website; (3) continue the evolution of our marketing spend from analog and mass to
digital and personalized mediums such as search, mobile devices and re-targeting; and (4) continue to increase the number of
addressable emails in our customer database.
The next initiative on our road map is Online. Our goal is to serve our customers based on how, when, and where they want to
be served and capture online share. In pursuit of that goal, we will continue to develop true omni-channel experiences,
including improving the online visibility of returned, opened box inventory; (2) extending our installment billing selling
capability online; (3) enhancing the online experience for appliance purchases; (4) expanding capabilities for life events like the
wedding registry and wish list; and (5) providing an integrated Geek Squad customer experience across channels and devices
and driving increased attach rates. We will also be continuing the transformation of our e-commerce technology platform and
accelerating the transformation of our mobile customer experience which we will support through our new technology
development center in Seattle. Similar to general industry trends, our traffic from mobile phones is growing much faster than
traditional desktop traffic and we are increasing our mobile investment accordingly. We believe it is imperative that we engage
mobile customers with improved and streamlined access to essential, rich product information during the discovery, research
and checkout processes.
The next initiative is Retail Stores. In our retail stores we are building on the momentum from our success in fiscal 2015 and
will be driving increased sales effectiveness and payroll leverage through focus on the individual sales productivity of our
associates, enhancing our in-store customer experience from both an expert service and physical environment perspective,
including expanding product training for associates and driving growth by implementing market plans that are tailored to
specific geographies.
Services is the next initiative on our road map. In fiscal 2015, we significantly reduced our legacy cost structure and improved
our services-related NPS. We also launched a loss and theft mobile phone insurance program and more complete technology
support bundles. Despite these accomplishments; however, revenue has been declining largely due to lower attach rates of
traditional extended warranties and lower mobile revenue due to our success in decreasing claim severity and frequency, which
is an operational positive. In fiscal 2016, we will be focused on (1) continuing to transform our traditional service offerings to
better address customer needs; (2) continuing to improve our delivery and installation experience; (3) increasing the investment
in marketing and selling our services offerings; and (4) integrating the Geek Squad experience into bestbuy.com to provide an
enhanced service experience to our customers and to increase online attach rates.
The next initiative on our road map is Supply Chain. Our goal is to leverage our network and improve our customer experience
with increased inventory availability, improved speed to customer, and improved home delivery and installation capabilities for
our large cube assortments. In pursuit of these goals, over the next 12 months we will unlock additional inventory for ship-
from-store, continue to pursue cost efficiencies through technology enhancements (including replacement of our warehouse
technology systems), drive growth in large appliances and large televisions by leveraging new regional inventory capabilities
and invest in improving our home delivery and installation services NPS.
The last initiative on our road map is our Cost Structure. Through the fourth quarter of fiscal 2015, we eliminated a total of
$1.02 billion in annualized costs, which exceeded our target of $1 billion. In fiscal 2016, we are launching phase two of our
cost reduction and gross profit optimization program with a target of approximately $400 million in annualized savings over
three years, including the remaining benefit of approximately $250 million from our previously discussed returns, replacements
and damages opportunity. These savings, because they are structural in nature, are not expected to begin until the second half of
fiscal 2016 and will be driven by streamlined processes and operational efficiencies that will be primarily enabled through
investments in systems.
We expect, however, that these incremental savings will be significantly offset by the investments we need to make to fund our
growth initiatives. In fiscal 2016, we expect these incremental investments to total approximately $100 million to $120 million,
or $0.17 to $0.21 in diluted EPS and fall into three main buckets: (1) the customer experience online and in our retail stores; (2)
information technology; and (3) marketing. We also expect to increase our fiscal 2016 capital expenditures to approximately
$650 to $700 million, from $550 million in fiscal 2015.