Introduction

I am not a Best Buy employee and will be limited to publicly available data; however, the wealth of information on the internet will help me create great insights for this case study. Best Buy is a multinational consumer electronics retailer focused on enriching their customers' lives through technology, both online and offline.

The business question I need to address is: What are the reasons for the increase in Gaming Hardware sales in FY24?"

Best Buy Financial Sankey Diagram - Fiscal Year 2024 | Source: www.bestbuy.com

To begin my analysis, I reviewed Best Buy's Annual Report for FY 2024, which showed that the entertainment category experienced a 9.7% increase in comparable sales growth in the domestic market and a 13.2% increase in comparable sales in the international market, driven primarily by Gaming Hardware sales. To conduct a more thorough analysis, we need additional data. Let's dive in.

Demographic

We can see that video games are enjoyed by people of all ages. Both adults and children play video games and continue to engage with gaming as they grow older. It's important to note that in 2004, only 17% of players were aged 50 or above; this percentage has significantly increased due to the rise in mobile gaming.

Gaming Platform played by Generation:

Among Total Players 8+

From the above data, we can conclude that Gen Alpha and Gen Z are the biggest users of gaming platforms, with 54% using PCs and 58% using consoles for gameplay. It appears that Best Buy's focused marketing efforts targeting Gen Alpha, Gen Z, and Millennials may have contributed to their increase in revenue.

Potential Contributors

While an uptick in Gaming Hardware sales might lead us to assume that the gaming industry is booming, and while this may be the major source of sales, we must also consider other user segments that require similar hardware. The other potential contributors to this growth would be designers, video editors, 3D artists, engineers, and scientists.

Engineers and Scientists

Engineers and scientists include professionals and enthusiasts who work with machine learning models, AI models, data science, and datasets. The increased adoption of open source models like Llama and Stable Diffusion has further driven sales growth, as these models require substantial VRAM (Video RAM) for training purposes.

 1,414,863

Average Downloads per month for META LLAMA 3

Design Professionals

Designers, video editors, and 3D artists require dedicated GPUs for faster workflows. The digital advertising industry, which is supported by these professionals, is growing at 8.9% year-over-year, with search and video advertising occupying the top two spots.

$ 740.3 B

Estimated Ad Spending in 2024

Purchasing and Spending Trends

Top Sources of Info When Considering Purchasing a new game (Gamers)

% Agree - Among Players 18+

It's interesting to note that all these information sources are fairly similar in importance, ranging from 49% to 54%, indicating that gamers typically use multiple sources to inform their purchasing decisions. They rely heavily on both official content and user generated content (UGC) created by actual users and content creators."

The gaming industry has grown dramatically from $10 billion in 2002 to $60 billion in 2023, driven by major console releases across generations. This growth reflects gaming's evolution from a niche hobby to mainstream entertainment, with peak acceleration during 2020-2021 and current stability in the $55-60 billion range.

Total Consumer Spending on Video Games in 2023

Source: Circana

Pricing

Graphic Cards

According to Steam's user data from October 2023 to February 2024, you can observe the most commonly used video cards among Steam users. The NVIDIA RTX 3060, which was in sixth place with 3.67% market share in January 2023, climbed to first place with 6.17% market share in February 2024.

The price of the NVIDIA RTX 3060 has been declining since May 2021, with a significant drop observed, which could be a potential reason for the increase in sales.

The price decreased by approximately 35% between January 2023 and February 2024. The release of the new RTX 40 series was the most significant contributing factor to this price reduction.

Conclusion

A combination of increasing market demand and reduced graphics card prices might have contributed to Best Buy's growth in Gaming Hardware sales. While these appear to be the primary factors, other elements may have influenced this growth as well. However, given the limited data available, this is my current conclusion, though it could be subject to change with access to additional information.

Follow up Question

This is excellent research. Based on the user perspective analysis, which product functions should we enhance to improve the user Experience?

Initial research

Looking at the annual report, I noticed that 32.7% of domestic revenue, amounting to $13.1 billion, comes from online purchases. An interesting point is that over 40% of online purchasers preferred to pick up their items from stores, demonstrating the importance of an omnichannel strategy that combines both online and physical retail presence. While the report doesn't specify whether the majority of users access from mobile or desktop platforms, it mentions that Best Buy is excited to enhance their app experience.

Important quote: 'Our business, like that of many retailers, is seasonal. A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season.' The company notes this seasonal concentration as a risk factor, as it is highly dependent on the fiscal fourth quarter. Unpredictable factors such as customer buying patterns and new product releases make it difficult to create accurate forecasts.

The search term 'Best Buy' spikes in Google Trends during the fourth quarter, as stated in the report, thus confirming this pattern through data. I installed the Best Buy app and analyzed it from a typical user's shopping perspective.

Observation

After using the app several times, I observed one particular feature that stood out, the Wishlist functionality. Usually when I shop, I maintain several wishlists with multiple items, but when using the wishlist feature in Best Buy's app, I found it slightly harder to add products, often requiring multiple clicks. To better understand this issue, I tracked the interactions on the app and compared them with competitors.

After tracking touchpoints, Best Buy has the highest number of steps required to add an item to an existing custom list, though adding an item to the default wishlist requires only one step across all apps. I also noticed that the share list feature, which is available in the web app, is missing in the Best Buy mobile app. Another notable difference is the behavior of the heart icon, when clicked, items are automatically saved to a list rather than offering user choice.

Screenshare of the interactions ( Best viewed in a desktop )

Why Lists are Important

40%

of shoppers surveyed think their shopping experience would be better if retailers offered a wishlist where they can save items they're interested in.

One might question why having an enhanced wishlist feature is important. Improving the wishlist functionality can create multiple benefits through a ripple effect.

  • Based on the items added to wishlists, we can analyze users' purchase intent patterns, helping us make better predictions during holiday seasons.
  • Multiple custom lists enable us to identify purchasing patterns beyond the festive season.
  • This feature provides additional data points based on actual user behavior rather than assumptions, allowing us to further personalize and enhance the app experience.
  • Users are likely to be more receptive to advertisements featuring items from their wishlists, as they have already expressed interest in these products.

Analogy

A great analogy for the wishlist feature is Santa's Naughty or Nice List, though in Best Buy's case, the list is always for the nice kids! :) Just as Santa Claus distributes gifts to all the nice children, with his elves maintaining and adding to their gift list throughout the year, Best Buy's wishlist feature allows items to accumulate over time before purchases are typically made during the festive season.

Similarly, users create custom lists for their families and friends, preparing for the festive season by using the wishlist feature to plan gifts for their loved ones.

Suggested Changes

  • Reduce the number of interactions required to add an item to a custom wishlist.
  • Improve the user experience (UX) flow of the wishlist feature.
  • Implement the wishlist sharing functionality in the mobile app, matching the capability already available in the web app version.

Conclusion

I believe these suggested changes will not only improve the user experience in the app but also provide more data points to help us better serve our customers.

Challenges faced for this Case Study

Data

Although it was challenging to navigate this case study without internal data, I did my best using external sources to identify major contributing factors. In cases where current data was unavailable, I utilized services like the Wayback Machine to access historical information. Below, I will outline scenarios where I had to be resourceful in obtaining relevant data.

Hugging Face

Hugging Face displays only the previous month's downloads for any model, and historical data is accessible only to model owners. Therefore, I utilized the Wayback Machine, which archives snapshots of popular websites worldwide, to gather download statistics for the past six months. By averaging these numbers, I was able to calculate the average monthly downloads for the Meta Llama Model 3.

Steam

Steam only displays public data for top GPU usage from recent months, so I had to utilize the Wayback Machine to access historical data and compare it with present statistics to analyze the growth of the RTX 3060 GPU.

Android App

Due to geographical restrictions on apps, it was particularly challenging to find APK versions of individual apps, especially for Best Buy. The available APK was an older version that wasn't functioning properly. I resolved this issue by installing APKPure, which allowed me to download the current versions of the apps.

Time

This case study was prepared within a short timeframe. Given more time, I could have developed a more in depth analysis. However, I did my best to deliver a comprehensive case study with the given constraints.