Home gyms and Best Buy (NYSE: BBY) might not seem like they belong in the same sentence, but the consumer electronics retailer has begun selling connected fitness equipment in what could be a very savvy move that just might help offset some of the decline it is experiencing in smartphone sales.
The future of fitness
Best Buy said it would be introducing connected-home gym equipment to 100 stores by the end of the year, and consumers can find the products from Flywheel Sports, NormaTec, Hyperice, Hydrow, and NordicTrack on its website now. It says the collection "is part of the company's commitment to helping customers use technology to live better, healthier lives."
Image source: Best Buy.
Although working out and electronics don't necessarily seem like a natural fit, the two worlds have been moving closer together for some time now, perhaps most prominently in the wearables category, where the likes of Fitbit fitness trackers and the Apple Watch help users gather data about their bodies.
But actual exercise equipment is getting more technologically advanced, too. Consider high-end fitness start-up Peloton, best known for its connected indoor stationary bike that allows users to stream live or on-demand classes, which recently filed for an IPO.
Best Buy Chief Merchandising Officer Jason Bonfig said in a statement, "We know there's a growing intersection between fitness and technology, and no one knows tech like we do."
A gym for nerds
That's not just hyperbole, as the retailer has made a concerted effort to become the go-to source for tech knowledge and know-how. Its Geek Squad supplies information and support and Best Buy has used it to lead a stunning turnaround from near ruin to being able to effectively challenge Amazon.com in consumer electronics sales. It subsequently launched its Total Tech Support subscription program, which provides members unlimited Geek Squad support for all of their technology, regardless of whether it was purchased at Best Buy.
Best Buy saw a 14% gain in its services comps last year, and while half of that was due to changes in revenue recognition policies, the remainder represents strong growth.
The company still needs time to figure out how the program will do with renewals and whether it increases store purchases and keeps customers engaged, but with the new initiative Best Buy will be leading with its strength again by providing its employees with training to best advise customers on selecting the proper equipment, and its Geek Squad technicians will handle delivery and setup in the home.
Bringing fitness equipment into its stores is a smart move. People who might be too intimidated to enter a dedicated home gym and fitness store will likely feel much more at ease looking at the equipment in a Best Buy setting. And, getting the assistance needed from the retailer to (literally) get up and running should lead to sales.
A healthy alternative
Best Buy's computing and mobile segment generated over $17.4 billion in sales in 2018. Fitness equipment won't get near that number, but Best Buy's push into health and fitness could supplement revenue as smartphone sales decline.
Best Buy CFO Corie Barry told analysts on last month's earnings conference call that the retailer views the health category as "a bit of a longer-term value driver for us."
Best Buy has already entered the space, acquiring aging-in-place specialist GreatCall last year, then following it up earlier this year by partnering with TytoCare, a telehealth platform that allows people to perform a home health examination, record it with TytoCare's technology, and relay it to a doctor for consultation. Best Buy described it as "another example of Best Buy's growing commitment to health and wellness and our dedication to enriching the lives of our customers through technology."
Selling internet-connected fitness machines enhances Best Buy's relationship with its customers. Since it remains in Best Buy's technology wheelhouse, it widens the playing field and offers a prescription for continued growth.
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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Fitbit. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.