Best Buy adds beauty gadgets and outdoor furniture to product lineup
Electric bikes. Patio furniture. Beauty gadgets.
Best Buy is adding merchandise that might surprise shoppers who typically think of its stores and website as a place to buy smartphones, laptops and TVs.
The company said Friday it has begun to carry about 100 skin-care devices, including a facial steamer and at-home tool for microdermabrasion, at nearly 300 stores and on its website.
Best Buy is making a broader push into categories such as fitness and furniture as it looks to propel growth beyond the covid pandemic. The company benefited from early pandemic trends, as people sought computer monitors for home offices, kitchen appliances for more at-home cooking and theater systems or giant TVs to pass the time.
Now, however, the retailer faces a more challenging landscape. It cautioned in March that it expects a same-store sales decline of between 1% and 4% in the coming year after a period of very high demand.
There are already signs of softening electronics sales, as consumers direct dollars toward vacations and social events. Major appliance maker whirlpool missed on estimates and saw sales drop 8.3% in North America in the most recent quarter versus the year-ago period, the sharpest decline since the pandemic began. microsoftwhich produces Xbox video game consoles, gave a negative outlook for the coming quarter with projected declines in the gaming category.
The NPD Group, a market researcher, projected that revenue from consumer electronics in the US will fall by 5% in 2022, 4% in 2023 and 1% in 2024 — but said total sales will remain higher than pre-pandemic levels. The declines follow a record-setting year for the industry in the US with consumer tech sales hitting almost $127 billion, a 9% jump over the elevated sales in 2020, NPD Group said.
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Some of the new items cater to consumers’ going out and getting social again — such as electric scooters, according to Best Buy’s chief merchandising officer, Jason Bonfig.
The retailer has expanded its merchandise offering in recent years. Best Buy debuted connected fitness products from exercise brands including NordicTrack and Hydrow in summer 2019. It rolled out outdoor grills from Weber and Traeger in June and a line of electric bikes, scooters and mopeds in August. It acquired Yardbird, a direct-to-consumer outdoor furniture company, for an undisclosed sum in November.
Best Buy has also bought health-care companies, including GreatCall, which sell devices and services that help older adults age in their own homes. It is testing services related to new products, too, such as a pilot program to offer repair services for e-transportation products.
Bonfig said in an interview with CNBC that the company has taken cues from customer and employee feedback — and clicks and searches on its website. For instance, he said, some shoppers would ask employees about outdoor furniture when buying a TV or audio equipment for the backyard.
“Our answer in the past has been ‘No, we actually don’t have an assortment of that,'” he said.
Now, with Yardbird, it does. This month, Best Buy added displays at one of its namesake stores and a handful of locations under the Best Buy subsidiary, Pacific Sales Kitchen & Home in Southern California. Customers can also buy outdoor sofas, wicker chairs and more on Best Buy’s website.
This year, the retailer plans to add Yardbird and e-transportation displays to about 90 stores, nearly 10% of its approximately 1,000 US store footprint. More than 250 of its stores currently have fitness equipment and Best Buy plans to add a larger, more premium experience for those products in about 90 stores.
Best Buy does not break out revenue by merchandise category, but emerging areas have been a powerful driver of sales, the company has said. At an investor day in March, Bonfig said most of Best Buy’s over $12 billion in sales growth in the past decade has come from large established products like computing, TV and appliance, but one-third has come from newer groups such as wearables and virtual reality headset.
Bonfig declined to tell CNBC specific growth numbers, but said the younger categories are resonating. And he said one of the skin-care devices it started to offer, the TheraFace Pro, has been a “breakout hit.” It sells for about $400, with features for cleansing and infrared light therapy. He said the products cater to consumers’ interest in health and wellness.
Michael Baker, an equity research analyst for retail at DA Davidson, said adding merchandise groups fits with the company’s history. With the moves, he said Best Buy can stay on the leading edge, expand its total addressable market and capture a larger share of consumers’ disposable income.
His price target for the company is $135, about 46% above where shares are currently trading.
The biggest risk, he said, is Best Buy could buy the merchandise only to see it linger and wind up marked down.
Baker said moderating sales may free up time and allow Best Buy to get creative in how it merchandises and promotes different kinds of items.
“There was such a focus on being able to fulfill demand for work from home, learn from home, play from home type products,” he said. “With those slowing down, it gives them a chance to see where they can go from here.”