Summary
Best Buy’s target of 15% cellphone share can be realized by three factors: 1) Demographics of smartphone buyers; 2) Reduction of independent agents; 3) Prepaid mainstreaming and smartphone demand launches.
Analysis
Best Buy’s expectations for 15% cellphone share from the existing 3% might seem inflated, but are justified by the current mobile market. Firstly, street presence with dedicated mobile storefronts is necessary for smartphone buyers. Best Buy is reacting with the launch of 40 standalone stores. Although the millennial generation is getting the iPhone attention for apps, the recent Nielsen survey shows that the smartphone buyers are older and more financially capable. Nielsen reported that 53% iPhone owners were over 35 years old, and surprisingly 17% over age 55 and just 13% in the 18-24 ages. And Nielsen determined that 40% of the iPhone owners have household incomes of greater than $100,000 compared to 19% in the overall market. Best Buy can attract those demographics with mobile stores instead of their warehouse-type locations. Secondly, the two largest carriers of Verizon and AT&T each have about 5,000 independent agents beyond their carrier-owned stores. These agent-operated stores were intended to cover the market to compete for new subscribers. With the U.S. mobile market at saturation, these agents will probably decrease at the same pace as new subscribers declines or about 10% to 20% for 2009. Best Buy has the opportunity to provide a better alternative of full-service stores. Thirdly, the
