Apple Watch, TV sales give Best Buy a boost, despite Prime Day
Best Buy’s Q2 2016 earnings announcement last week was a boon for the retailer’s stock price, driving shares up by 18 percent. Its brick and mortar revenue was relatively flat, but online sales grew by 24 percent, a bright spot amongst brick-and-mortar retailers that have generally failed to adapt to the competitive challenges unleashed by e-commerce, broadly, and Amazon specifically. We thought that it would be fun to unpack Best Buy’s online business a bit to try to understand what’s been going well for them and assess whether this good fortune might carry through into the all-important holiday season.
Beating its online competitors
Best Buy’s online business grew twice as fast as the rest of the online electronics category comparing the company’s fiscal second quarter (May to July) to the year prior. In Q2 2015, Best Buy had 11.4 percent share of the online electronics category. By Q2 2016, that had increased to 13.1 percent. Approximately half of Best Buy’s Q2 sales growth was the result of growth in buyers and about half was driven by an increase in average order sizes.
Sales of wearables and TVs were especially strong
Growth in buyers was strong across most categories, but four stood out. Seventy six percent more people bought wearables in Q2 2016 than in Q2 2015. This was largely on the strength of the Apple Watch, which became available in Best Buy stores in Q3 2015. While wearables certainly benefitted all electronics sellers, Best Buy benefitted inordinately. Television buyers grew by 68 percent in Q2 2016, bolstered by 4K televisions, in line with strong growth in online television sales across the category. Best Buy’s electronics accessories business grew its buyer base robustly as well, by 68 percent. The fact that televisions grew so significantly as a proportion of Best Buy’s online business, and that wearables were dominated by the relatively expensive Apple Watch, undoubtedly contributed to improving average order sizes.
Boomers and Gen X drove Q2 growth
Millennials are in Madison Avenue’s cross hairs these days, and indeed grew more quickly than any other age demographic for Best Buy in Q2 2015. In Q2 2016 it was Generation X (ages 35-49) and Boomers (ages 50-70) that grew the most quickly (10 and 8 points more quickly than Millennials, respectively). Not surprisingly, men continue to account for the bulk of Best Buy sales, at 66 percent in Q2.
Looking ahead to Holiday 2016
The fact that Best Buy performed well in Q2 2016 was particularly impressive due to two strong headwinds. First, Amazon Prime Day fell at the tail end of Best Buy’s second quarter and was Amazon’s biggest sales day ever. Second, iPhones, an important component of every electronics retailer’s sales mix, have been anemic for the past year. The good news for Best Buy is that it will not have to compete with another Prime Day for the rest of the year (unless Amazon has a surprise in store for us) and Apple will be announcing the iPhone 7 in September, which will drive surely drive sales and store traffic. If rumors are true that the iPhone will not have a headphone jack, there could be a surge in wireless headphone sales, as well.
All in all, it seems that Best Buy is a rare case of a brick-and-mortar merchant that has successfully managed the shift to omni-channel and is poised to continue to do so through the rest of 2016.
About this data
With a panel of 4 million online shoppers, Slice Intelligence gives the most detailed, and accurate digital commerce data available, and is reported daily.
Slice Intelligence is the only service to measure digital commerce directly from the consumer, across all retailers, at the item level, and over time. Our retailer-independent methodology precisely measures commerce as it happens. By extracting detailed information from hundreds of millions of aggregated and anonymized e-receipts, Slice can map the entire Purchase Graph, connecting each and every consumer to all their purchases.
Slice gets its data from e-receipts – not a browser, app or software installed by the end-user – so its measurement reflects comprehensive shopping behavior across multiple devices, over time which are key in an increasingly omnichannel retail world. Slice Intelligence is the exclusive e-commerce data provider for the NPD’s Checkout Tracking e-commerce service.