Best Buy 2015 Annual Report Download - page 18

Table of Contents
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Failure to protect the integrity, security and confidentiality of our employee and customer data could expose us to
litigation costs and materially damage our standing with our customers.
The use and handling of personally identifiable data by our business, our business associates and third parties is regulated at the
state, federal and international levels. We are also contractually obligated to comply with certain industry standards regarding
payment card information. Increasing costs associated with information security, such as increased investment in technology
and qualified staff, the costs of compliance and costs resulting from fraud could cause our business and results of operations to
suffer materially. Additionally, the success of our online operations depends upon the secure transmission of customer and other
confidential information over public networks, including the use of cashless payments. While we take significant steps to
protect this information, lapses in our controls or the intentional or negligent actions of employees, business associates or third
parties may undermine our security measures. As a result, unauthorized parties may obtain access to our data systems and
misappropriate employee, customer and other confidential data. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography or other developments will prevent the compromise of our customer
transaction processing capabilities and customer personal data. Furthermore, because the methods used to obtain unauthorized
access change frequently and may not be immediately detected, we may be unable to anticipate these methods or promptly
implement preventative measures. Any such compromise of our security or the security of information residing with our
business associates or third parties could have a material adverse effect on our reputation, which may in turn have a negative
impact on our sales, and may expose us to material costs, penalties and compensation claims. In addition, any compromise of
our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional
legal risk.
Our reliance on key vendors and mobile network carriers subjects us to various risks and uncertainties which could
affect our operating results.
We source the products we sell from a wide variety of domestic and international vendors. In fiscal 2015, our 20 largest
suppliers accounted for approximately 73% of the merchandise we purchased, with 5 suppliers – Apple, Samsung, Hewlett-
Packard, Sony and LG Electronics – representing approximately 47% of total merchandise purchased. We generally do not
have long-term written contracts with our vendors that would require them to continue supplying us with merchandise. We
depend on our vendors for, among other things, appropriate allocation of merchandise, development of compelling assortments
of products, operation of vendor-focused shopping experiences within our stores, acceptance of product returns, approval and
payment for factory warranty claims and funding for various forms of promotional programs. To varying degrees, our vendors
may be able to leverage their financial strength, customer popularity or alternative channels (including, in some instances, our
vendors’ own retail locations or websites) to influence these factors and other factors to our commercial disadvantage. Such
changes could have a material adverse impact on our revenues and profitability.
We are also dependent on mobile network carriers to allow us to offer mobile devices with carrier connections. The competitive
strategies utilized by mobile network carriers can have a material impact on our revenues and margins. For example, if carriers
change customer upgrade terms, monthly fee plans, cancellation fees or service levels, the volume of upgrades and new
contracts we sign with customers may be reduced, adversely affecting our revenues and profitability. In addition, many of our
carriers also serve customers through their own stores, websites, mobile applications and call centers. If customers choose to
upgrade or make new connections through carriers directly, rather than through us, our revenues and profitability could be
adversely affected. We could also experience declines in revenue and profitability if our carriers decided not to allow us to
market their products or services.
We have internal standards that we require all of our vendors to meet. Our ability to find qualified vendors who meet our
standards and supply products in a timely and efficient manner is a significant challenge, especially with respect to goods
sourced from outside the U.S. Political or financial instability, merchandise quality issues, product safety concerns, trade
restrictions, work stoppages, port delays, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation,
civil unrest, natural disasters, outbreaks of pandemics and other factors relating to foreign trade are beyond our control. These
and other issues affecting our vendors could materially adversely affect our financial results.
Changes in the demand for our service offerings could have a material adverse impact on our operating results.
Our customer promises include provision of a full range of services to complement our product offerings, including extended
warranties, delivery, installation, technical support, network set-up and repair services. Many of these service offerings are
through our Geek Squad brand, which provides an opportunity to deliver superior customer service and drives incremental
revenue and income – often through attachment of these services at the point of sale. As customers increasingly migrate to
websites and mobile applications to initiate transactions, there is a risk that we are unsuccessful in effectively promoting the
benefits of these complementary service offerings through those channels. If we fail to design and market these services