Best Buy’s Next Move To Attract Customers: Rent Before You Buy

Best Buy (NYSE:BBY) has shielded itself from the “Amazon effect” through several innovative ways of attracting customers to its stores and ensuring that they transact on its platform via its integrated retail channel. The company’s e-commerce sales are on the rise, as Best Buy works on faster delivery, provides in-home consultation and integrates its online and in-store shopping experience tightly. Best Buy reported better than expected Q1 2017 results, with online revenues comprising 13% of domestic revenues and a more than 22% growth in comparable sales. The company’s next innovative move to attract customers to its platform is a “try before you buy” option. According to Recode, the company is entering into a partnership with a San Francisco based startup – Lumoid – through which it will offer rentals for cameras, audio equipment and fitness trackers on its website. This service will allow customers to try out an expensive electronic gadget before making the actual purchase decision.  Interested customers will be directed to Lumoid’s website for rentals and they will get 20% of the rental price back if they choose to buy the item outright.

Monetizing Returned Goods, Better Customer Engagement

Best Buy’s latest strategy can have a dual benefit for the company. The products which the company is offering for rentals are “open box” items which are returned by customers and generally cannot be sold at full price by the company. By offering these products as rentals, Best Buy can generate additional revenues from these products before selling them at discounted prices. Further, through this service, the company can better engage with its customers and offer another convenient option. One key disadvantage of purchasing products via an e-commerce platform is the inability to try them out before buying. Best Buy’s stores have trained personnel who help customers understand the features of similar products and get a demo where needed, to help make an informed purchase decision. The company is now looking to take this customer service a step further by offering rentals before the actual purchase, which will allow the customer to use the product for a given period before owning it. While e-commerce websites – including Best Buy’s online platform – allow customers to return goods if they are not satisfied with them, a huge inventory of “open box” returned products impacts margins. A rental scheme could reduce the instances of returned open box items, especially in the case of higher priced products.

Best Buy is taking innovative measures to fend off competition from e-commerce players, especially Amazon. A rental scheme to try products could help attract more users to the company’s platform. While there is nothing stopping other players from introducing similar options in future, this service – coupled with Best Buy’s team of trained professionals, an integrated online and offline platform and strong customer service – is likely to give it an edge in the near term.

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