Best Buy 2014 Annual Report Download - page 11

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Distribution
Domestic Segment
U.S. Best Buy online merchandise sales generally are either picked up at U.S. Best Buy stores or delivered directly to
customers from a distribution center or, beginning in the fourth quarter of fiscal 2014, a retail store. The ship-from-store
capability allows us to improve product availability and delivery times for customers. Most merchandise for our U.S. Best Buy,
U.S. Best Buy Mobile, Magnolia Audio Video and Pacific Sales stores 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 Canada stores' merchandise is shipped directly from our suppliers to our Canadian distribution centers. In order to meet
release dates for certain products, merchandise may also be shipped directly to our stores from suppliers.
We receive our Five Star stores' merchandise at distribution centers and warehouses, the largest of which is located in Nanjing,
Jiangsu Province. Large merchandise, such as major appliances, is generally fulfilled directly to customers through our
distribution centers and warehouses.
Our stores in Mexico have distribution methods similar to that of our U.S. Best Buy stores.
Suppliers and Inventory
Our Domestic and International segment purchase merchandise from a variety of suppliers. In fiscal 2014, our 20 largest
suppliers accounted for approximately 70% of the merchandise we purchased, with 5 suppliers – Apple, Samsung, Hewlett-
Packard, Sony and LG Electronics – representing approximately 45% of total merchandise purchased. We generally do not
have long-term contracts with our major suppliers that would require them to continue supplying us with merchandise.
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 own line of exclusive brand
products.
Store Development
Domestic Segment
During fiscal 2014, the number of stores we operated remained relatively flat, but we continued to evaluate how to best
leverage our store portfolio. Most notably, we rolled out ship-from-store to more than 1,400 locations, opened 1,400 Samsung
and 600 Windows stores-within-a-store, and completed the first phase of our store space optimization. In fiscal 2015, we will
continue to evaluate our Domestic store portfolio, including renegotiating leases and selectively opening or closing locations,
as needed, to support our ongoing transformation.
International Segment
In our International segment, we opened 13 new stores and closed 27 stores in fiscal 2014. Store openings were primarily
driven by Best Buy Mobile stores in Canada and Best Buy stores in Mexico. Store closures were primarily driven by Five Star
stores in China. In fiscal 2015, we expect to continue to review our portfolio of stores across all geographies.
Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for tables
reconciling our Domestic and International segment stores open at the end of each of the last three fiscal years.