Electric bicycles. Patio furniture. Beauty gadgets.
Best Buy is adding merchandise that might surprise shoppers who typically view its stores and website as a place to buy smartphones, laptops, and TVs.
The company said Friday it has started selling about 100 skincare devices, including a facial steamer and a home microdermabrasion tool, in nearly 300 stores and on its website.
Best Buy is pushing broader pressures on categories such as fitness and furniture as it appears to drive growth beyond the Covid pandemic. The company took advantage of early pandemic trends as people sought computer monitors for home offices, kitchen appliances for more home cooking and theater systems or giant TVs to pass the time.
Now, however, the retailer faces a more challenging landscape. It warned in March that it expects same-store sales to fall between 1% and 4% for the coming year after a period of very high demand.
There are already signs that electronics sales are weakening as consumers spend their dollars on holidays and social events. Major appliance maker Whirlpool missed estimates and saw sales in North America fall 8.3% in its most recent quarter from the same period a year ago, the sharpest drop since the start of the pandemic. Microsoft, which manufactures Xbox video game consoles, painted a negative picture for the coming quarter with expected declines in the gaming category.
The NPD Group, a market researcher, predicted that US consumer electronics sales will fall 5% in 2022, 4% in 2023 and 1% in 2024, but said total sales will remain above pre-pandemic levels. The declines follow a record year for manufacturing in the US, with consumer technology sales reaching nearly $127 billion, a 9% jump from higher sales in 2020, according to NPD Group.
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According to Jason Bonfig, Best Buy’s chief merchandising officer, some new items are addressing consumer outreach and re-socialization, such as electric scooters.
The retailer has expanded its merchandise offerings in recent years. Best Buy debuted in the summer of 2019 with connected fitness products from fitness brands like NordicTrack and Hydrow. It introduced Weber and Traeger outdoor grills in June and a line of electric bicycles, scooters and mopeds in August. It bought Yardbird, a direct-to-consumer outdoor furniture company, in November for an undisclosed sum.
Best Buy has also bought healthcare companies, including GreatCall, which sell devices and services that help older adults age at home. It is also testing services related to new products, such as a pilot program to offer repair services for e-transport 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 example, he said some shoppers would ask employees about outdoor furniture when buying a TV or backyard audio equipment.
“Our answer in the past was ‘No, we don’t actually have an assortment of that,'” he said.
Now, with Yardbird, yes. This month, Best Buy added displays at one of its eponymous stores and a handful of locations under its Best Buy subsidiary Pacific Sales Kitchen & Home in Southern California. Customers can also purchase outdoor sofas, wicker chairs, and more from Best Buy’s website.
This year, the retailer plans to add Yardbird and e-transportation displays to approximately 90 stores, nearly 10% of its approximately 1,000 U.S. retail footprint. More than 250 of its stores currently carry fitness equipment, and Best Buy plans to add a larger, more premium experience for those products in about 90 stores.
Best Buy doesn’t split sales by trade category, but emerging territories have been a powerful driver of sales, the company said. On investor day in March, Bonfig said the majority of Best Buy’s revenue growth of more than $12 billion over the past decade has come from large established products such as computers, TV and appliances, but a third comes from newer groups such as wearables and virtual devices. reality headsets.
Bonfig declined to tell CNBC specific growth numbers, but said the younger categories resonate. And he said one of the skincare devices it started offering, the TheraFace Pro, was a “breakthrough hit.” It retails for about $400, with cleaning and infrared light therapy features. He said the products cater to consumers’ interest in health and wellness.
Michael Baker, a retail equity research analyst at DA Davidson, said adding merchandise groups is part of the company’s history. The moves allow Best Buy to stay at the top, expand its overall addressable market and capture a larger share of consumers’ disposable income.
His price target for the company is $135, about 46% above where the stock is currently trading.
The biggest risk, he said, is that Best Buy can buy the merchandise only to see it stick around and eventually be discounted.
Baker said moderating sales can free up time and allow Best Buy to get creative in the way it markets and promotes different types of items.
“There was such a focus on being able to meet the demand for work from home, learning from home, play from home like products,” he said. “With those delays, it gives them a chance to see where they can go from here.”