M+E Connections

Virtual reality (VR) may contribute to Best Buy’s growth in the future, but the retailer doesn’t expect the nascent technology to play major role in its performance this year, according to comments made by Best Buy CEO Hubert Joly Aug. 23, on the company’s earnings call for the second quarter, ended Aug. 1.

Best Buy has been rolling out VR merchandising at its stores and, by the holiday season, the retailer expects to be selling an expanded assortment of VR products at “the vast majority of our stores,” he said. More than 500 Best Buy stores will be equipped with VR demo stations by the holidays, enabling customers to “try out this exciting new technology,” he said.

But, although “we believe virtual reality has the potential to contribute to our growth in the future,” Joly said he was “not expecting a material financial impact this year given the timing of launches, inventory availability and the fact that we are early in the cycle.”

Through the VR product assortment that Best Buy will be offering this year and the demo stations at its stores touting those devices, “we certainly do expect to be a destination” location for customers excited by the technology, he said.

Consumers can buy VR products elsewhere, including online. But VR is “yet another example of a product” that must be seen by consumers, Joly said, adding: “If you want to learn about it, experience it, even though it says virtual reality, the reality is that you need to experience it physically to be able to see that virtual reality,” he said.

“We aim to be the home for the latest in virtual reality – from Oculus Rift to PlayStation VR to Samsung Gear VR and more,” Best Buy spokesman Shane Kitzman told us July 6.

Joly and CFO Corie Barry also expressed little concern on the Aug. 23 call about expected price compression and increased competition on 4K TVs.

Best Buy’s “market -leading customer experience around 4K and large-screen premium technologies” at its 79 Magnolia Design Center store-within-a-store locations “continued to drive sales growth and market share gains” in the second quarter, Joly said.

Best Buy’s forecast for its performance in the rest of this year “incorporates our best forecast” for the 4K TV category and all other categories, he said. There are “always cycles from a product standpoint and price deflation in these categories,” he said, adding: “There is nothing new here.”

Ultra High-Def TV price compression is “a phenomenon that’s been happening pretty strongly for the last eight quarters,” added Barry. “Our ability to really help people understand the differentiated experiences in 4K in a really unique way in our stores we see as a definite advantage for us,” she said.