Is Best Buy willing to buy back broken phones and let you upgrade for free? Do people realize how fragile their smartphones are, and how ridiculous it would be to pay an initial fee? Or does Best Buy expect customers to pay an additional insurance fee to cover the phone that they would eventually want to trade in? The answer to all of these questions is simple: Best Buy is marketing to the rich and/or ignorant.
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The Super Bowl brought us an exciting game and some entertaining commercials. Best Buy (NYSE: BBY) was all over the place with its "Buy Back" program: It offers to replace your new device (such as phone or laptop) two years after you buy it -- if you're willing to pay a fee for the privilege when you make your original purchase.
One of the commercials Best Buy ran -- besides the Justin Bieber/Ozzy Osbourne bit -- is about people finding out soon after they've purchased some technology product that it's already outdated. The spot pokes fun at this whole mentality, or reality, and makes the consumers look foolish.
Best Buy's solution is the buy back program -- but the numbers don't add up.
Despite the fact that Best Buy accounts for a third of U.S. consumer electronics sales, it is slipping. Options for buyers are plentiful, and Best Buy is not always the cool option.
It sells Apple (Nasdaq: AAPL) products, but most people seem to prefer to go through Apple for that. Amazon.com (Nasdaq: AMZN), Costco (Nasdaq: COST) and numerous online-bidding websites for used products have changed the game when it comes to buying new or used.
It's a Buy-Sell World
With the most recent push, Best Buy is competing with the buy-sell mentality. This is obvious from a quick glimpse of Craigslist: People are constantly buying and selling electronics -- or, more specifically, smartphones.
Right now, if you get a phone valued at US$500 but sign up for a two-year plan, you'll likely pay anywhere from $50 to $200 for the phone. If you are able to treat it well and it's in decent shape when it is time to upgrade and extend your contract, you can usually sell that phone for $200 or more, if you so choose. If you sell that phone and commit to a new plan, the new phone (let's call it the iPhone 6) is basically free, give or take a few dollars.
Best Buy's new gimmick helps enable this to happen as long as an initial fee is paid. It is clearly marketing to a consumer audience that does not know better.
The thing is, many people have dealt with eBay (Nasdaq: EBAY), Amazon or Craigslist, so they know what's up in terms of the value of their phones. It could be argued that some phones -- even with scratches and cracks in the screen -- could still garner plenty of money after two years of ownership, possibly enough to surpass the Best Buy buy back program.
Is Best Buy willing to buy back broken phones and let you upgrade for free? Do people realize how fragile their smartphones are, and how ridiculous it would be to pay an initial fee? Or does Best Buy expect customers to pay an additional insurance fee to cover the phone that they would eventually want to trade in?
The answer to all of these questions is simple: Best Buy is marketing to the rich and/or ignorant, realizing that it has probably already lost the frugal shoppers -- a group that is growing by the day.
A Little Respect, Please
The problem for Best Buy is that it doesn't offer very good prices on anything, really. It is a safer way to shop than from random eBay stores or Craigslist folk, but the overall prices can be double or triple for the same product.
While Best Buy owns a huge share of the market, it does not offer a Wal-Mart (NYSE: WMT) scenario -- that is, "Always Low Prices." Competition in the electronics retail game is ruthless, and low prices win over the overall quality or size of a business all the time.
Another thing working against Best Buy is that it doesn't sell anything exclusively. The same phones, insurance and protection plans that can be bought through Best Buy can be purchased at lower prices through a variety of electronics outlets. So even if buying new is important to you, cheaper options are available elsewhere.
Sometimes life calls for a manic run to Best Buy, sacrificing potential savings for convenience and instant gratification. I get that, and sometimes a good idea is to burn an hour and walk through Best Buy, possibly ending at the checkout line. But the buy back program is for suckers. It will probably flop, as it underestimates today's consumers. Yes, we like to upgrade and buy new, but we don't like to be mocked in the process.
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