Best Buy adds beauty gadgets and outdoor furniture to product line
Electric bicycles. Patio furniture. Beauty gadgets.
Best Buy is adding products that can surprise shoppers who usually think of their stores and website as the place to buy smartphones, laptops and TVs.
On Friday, the company said it had begun selling about 100 skincare devices, including a facial steamer and a home microdermabrasion tool, in nearly 300 stores and on its website.
Best Buy is making more choices in categories like fitness and furniture as it hopes to spur growth in the wake of the Covid pandemic. The company capitalized on early pandemic trends as people looked for computer monitors for home offices, kitchen appliances for home cooking and theater systems or giant TVs to pass the time.
Now, however, the retailer is facing a more difficult situation. The company warned in March that it expects same-store sales to decline by 1-4% next year after a period of very strong demand.
There are already signs of a decline in electronics sales as consumers funnel dollars into leisure and social events. Major appliance maker Whirlpool missed estimates, with sales in North America falling 8.3% year-over-year in the latest quarter, the sharpest drop since the pandemic began. Microsoft, which makes the Xbox game consoles, gave a negative outlook for the upcoming quarter, predicting a downturn in the gaming category.
Market researcher NPD Group predicts US consumer electronics revenue will fall 5% in 2022, 4% in 2023 and 1% in 2024, but overall sales will remain higher than pre-pandemic levels. The decline follows a record year for the industry in the US, with consumer technology sales reaching nearly $127 billion, up 9% from 2020 sales growth, according to the NPD Group.
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Some of the new products are geared towards getting consumers back out and socializing again, such as electric scooters, according to Best Buy’s merchandising director Jason Bonfig.
In recent years, the retailer has expanded its range of products. In the summer of 2019, Best Buy debuted connected fitness products from sports brands including NordicTrack and Hydrow. In June, the company launched outdoor grills from Weber and Traeger, followed by a line of electric bikes, scooters and mopeds in August. In November, the company acquired Yardbird, a garden furniture company for an undisclosed value.
Best Buy has also bought healthcare companies, including GreatCall, which sell devices and services to help seniors age at home. It is also testing services related to new products, such as a pilot program offering repair services for e-transport products.
Bonfig said in an interview with CNBC that the company considered customer and employee feedback as well as clicks and searches on its website. For example, he says, some buyers have asked employees about outdoor furniture when buying backyard TV or audio equipment.
“We used to say, ‘No, we don’t actually have that kind of range,'” he said.
Now, with Yardbird, it is. This month, Best Buy added display cases to one of its namesake stores and several locations of Best Buy subsidiary Pacific Sales Kitchen & Home in Southern California. Customers can also buy garden sofas, wicker chairs, and more from the Best Buy website.
The retailer plans to install Yardbird and e-vehicle displays in about 90 stores this year, nearly 10% of the roughly 1,000 stores in the US. More than 250 of its stores currently carry fitness equipment, and Best Buy plans to add a broader and premium experience for these products in about 90 stores.
Best Buy doesn’t break down revenue by product category, but growth areas have become a powerful sales driver, the company said. At Investor Day in March, Bonfig said most of Best Buy’s sales growth of more than $12 billion over the past decade has come from large, established products like computers, TV and home appliances, but one-third comes from emerging groups like wearables. and virtual devices. reality headphones.
Bonfig declined to give CNBC specific growth numbers, but said younger categories are resonating. And he said that one of the skincare devices the company has begun offering, TheraFace Pro, has been a “breakthrough hit.” It sells for about $400 with cleansing and infrared light therapy features. He said the products satisfy consumers’ interest in health and wellness.
Michael Baker, retail equity analyst at DA Davidson, said the addition of product lines is in line with the company’s history. He said that with these moves, Best Buy will be able to stay at the forefront, expand its overall addressable market and capture a larger share of consumers’ disposable income.
His price target for the company is $135, about 46% above the current share price.
The biggest risk, he says, is that Best Buy might buy an item only to see it get delayed and end up discounted.
Baker said sales moderation can free up time and allow Best Buy to get creative with how it sells and promotes different types of merchandise.
“There was such a focus on being able to meet the demand for work-from-home, home-schooling, home-based gaming products,” he said. “With those who are slowing down, it gives them a chance to see where they can go next.”