Best Buy SWOT Analysis 2024 : Key Points You Should Know

Best Buy is one of those stores in your neighborhood filled with childhood memories when CDs, CD games, and music were popular, and people used to love the store and buy their favorite CDs.

Time has changed, as have people’s perceptions, behavior, and culture. And Best Buy is one of those companies that can adapt to time and change in its 57 years of history. But there is more to learn about its strengths, weaknesses, opportunities, and threats in this best buy swot analysis.

Best Buy: Company Overview

Best Buy will turn 57 this year, 2023, as the company was founded in 1966 by Richard Schulze. Best Buy wasn’t even the company’s name; it was “Sound of Music,” which was changed to “Best Buy” in 1983.

The company has over 1,000 stores across the United States, Canada, and Mexico catering to millions of people with electronics products. Best Buy reported total revenue of $42.8B and employed approximately 90,000 people worldwide in 2022. For consumers, its goal is to enrich people’s lives through technology.

Product & Services of Best Buy
Consumer Electronics | Appliances | Tech Repair

Best Buy Competitors
Walmart | Amazon | Target | Alibaba | Costco | Staples | Office Depot | eBay | Home Depot | Apple Store | Newegg | Kohl’s Corp | Sam’s Club | Lowe’s | B&H Photo | Fry’s Electronics | Micro Center | Gamestop | Kmart

Did You Know?

Best Buy was one of the first retailers to offer Apple’s iPhone when it was released in 2007.

Strengths – Best Buy SWOT Analysis

Variety: Customers want to find what they need in one place, making shopping more convenient. And to ensure that they find everything they need, Best Buy offers a comprehensive selection of technology products and services, including electronics, appliances, computers, mobile devices, and home theater equipment.

Availability: The company has widespread availability, with over 1,144 stores in three countries and not to mention its strong e-commerce presence. Besides, they offer same-day delivery and curbside pickup options to provide convenient shopping experiences for customers, giving accessibility to customers.

Excellent Customer Service: As per the data, Best Buy has a vast number of loyal consumers, and it happened not just because of the variety and availability, but also for skilled staff and excellent customer service, which they are known for. Best Buy was ranked as one of the top retailers constantly for customer service, according to the JD Power study.

Strong Supply Chain: The company has invested in a sophisticated logistics network that includes multiple distribution centers, advanced inventory management systems, and partnerships with shipping carriers. Because of that, they can efficiently move products from manufacturers to their retail stores and online channels.

Steady Finance: Financial stability has allowed Best Buy to invest in its business and innovate in the highly competitive technology retail space to maintain expansion and market growth. The company reported revenue of $42.8B and a net income of $2.454B in 2022.

Customer Convenient: One of the primary reasons behind Best Buy’s growth and loyal customer base is because of the convenience of consumers. Besides, they offer several customer conveniences, such as their online shopping platform, allowing customers to purchase products and select in-store pickup or home delivery easily, and Geek Squad, which provides in-home installation, repair, and consultation services.

Weaknesses – Best Buy SWOT Analysis

Low Global Presence: Despite being a well-known retailer in North America, Best Buy has a low global presence. The company only has stores in three countries: the United States, Canada, and Mexico, and the lack of international presence may limit its ability to compete with these larger retailers in the global market.

Supplier Over-Reliance: When a company sources the products only from a few suppliers, it gives them authority or bargaining power and makes the company vulnerable. And Best Buy has been criticized for its over-reliance on a few suppliers. But the good thing is the company is already working on mitigating that.

Uneven Revenue Model: As mentioned, most of the Best Buy stores are located in the USA alone, almost 90% of them. As a result, a big chunk of the revenue comes from the USA, making it over-dependent and vulnerable to many economic downturns in the market.

Niche-Based Dependency: The company heavily relies on the sales of electronics and technology products, leaving it vulnerable to changes in consumer preferences and market trends. The world is already seeing the results as they face declining sales and trying to cope with a challenging time.

Low Profitability: The company’s net income was $1.419B in 2023, down from $2.454B the previous year, an overall 42% fall. Besides, the financial situation indicates that despite an increase in revenue, the company faces challenges in controlling its costs, as its profit margin has been consistently low, with an average of 3.06% over the past five years, compared to the industry average of 5.5%.

Opportunities – Best Buy SWOT Analysis

International Expansion: The company currently operates primarily in the US, Mexico, and Canada, but there is potential for expansion into other markets. As a part of the plan, they are trying to find the perfect opportunity to open in other markets. It starts with opening and maintaining a stronghold in the existing market by opening more experience stores.

Strategic Partnerships: To expand its product and service offerings, reach new customers, and increase revenue, the company has way more opportunities than it believes. Best Buy already has an extensive 41 partnerships, including 14 tech and 27 channel partners. With constant effort, the company is pushing another ‘Hospital At Home’ Partnership.

Expand Offerings: People always want more, and with the growing demand Best Buy has the opportunity to expand its product offerings to drive growth. The company has expanded its health and wellness offerings, such as fitness trackers and smart watches. Additionally, they have also increased its selection of home appliances and furniture, focusing on premium and high-end products.

Tech Adaptation: The company continuously leverages emerging technologies to enhance customer experiences and operational efficiencies. Best Buy has invested in augmented reality to help customers visualize how products will look in their homes before purchasing, not to mention implementing AI-powered inventory management systems to optimize stock levels and improve supply chain efficiency.

Threats – Best Buy SWOT Analysis

High Competition: Best Buy faces high competition in the retail electronics market, with rivals like Amazon, Walmart, and Apple. According to the data, Best Buy’s market share in the US consumer electronics market was around 10% in 2022, while Amazon’s was about 37.8%.

Controversies: The company has faced several controversies, including accusations of employee misconduct, deceptive sales practices, etc. A couple of years back, the company’s CEO was accused of inappropriate relations with the company’s female employee, and another case was against the company’s misrepresented prices in various stores.

Supply Chain Issues: SCM issues are regular in this industry, and best buy has faced several supply chain issues, including inventory management challenges and disruptions. Not only did the company face a huge sales downfall during Covid-19, but it also created long-term supply-demand problems that they are still trying to improve.

Economic Downturns: During the 2008-2009 recession, Best Buy saw a massive decline in same-store sales and a 30% drop in net income. As the 2023 recession is not a possibility but a certainty, every industry will be affected, especially the electronics market.

Security Concerns: Best Buy has faced security concerns, with data breaches compromising customer information. In 2018, it was reported that hackers had gained access to the payment information of some customers through a third-party vendor’s software. And, with more security threats, the company’s data is in danger without proper security management.

[Bonus Infographic] SWOT Analysis of Best Buy

Recommendations for Best Buy

The electronics market has changed in the last few decades, with many opportunities to grab and threats and weaknesses to overcome.

• The company should continue exploring opportunities for international expansion, especially in markets with high demand for technology products.
• Partnerships with major smartphone manufacturers or home automation companies could help Best Buy expand its offerings and improve its competitive position.
• Best Buy should consider expanding its offerings beyond traditional technology products to include new and emerging technologies such as virtual reality, augmented reality, and artificial intelligence.
• The company should prioritize its e-commerce platform, improve its mobile app, and explore new ways to leverage data and analytics to personalize the shopping experience for customers.

Frequently Asked Questions (FAQs)

Final Words on Best Buy SWOT Analysis

Best Buy is a well-established retailer with a reputation for providing high-quality technology products and exceptional customer service. The company has made significant investments in its online presence and is well-positioned to take advantage of the growing e-commerce market. On the other hand, Best Buy has several opportunities for growth, including international expansion, strategic partnerships, and innovation in new and emerging technologies.

References

• Wikipedia contributors. (n.d.). Best Buy. Wikipedia.
• Kokoris, G. (2022, February 9). Best Buy Modernizes Supply Chain Network with Advanced Automation and Warehouse Robots. Supply Chain 24/7.
• Unglesbee, B. (2021, June 24). Best Buy plans to spend $1.2B on diverse suppliers across its business. Retail Dive.
• Anderson, G. (2022, May 16). Best Buy Believes Time Is Ripe To Double Up On Outlets. Forbes.
• Repko, M. (2023, March 7). Best Buy will set up in-home hospital care through a new deal with Atrium Health. CNBC.
• Valeriano, A. (2022). Best Buy, Meta join forces to power 6 new Teen Tech Centers. Best Buy.
• Young, L. (2022, August 30). Best Buy Says Supply-Chain Strains Are Improving Heading Into Fall. The Wall Street Journal.