SWOT Analysis of Best Buy 2021

NameBest Buy Inc.
IndustryRetail (Consumer electronics, computing, and appliances)
Founded1966
HeadquartersRichfield, Minnesota, United States.
CEOCorrie sue Barry
RevenuesUSD 47.3 Billion, 2021
ProfitUSD 1.80 Billion, 2021
CompetitorsAmazon, Target, Walmart, Alibaba, Costco



Company Overview

Headquartered in Minnesota, United States, Best Buy offers consumer electronics, computing, and appliances to its diversified customers. It was established by James Wheeler and Richard Schulze in 1966. Best Buy is considered a renowned consumer electronics brand with more than 1,238 stores and 100,000 employees (Best Buy, 2021). According to Forbes (2021), it has a market capitalization of $25.9 billion, making it the top brand. It mainly has business segments: Domestic and International. The domestic segment handles the operations within the United States, while the international segment runs the operations outside the US, such as China, Europe, Canada, and so on (CNN Business, 2021). Let’s go over the SWOT Analysis of the brand.

Best Buy Strengths 2021:

  • Strong Local Market Presence.

    Best Buy is considered one of the leading consumer retailers in the US market. Although Best Buy has 997 stores in the US that is far less than its competitor Walmart, its stores are evenly spread all across the US market. According to Verdon (2019), around 70% of Americans live within 10 miles of a Best Buy store, contributing to the sales and profitability of the company. 

  • Sustainable Brand Image.

    Best Buy holds a strong image as a sustainable brand all across the world. According to Barron, Best Buy was awarded the most sustainable companies award in 2021, owing to its initiatives for reducing carbon emissions by 51% since 2009 (Jansen, 2019). It also provides additional employee benefits, such as backup child care, paid-time-off, and mental health coverage to its employees. 

  • Strong Free Cash Flow.

    Best Buy has strong free cash flows, providing it a huge competitive advantage in the market. According to Alnawaiseh, et al. (2017), free cash flows represent the cash available in a company to make payments to its creditors, interests to investors, and dividends to shareholders. Best Buy generated $4.2 billion free cash flows in 2021, which was 131% higher than 2020, along with paying $ 568 million payment to shareholders as dividend with $2.2 per share (Best Buy Inc., 2021), which is quite high in the market.

  • Significant Growth in Online Sales.

    Best Buy observed a significant growth in online sales with an increase of 144% in 2021 than last year (Best Buy Inc., 2021). Due to the pandemic, Best Buy has to close its stores in the US in March 2020, so it developed an in-store appointment model, allowing customers to shop by sitting at their homes. In addition to this, various facilities, such as video chats with store associates and virtual consultations with advisors have also been introduced, contributed heavily to increasing online sales.

Best Buy Weaknesses 2021:

  • Over-reliance on Domestic Segment.

    Best Buy has a network of 1,238 stores all across the world, of which 1,026 stores are situated in the United States (Best Buy Inc., 2021). This shows that around 91% of Best Buy’s sales are based on domestic sources, which can put serious risks on the future existence of the company.
  • Negative Publicity.

    Best Buy has faced various controversies that greatly affected the brand reputation in the market. In 2000, two customers filed a case against Best Buy for fraudulent business practices, related to the sale of extended warranties or service plans in Florida, and eventually, the company had to pay a penalty to the customers (Motor1.Com, 2021). 

  • High Dependency on Computers & Consumer Electronics.

    The major source of revenue for Best Buy is the revenue from computers and consumer electronics. In 2021, they accounted for 87% of the total company’s sales that shows the high dependency on computers & consumer electronics (Best Buy Inc., 2021). On the other hand, Best Buy’s competitors, such as Walmart and Costco, have a wide range of merchandise, allowing them to hold a major market share.

Best Buy Opportunities 2021:

  • Expansion in Emerging Markets.

    Currently, Best Buy has limited international footprints in comparison to the leading retailers of the United States. Best Buy has an opportunity to expand into emerging markets, such as Europe and Asia, to further expand its sales and revenues. According to EP&T (2021), global consumer electronics spending is expected to reach $1.106 trillion in 2021 with further growth to $1.16 trillion by 2025. This shows that Best Buy can benefit from such growth to expand its operations. 

  • High Potential in Senior Health Market.

    According to the Morgan Stanley report, Best Buy can become a bigger business by selling healthcare-related products than electronics, as this market has a lot of growth potential. Best Buy has acquired Great Call, which can allow Best Buy to become a giant after getting profit from the senior health market (Cheng, 2019). 

Best Buy Threats 2021:

  • Intense Competition.

    Best Buy is competing with high-end consumers brands, such as Walmart and Amazon, who have higher investments and customer portfolios like any other leading multinational company in the world. They also have a strong presence in the global market, in which Best Buy is still struggling to gain market share. The recent launch of online services by Best Buy will have to compete with the renowned services of Amazon, which is the biggest challenge for the company.

  • Threats from Entertainment Segments.

    The increase of online streaming brands, such as Prime Video and Netflix has brought a significant threat to Best Buy. The sale of its entertainment-related products, such as movies, have declined over the past few years, mainly due to pandemic, as people preferred to stay at home. 

Best Buy SWOT Analysis Conclusion:

As a whole, it is determined that Best Buy, being a leading consumer brand, has a strong presence in the US market, but struggling to get a huge market share in the international segment, due to its big competitors, such as Walmart and Amazon. Although the significant increase in digital sales and acquisition of new healthcare brands have opened the ways of growth and expansion for Best Buy, the company is required is give certain focus on increasing its product portfolio and market presence. 

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References:

  1. Alnawaiseh, M., Alomari, R., Rawashdeh, F. & Alnawaiseh, M., 2017. The effect of free cash flow on the companies’ financial polices: Evidence from Jordan. International Journal of Economic Research, 14(9), pp. 1-9.
  2. Best Buy Inc., 2021. Annual Report 2021,
  3. Best Buy, 2021. About Best Buy.
  4. Cheng, A., 2019. Healthcare May Eventually Become A Bigger Business For Best Buy Than Selling Electronics. Forbes. 
  5. CNN Business, 2021. Best Buy Co. Inc..
  6. EP&T, 2021. Growth anticipated for global consumer electronics revenues.
  7. Forbes, 2021. Best Buy (BBY).
  8. Jansen, C., 2019. Barron’s names Best Buy most sustainable company.
  9. Motor1.Com, 2021. 5 Most Reputable Extended Car Warranty Companies (2021).
  10. Verdon, J., 2019. Six Reasons Why Best Buy Will Continue To Dominate. Forbes.
SWOT Analysis of Best Buy 2021
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