As customers embrace value, Best Buy is emphasizing promotions and in-store experiences, aiming to create compelling reasons for them to make it to the checkout counter.
“We are excited about the promotions and deals we have planned for all customers and budgets, including special promotions and early access to deals for our my best five plus, and my BestBuy total members,” Best Buy CEO Corie Barry said during the company’s latest quarterly earnings call on Tuesday (Nov. 21).
With the goal of encouraging consumer spending, Best Buy has curated gift lists and introduced a new resource called “Yes, Best Buy Sells” on both the Best Buy website and app which allows customers to explore the latest tech and gifting items, including pet tech, baby tech, and electric vehicle chargers.
To enhance the holiday shopping experience, Best Buy has extended store hours and its product return policy. Additionally, customers can connect with virtual sales experts for assistance, and the company offers free next-day delivery, as well as store pickup and curbside options.
In terms of merchandising, Best Buy aims to showcase innovation across various categories, featuring artificial intelligence (AI)-powered devices like Microsoft Co-Pilot and Windows 11 computers, the latest in virtual and mixed reality with Metaclass 3 or ReBAM Meta Smart Glasses, and immersive audio with Bose Quiet Comfort Ultra headphones. The company also provides a trading program for old technology and deals on flagship categories such as computing, home theater and gaming.
“We continue to work closely with our vendor partners to add experiences to our stores,” Barry said. “For example, Lego and Therabody invested in new shopping shops in all our 35,000 square foot experience stores. In addition, and as you would expect, many of our premium partners are continuously updating their in-store spaces to reflect their latest innovations.”
As a case in point, Doug Sweeny, chief marketing officer at ŌURA recently told PYMNTS: “We launched in April with Best Buy. It was a big part of our playbook.”
Sweeny said the ŌURA team aimed to introduce a shop-in-shop experience, utilizing videos, storytelling, and a digital touchpad to inform consumers and provide a thorough grasp of the product experience.
See also: ŌURA Wants to Be the Wearable of Choice for Consumers
“The consumer is still spending but as we have said before, they are making careful choices and tradeoffs right for their household, given the sustained inflationary pressure on the basics like food, fuel and lodging and the ongoing preference towards services spending, like restaurants concert tickets,” Barry said. “Additional indicators have continued to soften including declining consumer confidence, increasing debt and waning savings.”
A recent PYMNTS Intelligence report indicates that U.S. consumers are experiencing financial strain and pressure extending into the final weeks of the year and beyond. Over the past few months, almost half of consumers expressed concern that the resumption of student loan payments would negatively impact their savings capability. Additionally, 35% were concerned about being able to afford everyday expenses.
Depending on the generation and the amount of student debt carried, the reduction in disposable income varies, ranging from mid-single-digit percentage points to low-double-digit percentage points.
Retail giants such as Walmart and Target have said student loan payments are exerting pressure on consumers, making them more cautious while shopping. This added strain contributes to the challenges of a paycheck-to-paycheck lifestyle, impacting approximately 60% of consumers.
“You’ve got the repayment of student loans, which affects about 27 million Americans. All of these things could be contributing” to the slowdown,” Walmart Chief Financial Officer John David Rainey said in a discussion with analysts about earnings, touching on the decline in consumer spending in October, leading to a cautious outlook for the remainder of the year.
Target CEO Brian Cornell also acknowledged during his company’s earnings call that “overall, consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt, and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs in their family budgets.”
Read more: 5 Signs Consumers Are Feeling Pinched Into the Holidays and Beyond
“Today we are reporting better-than-expected profitability on slightly softer-than-expected revenue for the third quarter,” Barry said in a press release. “These results demonstrate our ongoing, strong operational execution as we navigate through the near-term sales pressure our industry has been experiencing for the past several quarters.”
Citing “uneven” consumer demand, Barry said, “Based on the sales trends in Q3 and so far in November, we believe it is prudent to lower our annual revenue outlook.”
In Q3 FY24, Best Buy reported a decline in domestic revenue by 8.2% to $9 billion, driven by a 7.3% decrease in comparable sales. The main contributors to the decline were appliances, computing, home theater and mobile phones, partially offset by growth in gaming.
Domestic online revenue also decreased by 9.3% to $2.75 billion. The domestic gross profit rate increased to 22.9%, attributed to improved financial performance from membership offerings, higher service margin rates, favorable product margin rates and lower supply chain costs.
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