Best Buy Betting Big on Mobile

Summary

Best Buy’s stated goal of 15% mobile phone market share is aggressive and likely unattainable but mobile is an area of growth that Best Buy should continue to pursue.

Analysis

Best Buy moved into the dedicated mobile retail arena in 2006 with its Best Buy Mobile stores roll-out, and further committed to this strategy by acquiring a 50% stake in its joint venture partner and mobile distributor pioneer, Carphone Warehouse.  Best Buy recently stated that it would like to significantly increase its US mobile phone distribution market share but in order to achieve its lofty goal of a five-fold share increase, Best Buy would need to effectively change how US consumers buy their mobile phones and service. 

 

For years the US mobile retail landscape has been dominated by operator and authorized dealer networks, with big box retailers playing a smaller role in mobile, especially compared with their dominance in consumer electronics.  Best Buy is hoping to leverage the dual trends (in different customer segments) of increased smartphone adoption, via devices from Apple, Google / HTC, Palm and Research in Motion, and a migration to pre-paid services to shake up the US cellular retail market.  These shifts alone are not fundamental enough to inspire a flocking to Best Buy, not to mention competition from other retailers hoping to cash in on the continuing mobile boom, such as Wal-Mart.  Also, since the US is a saturated mobile market, most consumers have bought devices and services already, and therefore have a legacy purchasing (and billing) relationship with someone other than Best Buy.  One thing Best Buy can leverage, however, is its Carphone Warehouse relationship, which gives Best Buy significant exposure to a market leader in Europe, where non-operator retailers wield more influence.

 

Mobile is a viable growth segment but Best Buy would have to alter consumer behavior and dominate the retail distribution segment in order to reach its 15% market share goal.