Best Buy Value Plunges After Amazon Targets Their Geek Squad
Last week they were flying high, they had just reported increased revenues and profits, their share value was up 36% this year alone, now Best Buy has seen their shares plunge 6.3% overnight simply because Amazon has targeted their Geek Squad operation.
Overnight Best Buy fell the most in more than a year after Amazon introduced a new service that helps customers set up their consumer electronics gear including smart home devices, voice activated technology and home entertainment systems.
Called Amazon Smart Home Services, it’s designed to let customers install and configure consumer electronic products that have been purchased from Amazon. The service is tipped to be launched in Australia when Amazon finally launches here.
Services account for approximately 5 percent of revenue at Best Buy, which acquired Geek Squad more than a decade ago to help solve customers’ technology problems. The service along with their Magnolia Premium Service package aimed at high end audio and entertainment systems has proved extremely popular especially with an ageing population.
The debut of Amazon’s service, which was reported earlier on Monday by Recode, sent Best Buy shares down 6.3 percent to $54.23. That was the worst single-day decline since May 2016.
The threat to Geek Squad comes after an upbeat earnings report last month. Best Buy posted a surprise gain in same-store sales — a closely watched measure — after laptops and Nintendo Co.’s Switch game helped fuel growth. Before Monday’s tumble, Best Buy shares had been up 36 percent this year.
Geek Squad, with its mobile staff of technicians, was an area that would be harder for Amazon to disrupt. But the e-commerce giant has been hiring a staff of in-house gadget experts over the past few months, Recode reported. The program has been quietly introduced in seven markets, the news site said.
Amazon, based in Seattle, also is gearing up for Prime Day — its annual blowout sale. The event, slated for Tuesday, is designed to encourage customers to sign up for Prime memberships.
In a statement issued this morning Best Buy said ‘Consumers love technology but frequently need help getting the most out of it. This belief is central to our strategy as we work to help customers pursue their passions and enrich their lives through technology’.
‘We are excited about the range of initiatives we have previously announced that do just that and feel uniquely positioned to serve consumers by offering products, services and support wherever the customer wants it, including in one of our 1,000 stores, on BestBuy.com and in homes millions of times a year. Additionally, our 20,000 Geek Squad agents serve tens of millions of customers annually, taking a brand agnostic approach to virtually any technology need people may have, just as we do online and in our stores’.