After years of what seemed like certain retail doom at the hands of Amazon, Best Buy has recently managed to mount an impressive recovery, thanks to things like adding mini-stores for brands, embracing its role as an electronics showroom, and price-matching competitors. However, the chain’s latest sales results show that some things are far beyond the company’s control. Like self-immolating smartphones.
Yes, the chain expected to sell Samsung’s Galaxy Note 7 through the launch period and the whole holiday season, and instead welcomed customers back to exchange or return their phones.
That was one product disaster, but the big-picture problem is that the market for smartphones has “matured,” meaning that there aren’t really any new customers who don’t have smartphones yet who want them. Most sales are upgrades, not people new to the product. It’s the same with tablets and wearables.
Another problem was what CEO Hubert Joly referred to as “softness” in the video game market. “The level of industry softness across both gaming hardware and software was much steeper than anticipated,” he explained in a phone call with stock analysts this morning. There were no hot new consoles for sale, or game titles that brought customers into stores.
Best Buy’s offline competitors aren’t doing very well, either. GameStop stores are suffering due to the ease of downloading games and perhaps their own sales practices. hhgregg is a direct competitor of Best Buy, selling electronics and home appliances, and is facing down a possible bankruptcy filing.
Best Buy, however, is doing well within its category, with online sales still rising and customers still shopping in its stores. There just weren’t enough compelling products to sell at the end of 2016.