Best Buy and Barneys cancelled holiday orders because of technical glitch

Best Buy, the largest U.S. specialty electronics retailer, has alerted some customers that it will not be able to fill their online orders, just days before Christmas.

Best Buy 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”.

Meanwhile, the iconic upscale New York department store Barneys said a number of its online orders were canceled because of technical glitch.

Neither Best Buy nor Barneys are saying exactly how many customers were affected.

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% 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,” R.J. Hottovy said.

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

Even though online sales are a huge boon for retailer, the shift has already created some problems.

Discount retailer Target Corp’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 November 26, Best Buy said its net income fell 29% as it cut prices in popular categories such as tablets and TVs to drive sales and traffic during the holiday season.

Best Buy shares rose 8 cents to $22.96 in midday trading.

Barneys sent out e-mails to some customers with the following message:

“This technical issue posed a significant challenge for our IT department and in turn caused some lengthy delays in responding to both order requests and emails and so I apologize as well for the lateness of this reply… but nonetheless your order was canceled as we no longer have the inventory to fulfill it.”