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Best Buy (NYSE: BBY ) is diving headfirst into the consumer electronics repurchase market -- but it may have forgotten to fill the pool with water.
Boy Genius Report is unearthing documents of a new service that Best Buy is presumably launching tomorrow, where it will begin to repurchase smartphones, laptops, tablets, and TVs.
If this were it -- and Best Buy were just setting up space within its massive stores to offer up a glorified pawnshop or the means for suppliers to get back parts or merchandise worth refurbishing -- it would simply be a puzzling move. Yes, Best Buy has followed GameStop (NYSE: GME ) into video game trade-ins, but does it really want to be portrayed as the place where folks lug in year-old handsets and flat screens?
Unfortunately, this isn't just about the resale opportunities. Best Buy won't buy back your wares unless you paid the chain a premium for that right first.
Similar to its Geek Squad Black Tie Protection, where buyers pay for a set number of years of support and maintenance, the new Buy Back program is a premium service that Best Buy is pitching as protection against obsolescence on new purchases.
It may have been neat to know that Best Buy would repurchase any of the covered products during the first six months of ownership, at 50% of what customers shelled out, but folks have to pay a small premium for that coverage. For example, with a mobile phone, the scale slides quickly after the first six months -- all the way down to 20% during the last half of the second year -- so it's really more a confirmation of obsolescence than protection.
There may be a market here for serial early adopters, particularly for smartphones. Apple (Nasdaq: AAPL ) refreshes its products annually, and buyers of Android phones find a slicker model being rolled out every few weeks. However, there are already plenty of outlets -- from Craigslist to eBay (Nasdaq: EBAY ) -- that serve as clearinghouses for secondhand goods in working condition. If consumers don't want the hassle of haggling or waiting for interested buyers, RadioShack (NYSE: RSH ) accepts trade-ins. Wal-Mart's (NYSE: WMT ) website offers a trade-in program through Gazelle for Wal-Mart gift cards.
We'll see tomorrow if Best Buy is really doing this, but it seems to be a flimsy solution to a problem that others are tackling more effectively without the upfront tollbooths.
It's easy to see why Best Buy is hungry for something new, as the superstore chain is coming off a horrendous preholiday quarter. I'm sure the margins on these plans opened up the eyes in the boardroom, but it just won't fly.
Online sales continue to eat at Best Buy's business. The failure of Circuit City is appearing to be more a case of foreshadowing than an opportunity. Best Buy shareholders appear to be the ones needing protection from obsolescence.
It stings, I know -- but it's true.
Would a premium buyback service work at Best Buy? Share your thoughts in the comment box below.