Best Buy (NYSE:BBY) is keen to rebuild its internal IT team over the course of next 12 months. Best Buy has plans to hire approximately 200 IT professionals as part of this effort, bringing the present count to 350. Best Buy is hoping to grab a share of the growing e-commerce market. It plans to hire specifically for e-commerce, business analytics, application development, engineering and project management areas. Best Buy competes with general retailers like Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) as well as other specialty retailers like Radio Shack (NYSE:RSH) and GameStop (NYSE:GME).
Our price estimate for Best Buy’s stock stands near $35, implying a 25% premium to the market price.
Expanding its IT Efforts
Best Buy conducts online retail operations under a variety of brand names such as Best Buy, Best Buy Mobile, The Carphone Warehouse, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, PacificSales and The Phone House. Focusing its efforts to build a strong internal IT team amidst intense competition looks like a wise move. Previously, Best Buy had outsourced these operations.
Best Buy’s domestic online revenues witnessed a substantial growth of 13% in Q2 2011, driven largely by traffic growth. Best Buy intends to hire IT people with leadership qualities who can be instrumental in translating business strategies to IT needs. According to Scott Heise, Vice President, Application Maintenance and Development at Best Buy,”IT is becoming a focal point for Best Buy to compete in the marketplace. A key component of that is us retaking control of IT.” 
However, it will still continue to rely on outsourcing for direct technical needs, such as coding. With its internal IT team in place, it plans to eliminate steps in the process that are part of a highly outsourced model. This would enable Best Buy to quickly turn a business idea or strategy into execution.
Other retailers are also focusing on developing their e-commerce platform. For instance, Lowe’s plans to create 150 new IT positions to prepare for future e-commerce platforms. Macy’s is also known to be expanding its e-commerce technology staff. We believe a strong and more interactive e-commerce platform would surely drive online sales. Going forward, with further penetration of internet and mobile shopping, we see a large quantum of sales being done online.Notes:
- See: Best Buy Rebuilding IT Capability it Outsourced, Starts Hiring, Computer World [↩]