Can Smartphones Save Best Buy?

Things have been looking pretty bleak lately for the Best Buy chain. The most recent quarterly report was pretty disappointing and today the company’s CEO Brian Dunn resigned. Still, there could be a ray of sunshine coming through the clouds in the form of the Best Buy mobile devices business.

Best Buy used to be one of the top go-to stores for entertainment, but the CD market has been wiped out by digital music and the DVD/Blu-ray niche is losing out to streaming video from brands like Netflix and Amazon. That’s part of the reason that the chain saw declines in revenue during the fourth quarter, especially in the once-lucrative entertainment category.

It didn’t help that Best Buy had become the place where frugal shoppers went to scope out the latest electronics before going home to buy them for lower prices online at retailers like Amazon and eBay.

The one bright spot in an otherwise bleak outlook was the 7.6% growth in Best Buy’s computing and mobile phones departments. This is more important than it sounds because mobile phones make up almost 40% of the chain’s total revenue for the month.

The only other segment of the business to show growth was appliances, which account for just 5% of Best Buy’s revenue. While appliances are a big-ticket item, they don’t have the frequent turnover that keeps customers coming into the store. You might pay $1,000 for a refrigerator, but you could keep it ten years or more. You pay much less that that for a smartphone, but will be looking for another one in two years or less.

Best Buy has seen its fortunes rise along with those of the smartphone business. As they get faster, more feature-packed and just “smarter,” they’ve taken over more than half of the mobile phone business. While the carriers still sell more smartphones, Best Buy has a healthy share of the business.

The Best Buy store has become a favorite place to check out new smartphones and compare what’s available at various price points. The electronics chain has better-trained employees who are able to discuss the fine points of numerous devices with customers. Best Buy locations are likely to have a larger selection of phones than the carriers. They’ve also been known to sweeten their deals by tossing in a Best Buy Gift Card or free game. All this makes Best Buy a good choice for the buyer who wants to upgrade but isn’t sure which model to pick.

Best Buy seems to have seen the writing on the wall, as the chain is closing 50 big box stores while opening 100 standalone Best Buy Mobile stores. The mobile stores are likely to be smaller and more cost-efficient to operate, so this definitely looks like a smart move for a company that needs one to avoid being knocked out of the game permanently.