Will Best Buy increase gadget sales with a try-before-you-buy offer?

Discussion
Source: lumoid.com
Jun 13, 2017
George Anderson

Best Buy is looking to reduce buyer’s remorse and drive sales of open box items with a new program that allows customers to rent gadgets on a short-term basis before making the decision to buy them outright.

Beginning later this month, BestBuy.com will begin advertising a program giving customers the option to rent open box items such as audio equipment, cameras, fitness trackers and smartwatches.

Those interested in the try-before-they-buy offer will be directed to Lumoid, a site launched in 2014, which allows consumers to rent up to five items at a time. Once a decision has been made on what to keep, consumers use the supplied return label to ship back unwanted items. For those items they keep, consumers get to deduct 20 percent of their rental subtotal and apply it to the final purchase price.

Best Buy benefits from the program by moving gadgets that, after being purchased by customers, were later returned. Since Best Buy is unable to sell these items at full price, working with Lumoid to create trial should, at least in theory, lead to more sales. (Best Buy will not be offering drones in this program even though Lumoid does so on its site.)

Lumoid’s founder, Aarthi Ramamurthy, told Engadget that wearables have the highest rate of consumers moving from rental to purchase with one in three making the decision to buy after trial.

According to a Recode report, the chain also sees the service as a way to connect with customers earlier in the discovery process, which could help give Best Buy a leg up on rivals including Amazon.com.

DISCUSSION QUESTIONS: Will Best Buy find success moving open box inventory through its relationship with Lumoid? Will the program provide Best Buy with an edge in reaching consumers earlier in their shopping journeys?

Braintrust
"Best Buy is onto something here ... especially for new tech (say, wearables, VR, etc.)."
"Potentially this could lead to a subscription model, where you can rent electronic gadgets for a monthly fee without the full cost of ownership..."
"Once consumers have a device in their hands, a good number of them will likely rent again or move to a full purchase."

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12 Comments on "Will Best Buy increase gadget sales with a try-before-you-buy offer?"

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Art Suriano
BrainTrust

I like this idea and I think it will have success. We have become used to 30-day free trials with software to see if we like the program before purchasing and, for decades, sellers of musical instruments to schools have offered rentals before purchase so that parents don’t have to waste the money if the child loses interest. In both cases, it gives the customer a chance to see if the purchase is right for them and it has proven to lead to more sales and fewer returns. I see this as an excellent service for many customers and, if successful, I can see other retailers offering the same program.

Lyle Bunn (Ph.D. Hon)
BrainTrust

This is helping consumers to feel the love by reducing the anxiety related to new tech items. The real question is, will it accelerate the sale of new products beyond the earliest adopter market? I would suggest not, that category sales will not increase significantly. But it will impact market share within categories as buyer intent advances to specific purchases through product comparison. I love the concept, but would likely not use it. I’ll defer to non-trial research leading to my purchase and will forego the feeling that I owe the brand or retailer something in exchange for their loan.

Max Goldberg
BrainTrust

Great idea. Consumers get to try products before they buy and Best Buy reduces open box inventory. The key element determining success or failure is going to be cost. If consumers perceive that they are paying more they will not participate. If they are paying a fair price, vis-à-vis the normal retail price, the plan could work. After all, this is a commodity business.

Chris Petersen, PhD.
BrainTrust

Kudos to Best Buy for trying something different! The key to tech adoption is customer experience. And the customer’s fear of open box is that it might not work properly. Short-term rentals could work really well to address both of these things.

An added benefit could be that the customer not only buys the open box item but steps up to a newer/upgraded version later based upon their experience.

Liz Crawford
BrainTrust

Best Buy is onto something here … especially for new tech (say, wearables, VR, etc.). My prediction: Amazon will offer a me-too trial option.

Cathy Hotka
BrainTrust

Hubert Joly and his team continue to innovate with the customer in mind. If Best Buy had disappeared a few years ago no one would have been surprised, but under Mr. Joly’s leadership it’s a force to be reckoned with. This new program is a wonderful idea.

Brandon Rael
BrainTrust

Outstanding idea, as enabling consumers to try and rent products before buying will go a long way to help Best Buy gain and retain customer loyalty. Best Buy and other electronics retailers have been challenged to close and convert consumer transactions, as their stores have been leveraged for their showroom capabilities. This has led to sales decreases as consumers tried out the product in-store and ultimately bought the product online, most likely at Amazon.

This is the age of the sharing economy and one that is experience-driven. Once consumers have the opportunity to try these innovative gadgets at home and they determine that one fits their lifestyle, then Best Buy will have a winner on their hands. Potentially this could lead to a subscription model, where you can rent electronic gadgets for a monthly fee without the full cost of ownership, similar to what Rent the Runway has done for fashion couture.

Carly Tysh
Guest

I agree that the try-before-you-buy offer is perfectly aligned for new technology offers (wearables, VR, etc.), giving customers confidence before making a big investment. Warby Parker is the perfect example of the success of the trial model. Clarity in pricing and overall value will be critical, as leasing technology often carries the perception of a higher overall payout (i.e. almost every wireless carrier.)

However, the shopper of today and tomorrow seeks the thrill of the new and the next, and for them experiences trump ownership. Going forward, a subscription based model for those who want the latest and greatest may prove to be a winner. Paired with a try-before-you-buy offer via Lumoid should give Best Buy an edge in reaching a wider customer base, earlier in their shopping journey.

Steve Montgomery
BrainTrust

This is a variation of the try-and-buy programs that have been available in different verticals for some time. In some cases, during the trial period no payment was required. This worked well with downloaded software for which there was not a shipping cost, the seller retained control of their ability to deactivate the product, etc. To each customer the product was seen as “new.”

The Best Buy program is a little different in two ways. There is a rental payment involved for the potential buyer and the merchandise is considered used. My assumption is that Best Buy is making sure all the necessary parts and instruction manuals accompany the merchandise.

Bottom line — this is a potential winner for all parties involved as long as the item’s rental and final cost are seen as representing a value.

Sterling Hawkins
BrainTrust

Very smart move and I think it’ll see a lot of success. With the sometimes high price point some wearables have, combined with being a relatively new category for consumers, it lowers the barrier to entry to get people involved. Once consumers have a device in their hands, a good number of them will likely rent again or move to a full purchase.

Ricardo Belmar
BrainTrust

This is a great idea by Best Buy to leverage open box items in a way to address buyer hesitation in categories many customers will consider luxury items. Many shoppers will hesitate to make a buy decision for fear they will regret the expense or simply not find the product suitable to them. The try-before-you-buy model will help convert these shoppers. Then there are customers who fear open box items because they believe they will fail. Now these shoppers can safely try and buy while getting what they perceive as a discount.

Lots of potential for Best Buy here and I can see them turning this into a subscription model for new technology to appeal to early adopters or better yet appeal to those who are afraid of becoming an early adopter! It will be very interesting to hear the metrics on this a few months from now!

Jennie Gilbert
Guest
This is a really smart experiment. We know that humans desire the ability to change their mind … but they rarely execute it — that’s why all those exercise equipment infomercials include a 30 day money-back guarantee. Other retail models have been been successful building their brand around the peace-of-mind that comes with the welcoming of returns and exchanges. I love Road Runner Sports’s VIP Club. You can use any shoes you purchase there — as much as you want — and exchange them any time, no questions asked, for 90 days. I know I could probably get my sneakers cheaper elsewhere, but I never would because of how much I value the ability to test to my heart’s content so I never have to settle for a show that doesn’t quite fit me right. And another reason I love this model is it’s built around the best of people. So many businesses stop short of enacting programs like this because they worry about the few bad eggs that will abuse their policies. But businesses win when they insist on making policies for their BEST customers — and accept that a few of their worst may take advantage. Those losses… Read more »
wpDiscuz
Braintrust
"Best Buy is onto something here ... especially for new tech (say, wearables, VR, etc.)."
"Potentially this could lead to a subscription model, where you can rent electronic gadgets for a monthly fee without the full cost of ownership..."
"Once consumers have a device in their hands, a good number of them will likely rent again or move to a full purchase."

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