The emergence of smart speakers like the Alexa-powered Echo by Amazon.com, Inc. (NASDAQ:AMZN) and Google Home by Alphabet Inc. (NASDAQ:GOOGL) has given birth to an industry. With no smartphone to call home, Amazon housed its virtual assistant in a countertop speaker that quickly invited competition, with every major tech company scrambling to debut their own version.
While eMarketer estimates that 36 million consumers in the U.S. will use a smart speaker in 2017, most still see the product as a novelty. Its ability to stream and play music, provide news updates, set timers, and answer questions haven't made it a must-have device, though many have found it intriguing.
One of the more practical uses to emerge from the advent of smart speakers is the ability to control connected-home products like locks, thermostats, lights, and smoke detectors. The option to slowly build out these do-it-yourself home automation systems has seen a boost from the devices, but consumers' lack of familiarity with smart speakers has been a deterrent. Electronics retailer Best Buy Co., Inc. (NYSE:BBY) wants to change that and become your smart home headquarters.
Expanding on a theme
Beginning next month, Best Buy will expand the smart home displays in 700 of its stores, prominently featuring both the Amazon Echo and the Google Home, in a move to tap into the fast-growing segment. Best Buy staff will demonstrate potential applications of the devices when assembling a system of smart home accessories. This move follows a recent partnership with Vivant Smart Home that helps consumers customize a system of smart home security and monitoring products including lights, thermostats, cameras, and locks.
These partnerships play to Best Buy's strengths, providing a physical location for consumers to see and hear electronics firsthand, with staff available to address questions and concerns. The ability to see how these smart speakers integrate with other connected-home products will also allow Best Buy to sell a suite of peripheral items including routers and range extenders, as well as the smart home devices themselves.
Best Buy has also launched a pilot program that will have its Geek Squad agents provide consumers with in-home consultations to outfit their smart homes and troubleshoot wireless speeds. The agents already make house calls to install home theaters and to assist with issues involving home computers. The addition of connected-home systems could provide the electronics retailer with the ability to expand its services into a fast-growing area of new technology.
The principal beneficiary
Peter Keith of Piper Jaffray believes Best Buy will be the principal beneficiary of the smart home movement, positing that the company is in the best position to capitalize on consumers' increasing interest in the space. He also pointed out that the connected home segment has been identified by Best Buy as a "key comp driver for each of the last 3 quarters."
Best Buy has been able to leverage its longtime partnership with Apple Inc. (NASDAQ:AAPL), which will reportedly deploy its Horizon machine to select Best Buy locations for the repair of broken iPhone screens. This expands on its position as an Apple Authorized Service Provider and a seller of Apple Care and Apple Care+.
The right stuff
Best Buy has been making all of the right moves to position itself for the future. After being left for dead several years ago, the company has made an astonishing comeback. In its most recent quarter, Best Buy reported a 1.6% revenue increase over the prior-year quarter, which was better than many investors expected. Year-over-year growth of 23% in online sales stole the show, though, and earnings per share grew 40% when discounting one-time items.
Best Buy continues to reinvent itself and has successfully demonstrated that when it comes to technology, many consumers still want the experience of interacting with a product before they buy it. This further reinforces Best Buy's once-tenuous place in the evolving retail ecosystem.