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Best Buy Cancels Some Orders Ahead of Christmas

Best Buy has alerted some customers that it will not be able to fill their online orders, just days before Christmas.

Best Buy
CNBC.com
Best Buy

The largest U.S. specialty electronics retailer said late Wednesday that "overwhelming demand for some products from Bestbuy.com has led to a problem redeeming online orders made in November and December.

The Minneapolis company declined Thursday to specify how many orders are affected or which products are out of stock.

The shortages are a black eye for Best Buy , which has beefed up its online campaign to fight off intense competition from online retailers and discount stores. And the holiday season is crucial for retailers like Best Buy because it can make up to 40 percent of annual sales.

Some glitches should not be a surprise with such a massive surge in online shopping this year, analysts said, but there is a risk of a backlash.

"It is a hiccup for the company," said Morningstar analyst R.J. Hottovy. "They were kind of behind the curve building out their online channel. They've done a good job investing in it, but if you make a lot of rapid changes, inevitably there are going to be growing pains."

The canceled orders probably won't make a big difference for Best Buy's holiday sales this year, but it may lead to more customers looking elsewhere in the future, he said.

"The risk is any consumers affected by canceled orders will be willing to explore other alternatives for online shopping in years to come," Hottovy said.

Online sales are up 15 percent to $32 billion so far this holiday season, while total sales are up just 2.5 percent.

Even though online sales are a huge boon for retailer, the shift has already created some problems. Discount retailer Target's site crashed in September because of overwhelming demand for Missoni for Target, a limited designer line of clothing, home goods and accessories.

Best Buy benefitted when its now-defunct rival Circuit City went out of business more than a year ago, but its suffering as Americans hold off on big ticket items and search for deals online and at discounters.

In order to compete, Best Buy has expanded its online offerings, cut back on square footage in the U.S. by closing stores and sought to expand internationally. In its most recent third quarter ending Nov. 26, Best Buy said its net income fell 29 percent as it cut prices in popular categories such as tablets and TVs to drive sales and traffic during the holiday season.

Best Buy shares fell 20 cents to $23.02 at the close of trading Thursday.