As one of the few brick-and-mortar retailers to successfully navigate the digital disruption of the past decade, Best Buy is a case study in the power of knowing your customer and catering to their needs. The consumer electronics giant has defied the "retail apocalypse" by laser-focusing on its core target market: tech-savvy Millennials.
In this deep dive, we‘ll explore how Best Buy‘s intimate understanding of its target customers shapes every aspect of its business strategy, from the products on its shelves to the services it offers to the way it seamlessly integrates online and in-store shopping. We‘ll look at the key characteristics and shopping habits of Best Buy‘s target market, how the company is working to expand its appeal to new segments, and what lessons other retailers can learn from Best Buy‘s success.
Millennials: Best Buy‘s Bread and Butter
There‘s no question that Millennials are the heart of Best Buy‘s target market. This generation, roughly defined as those born between 1981 and 1996, grew up as digital natives and have an affinity for technology that shapes their shopping behaviors and expectations.
Consider these statistics:
- 86% of Millennials own a smartphone, compared to 73% of the general population
- Millennials spend an average of 3 hours and 45 minutes per day on mobile devices
- 60% of Millennials research products online before making a major purchase
For a retailer like Best Buy, this tech-savvy generation is a natural fit. They‘re constantly on the lookout for the latest gadgets and are willing to spend on high-quality electronics that support their digital lifestyles. Best Buy has built its product assortment and shopping experience to cater to these preferences.
Best Buy stores feature interactive displays that let customers try out products, knowledgeable salespeople who can offer expert advice, and a wide selection of the latest devices from top brands. The company‘s website and mobile app make it easy to research and compare products, read reviews, and make purchases from anywhere.
But Millennials are also a price-conscious bunch, often saddled with student debt and facing economic headwinds. Best Buy meets this need with competitive pricing, price matching guarantees, and a steady stream of deals and promotions, especially during the key holiday shopping season. Flexible financing options and trade-in programs make big-ticket purchases more manageable.
Beyond just selling products, Best Buy also offers a range of services that appeal to Millennial shoppers who want expert support and a seamless technology experience. The Geek Squad provides installation, repair, and tech support both in-store and through house calls, while in-home consultations and smart home setup make it easy to integrate new devices into daily life.
Expanding the Tent: Female Shoppers and Beyond
While Millennials are Best Buy‘s bread and butter, the company has also been working to expand its appeal to new customer segments in recent years. One key area of focus has been female shoppers.
Historically, consumer electronics retail has been a male-dominated space, and Best Buy‘s customer base has skewed heavily towards men. But as technology has become more central to everyone‘s lives, Best Buy has recognized the opportunity to better serve female customers.
The numbers show that this focus is paying off:
- In 2010, just 31% of Best Buy shoppers were women; by 2020, that number had risen to 45%
- Women‘s consumer electronics spending is growing at a faster rate than men‘s, with a compound annual growth rate of 3.5% vs 1.8% for men
To make its stores and shopping experience more welcoming to women, Best Buy has made changes like adding more female-focused products, featuring more diverse imagery in its marketing materials, and training salespeople to provide unbiased, helpful advice. The company has also partnered with brands like Magnolia and Pacific Kitchen & Home to expand its offerings in categories like home appliances and decor that tend to resonate with female shoppers.
Best Buy‘s efforts to appeal to a broader audience extend beyond gender. The company has also been working to better serve multicultural customers, a growing and influential segment of the US population. This includes things like offering bilingual customer service, celebrating cultural holidays and heritage months, and reflecting diverse families and lifestyles in its advertising.
Brick-and-Mortar Bets: Best Buy‘s Geographic Strategy
While e-commerce has been a major growth engine for Best Buy, especially during the COVID-19 pandemic, the company‘s physical stores remain a critical part of its target market strategy. With over 1,000 stores across the United States, Best Buy has a significant brick-and-mortar footprint that allows it to provide in-person experiences and services that pure-play online retailers can‘t match.
Best Buy‘s stores are concentrated in major metropolitan areas, typically in suburban shopping centers and power centers that are easily accessible by car. This reflects the shopping habits of Best Buy‘s target customers, who often prefer to see and try out products in person before making a purchase, especially for big-ticket items like TVs and appliances.
The map below shows the distribution of Best Buy stores across the United States:
As you can see, Best Buy has a particularly strong presence in the Northeast, Midwest, and West Coast regions, which tend to have higher population density and income levels. These regions also account for a disproportionate share of Best Buy‘s revenue:
- Northeast: 25% of stores, 28% of revenue
- Midwest: 20% of stores, 22% of revenue
- West Coast: 15% of stores, 17% of revenue
While Best Buy has a solid base of stores, the company has also been judicious about pruning underperforming locations and experimenting with new formats. In recent years, Best Buy has closed some of its larger stores in favor of smaller, more specialized locations like Best Buy Mobile (focused on smartphones and mobile plans) and Pacific Kitchen & Home (focused on high-end appliances).
Best Buy has also been investing in its omnichannel capabilities to create a more seamless experience across online and in-store shopping. Initiatives like ship-from-store, in-store pickup, and curbside service have helped Best Buy leverage its physical stores as fulfillment hubs, while digital tools like interactive store maps and appointment scheduling make the in-person shopping experience more efficient and personalized.
Category Clout: Where Best Buy Makes Its Money
Within the wide world of consumer electronics, Best Buy‘s target market has clear affinities for certain product categories. Understanding where the company makes its money is key to grasping its target customer strategy.
Here‘s a breakdown of Best Buy‘s revenue by major product category:
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Computing & Mobile: 43%
- Computing: 25%
- Mobile Phones: 18%
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Consumer Electronics: 34%
- Home Theater: 14%
- Appliances: 10%
- Digital Imaging: 5%
- Other CE: 5%
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Services & Other: 23%
- Warranty Services: 8%
- Credit Card Revenues: 6%
- Gift Cards & Other: 9%
As you can see, computing and mobile devices are far and away Best Buy‘s biggest moneymakers, accounting for over 40% of total revenue. This reflects the centrality of these devices to modern life, especially for Best Buy‘s tech-forward target market. It also points to the strength of Best Buy‘s relationships with key vendors like Apple, Samsung, HP, and Dell.
Home theater is another critical category, as Millennials and other target customers look to outfit their living spaces with the latest TV and audio technology. Best Buy is known for its high-quality home theater shopping experience, with demo rooms that let customers experience immersive sound and visuals firsthand.
In recent years, Best Buy has also been ramping up its share in the appliance market, leveraging its position as a trusted electronics retailer to gain credibility in a new category. While still a relatively small part of the overall business, appliances are a strategic priority as Best Buy looks to serve customers more holistically across product categories.
And while product sales are Best Buy‘s main revenue driver, don‘t underestimate the importance of services to the company‘s target market approach. Offerings like the Geek Squad, extended warranties, and the Best Buy credit card create stickier customer relationships and predictable revenue streams. They also differentiate Best Buy from online-only retailers by providing support and peace of mind throughout the product lifecycle.
Holiday Heat: Making the Most of Peak Season
Like most retailers, Best Buy sees a significant spike in sales during the holiday season. In fact, the company typically makes around one-third of its annual revenue in the fiscal fourth quarter (November-January), driven by Black Friday, Cyber Monday, and the run-up to Christmas.
For Best Buy‘s deal-seeking target market, the holidays are a prime opportunity to score big savings on the latest tech. The company goes all-out with doorbuster deals, category-wide discounts, and bundle offers designed to drive traffic and create urgency. It also extends its return policy and price matching guarantee to give shoppers confidence in their purchases.
Behind the scenes, Best Buy spends months preparing for the holiday rush. This includes:
- Carefully forecasting demand and building up inventory on popular gift items
- Increasing staffing levels and providing extra training to handle higher traffic
- Collaborating with key vendors on exclusive products and promotions
- Upgrading its website and app to handle higher volumes of traffic and transactions
- Extending store hours and offering expedited shipping options to maximize convenience
Best Buy‘s omnichannel capabilities really shine during the holidays, as the company leverages its stores for fast fulfillment of online orders. In 2020, a year where COVID-19 drove record e-commerce growth, over 40% of Best Buy‘s online orders were picked up in store or curbside.
The chart below shows how Best Buy‘s quarterly revenue spikes during the holiday period:
As you can see, Q4 is reliably Best Buy‘s biggest quarter by far, often accounting for more revenue than Q2 and Q3 combined. This underscores the make-or-break importance of holiday execution for Best Buy and the intense level of planning and coordination that goes into making it happen.
But the holiday push isn‘t just about short-term sales. It‘s also an opportunity for Best Buy to flex its customer service muscles and create wow experiences that drive long-term loyalty. By being there for its target market during this critical time of year, with great deals, fast shipping, and expert support, Best Buy aims to be the go-to destination for all their holiday technology needs.
Seamless Shopping: Best Buy‘s Omnichannel Edge
In the age of Amazon, one of Best Buy‘s biggest competitive advantages is its ability to offer a truly seamless shopping experience across online and in-store channels. For Best Buy‘s target market of busy, digitally-savvy consumers, this kind of flexibility and convenience is increasingly non-negotiable.
Consider these statistics:
- 90% of Best Buy customers start their shopping journey online, regardless of whether they ultimately purchase in-store or digitally
- 70% of customers who buy online from Best Buy pick up their orders in store
- Best Buy‘s online sales have more than tripled in the past five years, reaching over $15 billion in fiscal 2021
To support this omnichannel behavior, Best Buy has invested heavily in its e-commerce platform and fulfillment capabilities. The company‘s website and mobile app offer an intuitive, personalized shopping experience, with features like product recommendations, customer reviews, and easy access to technical specs and expert advice. Best Buy has also been a pioneer in using its stores as fulfillment hubs, with options like in-store pickup, curbside service, and same-day delivery that leverage its nationwide footprint.
But Best Buy‘s omnichannel strategy isn‘t just about online sales. The company has also been rethinking its store experience to better support digital behaviors and create more immersive, hands-on shopping environments. For example:
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Best Buy has rolled out a new store format called "Experience Stores" that feature interactive demo areas for things like smart home technology, gaming, and home theater. These stores also have dedicated space for Geek Squad services and consultations.
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Best Buy has equipped its sales associates with mobile devices that provide real-time access to product information, customer purchase history, and inventory data. This allows them to provide more personalized, efficient service and close sales on the spot.
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Best Buy has implemented appointment scheduling and queuing technology to help manage traffic flow and reduce wait times, especially during busy periods like the holidays.
By blending the best of human and digital capabilities, Best Buy aims to create an omnichannel shopping experience that feels truly frictionless for its target market. Whether they‘re researching a product on their phone, trying it out in store, picking it up curbside, or getting post-purchase support from the Geek Squad, Best Buy wants to be there at every step of the journey.
Cultivating Loyalty: Building Lasting Customer Relationships
With so many options available for buying technology, Best Buy knows that winning the long-term loyalty of its target market is critical to its success. That‘s why the company has invested heavily in building out its customer relationship management (CRM) capabilities and loyalty program in recent years.
At the center of these efforts is the My Best Buy program, which offers perks like exclusive deals, free shipping, and points on purchases that can be redeemed for reward certificates. My Best Buy members also get access to special financing options and extended return periods.
The program has been a hit with Best Buy‘s target market:
- My Best Buy membership has grown by over 50% in the past three years, reaching nearly 40 million members in 2021
- My Best Buy members spend more and shop more frequently than non-members, with 20% higher average order values and 50% more annual visits
- Nearly half of Best Buy‘s total sales come from My Best Buy members
But My Best Buy is more than just a transaction-based loyalty program. It‘s also a powerful data engine that allows Best Buy to better understand and serve its customers over time. By tracking member purchases and interactions across channels, Best Buy can tailor its marketing messages, product recommendations, and service offerings to individual needs and preferences.
Best Buy has also been experimenting with new subscription-based services like Totaltech, which offers benefits like unlimited Geek Squad support, free delivery and installation, and exclusive member pricing on merchandise. With Totaltech, Best Buy is looking to create an even stickier relationship with its most engaged customers and provide a predictable recurring revenue stream.
Beyond formal programs, Best Buy also cultivates loyalty through its commitment to customer service and community engagement. The company regularly hosts in-store events and workshops on topics like smart home technology, digital photography, and gaming, providing opportunities for customers to learn and interact with experts. Best Buy also partners with schools and nonprofits to support STEM education and digital literacy programs, helping to build goodwill and long-term affinity with its target market.
At the end of the day, Best Buy understands that earning the repeated business and advocacy of its customers is about more than just offering the latest products at competitive prices. It‘s about creating a holistic, differentiated experience that adds real value to their lives and makes them feel valued in return. By staying laser-focused on the unique needs and preferences of its target market, and continually innovating to serve them better, Best Buy is well-positioned to build lasting loyalty in an increasingly competitive retail landscape.
