By: Francisco Velasquez
Best Buy Co Inc. announced Tuesday that it is launching Totaltech, a tech support membership program.
The program will provide unlimited Geek Squad support, 24/7 access to team members for video or chat assistance and free delivery, for $199 a year.
Among the benefits, Totaltech members will have a 60-day return and exchange window, including discounts on fees for labor and service installation.
The program, which is now available nationwide, aims to give consumers the option to get tech support online, in-store and at home, at any time.
The electronic retailer’s stock rose slightly 0.5% on Tuesday, Oct. 6, following the launch, closing the trading day at $107 a share. Best Buy has gained 5.9% in the year-to-date.
Totaltech mirrors the Beta pilot, which launched in April in 60 stores across six states. The membership program falls under a number of new pilot and test initiatives launching this year to reach young consumers. Best Buy found that young consumers used the Beta membership more often than non-members, led in part by the program’s overall benefits.
Totaltech’s updated benefits are likely to resonate with young customers. Among the new benefits, members will have the option to schedule free deliveries to areas outside metro locations, 10% off labor installations and free product replacement.
“They’ve added a number of bells and whistles to Best Buy Beta for the same price as its predecessor, and have seen really encouraging initial results,” said Sean Dunlop, equity analyst at Morningstar Research Services LLC.
As part of the company’s Totaltech rollout, 3.1 million existing members, who are dispersed between the company’s three previous membership programs, including Best Buy Total Tech, Best Buy Beta and Geek Squad Tech support will be transferred over to the new program. The revamp is focused on a similar iteration of a program launched in 2018.
Those results reflect new member sign-ups and a rise in customers purchasing more items online. Online sales rose to 32% this year, compared to 16% in 2019, according to the company’s most recent earnings report.
Additional factors, however, like the company’s announcement that it is closing its Mexico-based stores, covering promotional content expenses, and potential supply chain disruptions, could affect how the company’s stock performs.
Best Buy’s chief financial officer, Matt Bilunas, estimates that Totaltech’s launch and rollout will cost the company more and could hurt its profits in the coming months.
“The intent of Totaltech is not to drive margin rates,” said Bilunas during an August earnings call. “The intent is to leverage more sales in the future.”
Dunlop said the strategy could also better position the company to earn the first crack at servicing customers’ tech needs, which are evolving at a faster pace.
Best Buy hopes the new membership program will make its customers more loyal to the retailer, which could improve sales in the long run.
“What we want people to do is to use it more,” said Bilunas. “As you can imagine, the enhanced benefits do come with more costs, but we believe that will keep people stickier and coming back,” he said.