Demand leaves Best Buy unable to fulfill some online orders

Best Buy
Customers shop at a Best Buy store on Black Friday, Nov. 25, 2011 in Burbank, Calif. The official kickoff to the holiday shopping season underscored a big challenge to retailers: shoppers will only come out when they believe they're getting a big discount.
AP Photo/Jae C. Hong, File

With Christmas only a few days away, Best Buy is telling some customers their online orders won't arrive in time.

It's another headache for Best Buy, and this could be a big one. The consumer electronics retailer has drawn increased scrutiny because of its disappointing sales, profits and stock performance.

The scale of the problem is a mystery. Best Buy officials won't disclose how many customers will not receive their orders as promised, or what items are out of stock. In a statement, company officials said that because of overwhelming demand for some hot products this month and last the retailer has "encountered a situation that has affected redemption of some of our customers' online orders."

For that, Best Buy is very sorry.

Among the disappointed customers is Laura Suess, of Hastings, Minn. She ordered a laptop on BestBuy.com on Black Friday and received an email informing her that it would be ready for pickup that day.

"Then like ten minutes later I got an e-mail, saying, 'Nope it's not available,'" she said. "Then they said it'll be available at another Twin Cities location to pick up later today. And then I got another email indicating it's not available. And it was just like this runaround where I had to constantly call. Finally I told them, 'Just cancel the order, I'll go elsewhere.' "

If Suess hadn't canceled, that laptop would have been a long time coming.

"They said if I kept my order active, it wouldn't have been available to ship till the end of January," she said.

The delivery delays are a big black eye for Best Buy, which has beefed up its online sales efforts to fight off intense competition from rivals such as Target, Walmart and Amazon.com. The holiday season is crucial for retailers like Best Buy because it can amount for as much as 40 percent of annual sales.

Retail consultant Howard Davidowtiz said no online retailer is going to make all its deliveries on time. But he said Best Buy is drawing intense scrutiny because of its continuing troubles.

"Here's a company whose stock is down a third this year, right? Earnings off. Not doing well, at all," he said. "The future is online. And Amazon is frying their brains out. And reliability is the key. Yes, it's happening to other people. But this is bad."

Davidowitz speculates the problem is related to inventory management. He said Best Buy would be smart to disclose details of its delivery problems. That way, consumers won't overestimate their chances of being burned if they order from Best Buy.

"This is central to Best Buy's future," he said. "Much more central than other companies."

Online sales mean more to Best Buy because so much of what it sells — from computers and cell phones to TVs and DVDs — is sold online by rivals intent on meeting or beating Best Buy's prices. Especially Amazon.com.

"Amazon has done a great job building out their product assortment, making it more relevant for the holiday consumer and generally offering lower prices than what you'd find at Best Buy," said R.J. Hottovy a retail analyst with Morningstar.

Online retailers have been making increasingly generous promises about deliveries, guaranteeing delivery closer and closer to Christmas Day. Free shipping offers abound. Both Best Buy and Target offered free shipping this year. Hottovy said online retail sales are up about 15 percent his year.

"With the overwhelming amount of demand for online sales this year, it caught a couple of the retailers a little bit off guard," Hottovy said. "You have seen a couple of delays in terms of shipping. But generally speaking most of these companies have a pretty good track record, probably in the 90 percent range, of getting products to consumers when they were promised."

But Hottovy said individual retailers typically keep their delivery performance to themselves.

There are indications other retailers also are having trouble fulfilling orders, Hottovy said. It may have to do with a 15 percent jump this year in online retail sales.

"The demand for online really caught a lot of retailers off-guard and we have seen some issues with order timing pop up, probably more than we have seen in previous years," he said.

For now, at least, that's the policy Best Buy is following, leaving consumers to wonder just how bad a job Best Buy may be doing filling online orders on time.

Until early Thursday morning, Best Buy.com was still taking orders for delivery in time for Christmas, according to the website. Meanwhile, officials at Target said its employees are "working around the clock" to fill online orders in time for Christmas.

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