A shopper leaves a Best Buy store during the Black Friday sale in Brooklyn, New York, November 26, 2021.
Brendan McDermid | Reuters
Best buy said on Thursday that it would double its membership program as consumers buy fewer discretionary items.
Starting June 27, the program will have three tiers, including a lower price option that offers perks like exclusive discounts and access to great products, consumer electronics retailers said. The program will also have a new name: My Best Buy Membership.
Best Buy is looking to monetize and drive customer loyalty while solving the problem of falling demand. Consumers are buying fewer electronics as they face higher prices for food and essentials, and some are prioritizing spending on travel, restaurants and other services. Additionally, during the early years of the pandemic, many shoppers bought new laptops, home theater systems, and kitchen equipment — the kinds of purchases people don’t often repeat in the near term. .
The company said in March that it Revenue is expected to be between $43.8 billion and $45.2 billion this financial year. The total will be down from $46.3 billion year-over-year and from $51.8 billion the year before — but revenue is up from pre-pandemic.
CEO Corie Barry told investors during its March earnings call that Best Buy expects this calendar year to “be the bottom of a decline in tech demand.” She said spending will pick up again as US households have a record number of high-tech devices and will want to upgrade or replace them, especially as suppliers launch bright products. create.
Meanwhile, Best Buy has also taken steps to cut costs. It has had at least two rounds of layoffs, one in august And one in april. The company confirmed the job cuts, but declined to share any numbers.
Best buy Launch of membership program, TotalTech, nationwide two years ago. The program grew to 5.8 million members at the end of January — adding nearly $1.2 billion in annual revenue. That’s up from 4.6 million members the previous year.
Paying members are a fraction of the roughly 100 million people in a retailer’s loyalty program, of which 40 million to 45 million are active.
As part of the relaunch, Best Buy’s TotalTech will become the top tier of the membership program, but with a different name: My Best Buy Total. Its price will also drop from $199.99 per year to $179.99. That top tier includes round-the-clock technical support, up to two years of product protection, and 20% off repairs, among other benefits.
The other two tiers are the retailer’s free loyalty program, which includes free shipping with no minimum purchase, or an option in between: My Best Buy Plus. A new $44.99 per year subscription includes members-only pricing, free two-day shipping with no minimum purchase, and an extended return policy.
Patrick McGinnis, senior vice president of memberships, said Best Buy recognizes that its diverse customers want different perks. Older customers tend to take advantage of 24/7 tech support, while younger customers sign up for members-only discounts and extended product protection.
McGinnis says the innovative program is better suited to those different budgets and needs. He declined to share the program’s total membership updates and renewal rates.
During an earnings call in March, Barry said Best Buy was pleased with the program’s results. She said members shop more with the company, buy more across categories, and rate their experience higher than non-members.
But she added that the retailer is still tinkering with costs. For instance, it added a restocking fee on some returned products and removed the same-day delivery benefit, the CEO said.
Joe Feldman, a retail analyst with Telsey Advisory Group, recently downgraded the company’s stock from better to better than the market and cut its price target to $81. He said Best Buy is an efficient company with a good strategy, but “they’re in a tough market right now.”
“People don’t buy electronics these days and you’re seeing it everywhere, whether it’s Walmart, Target, Costco, Amazon,” Feldman said. “Electronics aren’t selling well – big-ticket electronics in particular – and that’s been a point of pressure for about half a year.”
So far, he said, the membership program “hasn’t been a huge hit” when you consider the number of customers Best Buy has.
He added that paying for a service that offers technical support and extended protection will be harder to sell if the buyer doesn’t buy the new device.
Feldman said the program is “usually tied to purchases, so some of it is chicken and eggs.” “It makes it a challenge.”
Shares of Best Buy are down about 10% this year. Shares closed Wednesday at $72.22, down about 23% from their 52-week high.
Best Buy will report first-quarter financial earnings later this month.