Best Buy is an American consumer electronic retail multinational company. Richard M. Schulze and James Wheeler Richard established the consumer electronic brand on 22 August 1966. The company headquarters is in Richfield, Minnesota, USA.
Some of the top products and services of Best Buy are Best Buy Express, Geek Squad, Magnolia Audio/Video, Repair Services, Pacific Kitchen & Homes, Best Buy Mobile, Napster, Warranty Services, Consumer Electronics, and Service Plans.
Best Buy Revenue
The brand has a network of 1159 stores, and it has employed roundabout 102,000 employees to manage its worldwide operations.
Some of the main competitors of Best Buy are Walmart, Office Depot, Staples, Amazon, Target, Costco, Home Depot, eBay, and Lewe’s.
Here’s the Best Buy swot analysis as follows;
Strengths of Best Buy
Best Buy claims that it has the best and most skillful sales personnel and retailers. The company provides special training to its employees while launching any offers, so they would provide customers with a better shopping experience. The training amplifies their capabilities to answer questions in a better way and present the comparison of different brands. However, the employees of Geek Squad in the company have the trait to offer the best tech support to the customers.
The reason Best Buy’s products attract the attention of customers is that they offer high product value. The company offers a wide range of quality products in its extensive portfolio to its customers. However, the company also owns some of the private brands in its portfolio are Modal, Pacific Sales, Magnolia, and Insignia.
Cost Management Strategies
The earnings and profitability of Best Buy have increased to a great extent by following the different cost management strategies. They allow the consumer electronics company to lower the operational cost, losses, and expenses, and amplify profitability in the long term.
Best Buy offers the customers a very unique and interesting offer of BOPIS (buy-online-pickup-instore). Roundabout 93% of the company’s orders are processed in-store through this program, and all of the company’s stores have the capability to dispatch orders. The brand has separately launched UPS location points for online customers and CVS pickup points.
Best Buy has effectively invested resources in both online e-commerce stores and physical retail stores. When customers visit its stores either online or the physical retail store, they can get a wide variety of products and services. However, the Geek Squad of the company is always ready to visit customers’ houses to provide maintenance services, repair, installation, and delivery.
Reliable Customer Service
One of the strongest suits of the company is to maintain excellent customer service quality, and it has helped the company to amplify its customer satisfaction level. Best Buy follows the customer focus strategy and it makes sure that the customer would receive the service either from the Geek Squad or the tech support personnel. Usually, customers prefer such retailers and salesmen that understand their needs and requirement and deal with them accordingly.
Collaboration and strategic acquisitions are the best way to amplify a company’s profitability. Best Buy has done so successfully by making several acquisitions in the consumer electronics industry in order to increase its market share. For instance, the company acquired Critical Signal Technologies in 2019 and Great Call in 2018. It has allowed the company to enter the healthcare industry.
Best Buy has achieved the status leadership position in the consumer electronics industry in the US. The company is also operating a retail network in Canada, Mexico, and the US. The brand has earned a reputation as the world’s leading multichannel retailer of consumer electronics. In other words, the company has a significantly dominant position in the market.
Weaknesses of Best Buy
Best Buy has caught into various types of controversies over the years. For instance, two customers of the brand filed a lawsuit against the company in 2000 claiming that the company is engaged in fraudulent activities. It was focusing on the service plans and warranty of services. After the investigation of the case, the court ordered the company to pay the penalty.
Over-reliance on Supplier
Best Buy has been overly relying on credit suppliers. Ideally speaking, the company should pay for the supplies after the sale of items, and the company doesn’t have to pay for every item at its stores. If the products at its stores don’t get sold, the company has to pay for them after some time.
Best Buy offers quality consumer electronic products at an economical price range, and it costs the company in the form of lower profitability.
Reliance on Electronics
We’re living in the world of fast-evolving technology. The innovation in technology is making things obsolete, and it puts the company’s products at greater risk. However, whenever a new tech product enters the market, it would make the products on the company’s shelves outdated, and ultimately more losses to the company.
A report in 2020 came out that the company’s CEO was having inappropriate romantic relationships with one of the company’s executives. BOD had no other choice but to conduct a formal investigation regarding this case. The whole incident attracted the attention of the media and brought negative popularity.
Over-Reliance on US Market
Best Buy has a network of approximately 1159 stores in three countries, and out of the 1036 stores are present in the US. Due to over-reliance on the US market, the company has a greater market presence in North America and it is in desperate need of expansion.
Opportunities for Best Buy
Best Buy should invest resources in the development of new technology, it would help the company to lower the operational cost and improve productivity. The introduction of innovative technology in various areas would amplify the company’s profitability and revenue stream.
Collaboration & Acquisition
Best Buy has earned the reputation of expanding its business through the acquisition of other brands. The consumer electronic brand should keep on following the same strategy of acquisition and expand its customer market share and influence.
The company is heavily relying on the North American market, and Best Buy should expand its market presence in other countries. The company’s retail stores are at a great distance, and customers have to travel to do the shopping. Therefore, the company should launch new stores in order to minimize the distance between them. It would help the company to strengthen its market position.
Best Buy is operating its business in three major markets; Canada, Mexico, and the USA. The company should exploit the opportunity and expand its operations in emerging markets. If the brand wants to decrease the competition in the saturated market, the company should enter the unsaturated and developing markets.
The online shopping trend is increasing after the pandemic crisis, and Best Buy should develop a strategy to attract more people to its online stores and make them do shopping online. Even though the consumer electronic brand has taken very efficient strategic steps, there is always room for growth. The company should follow in the footsteps of the world’s leading e-commerce store Amazon.
Expansion in Senior Health Category
After the acquisition of Great Call, Best Buy has got an opportunity to amplify its operations and expand its business in the healthcare industry. According to a research report by Morgan Stanly, the company has got an opportunity to earn more revenue from the healthcare industry rather than consumer electronics.
Threats to Best Buy
Changes in Technology
The rapid change in technology introduces new products every year, and it makes the old electronic products obsolete. For instance, online video streaming platforms have replaced CDs, DVDs, and cassettes; and smartphones and tablets have replaced big computers. When tech products become obsolete, the company would have to incur losses.
Consumer electronics are the main category products of the company’s portfolio, and counterfeit companies are there to copy Best Buy’s products and launch the lower quality product into the market. Sometimes, they offer the same quality product at a lower price than the original producer. Price-conscious customers would go for the cheap product.
The enactment of the USMCA has not only empowered employees in the US but also across the borders in the neighboring countries. For instance, employees of Best Buy and Home Depot in Mexico went on strike for higher pay. The thing of strikes, they are like infections and are contagious.
Best Buy is in fact a very tough competition both online and in its physical retail store category. The competitor brands are introducing loyalty programs in order to strengthen their customer market share. For instance, Amazon, Walmart, Target, and Costco are offering discounts and free delivery services to their loyal customer in order to increase the customer retention rate.