Fighting a highly promotional environment for consumer electronics, Best Buy sees holiday shopping patterns this year returning to some pre-pandemic norms.
Reviewing FY23 third quarter financials on a Tuesday (Nov. 22) earnings call, Best Buy CEO Corie Barry noted year-over-year sales declines across most product categories, adding that the largest impact to the slump in sales came from computing and home theater.
“At the highest macro level across retail, each customer is making trade-offs, especially with the significant impact of inflation on the basics like food, fuel and lodging,” Barry told analysts on the company’s call. “Across consumers, we can also see that savings are being drawn down, credit usage is going up, and value clearly matters to everyone.”
As a result, she said, the Minnesota-based retailer continued to see more interest in sales events geared at “exceptional value,” calling the current macro environment “uneven and unsettled” for consumers.
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Anticipating shopping patterns to move toward historical holiday norms for the first time in two years, Barry said, “we expect there will be more customer shopping activity concentrated on Black Friday week, Cyber Monday and the two weeks leading up to Dec. 25.”
In addition to offering free next-day shipping on “thousands of items” and beefing up in-store and curbside pickup, Barry said, “We feel confident heading into what could be an uneven holiday season, and we have tailored our offerings to delight our customers whatever their budget.”
Digital Shift is Sticky
Barry said, “It is becoming more evident every quarter that the pandemic-induced shopping behavior changes are sticky, and that our digital penetration of domestic sales will likely remain above 30%.”
She added that for the first nine months of the year, “our online sales as a percentage of domestic revenue were 31%, nearly twice as high as pre-pandemic,” adding that “customer demand for other virtual interactions has remained elevated and we have seen strong and sustained sales growth from our investments in chat, phone and video sales experiences this year.”
In loyalty, she said the Totaltech membership launched a year ago for a $199 annual fee “is driving the member behavior we envisioned. Members are engaging more frequently with us and shifting their share of wallet to Best Buy,” adding that “nearly half of the new members joining the program in the past year were either new or lapsed customers, reinforcing that the value of Totaltech resonates beyond our existing loyal customers.”
Turning to payments, Barry called Best Buy “well-positioned to meet customer’s needs in this environment, noting that the chain offers “multiple financing options to improve affordability. These include our cobranded Citibank credit card, buy now pay later options and most recently, our exclusive Upgrade Plus program for Apple MacBooks.”
The Apple partnership on Upgrade Plus powered by Citizens Pay lets consumers pay off purchases “for a low monthly fee” and trade in for an upgrade after three years. It’s one of several vendor partnerships, including one with Whirlpool in the homebuilder space.
See also: Best Buy, Google Join Outsiders in Push to Capture Remote Patient Monitoring Boom
Barry had little to say on recent Best Buy forays into healthcare, noting only the October launch of over-the-counter hearing aids in almost 300 stores. “Volume is still relatively low, but the Q3 sales growth rate exceeded our expectations and demonstrates that customers see Best Buy as a relevant provider of these products,” she said.
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