Best Buy (NYSE: BBY) reports more than 1 million customers have signed up for its $199/year Total Tech Support program, which launched in May 2018. Do the math… that equates to a $199 million annual line item. Not too shabby.
The news helped skyrocket the company to stronger sales numbers for Q4 and propel is stock price up 16 percent in one day to nearly $70/share.
Specifically, the CE Pro 100 company reports ending its FY2019 with $42.8 billion in revenue, up $6 billion from 2018, or 4.8 percent. For the quarter, Best Buy had revenues of $14.8 billion, up 9 percent in comparable sales growth (only a 3 percent YOY growth because 2018 had one additional week versus 2019).
Expansion of Total Tech Support Service
“We are very proud of the financial results we have just delivered,” says Hubert Joly, chairman and CEO. “Strategically, we've made progress in expanding what we do for our customers and how we interact with them. The first example is the launch of our Total Tech Support program.
“Having a service that provides members unlimited Geek Squad support for all their technology no matter where or when they brought it is a compelling and unique value proposition for our members. We continue to be pleased with the customer enrollment and ended the year with more than 1 million members.”
Best Buy plans to grow the member base of Total Tech Support by improving the experience by adding new capabilities around self-service and proactive support.
Joly also touted the company’s In-Home Advisor program, which grew from about 300 advisors to 530 and provided more than 175,000 free in-home consultations to customers across the nation.
“The revenue per order that we generate from these interactions continues to be much higher than in the store and online and it tends to have a higher gross profit rate… and higher attach rate of paid services,” he notes.
Best Buy Outlook: Digital Health a Big Focus
Joly says he expects Best Buy to continue to grow in 2019 and 2020, targeting 2.7 percent growth.
Best Buy CEO
“Notably in existing categories like home theater, we see opportunities relating to increasing the penetration of large screen sizes 4K and OLED, and from the introduction of new technologies such as 8K,” he says.
Joly cited data that the smart home market will triple by 2025. He pinpointed in-home cameras as a key driver, expect to increase household penetration by more than 50 percent by 2022.
“We also believe that digital health is an exciting area with enormous opportunities from the use of technology to help customers with their health, fitness, sleep, etc., across multiple age groups from babies to seniors,” says Joly. Best Buy purchased GreatCall last year to serve the aging-in-place market.
“We will continue to expand our health business by scaling both the GreatCall consumer devices and services and the commercial monitoring service with a focus on the senior population,” notes Joly.
“As children of aging parents, many of us would appreciate the potential power of our health monitoring service that enables seniors to live longer in their homes, while reducing related healthcare costs. We're currently in pilots with a number of managed care organizations. And over time, we believe this could become a material growth opportunity for us.”