Best Buy is one of the most popular electronic retail outlets in the United States.
They are known for their wide variety of high-quality electronic devices and accessories and are among the top resources for many consumers and businesses.
However, like most retail businesses, their prices seem to have risen considerably over the last few years, and many people would like to know why.
Read on to find out why Best Buy is so expensive.
Why Is Best Buy So Expensive? (Top 10 Reasons)
1. Global Shipping Rates
It has never been cheap to ship things, especially when they come from overseas.
However, in recent history, international shipping rates have skyrocketed, and consumers are feeling the hit in their wallets.
Since they increased their online sales push during the pandemic, Best Buy was one of many retail operations hit hard by the rise in shipping costs.
Best Buy was faced with three choices when the pandemic occurred.
They could halt trade, raise their prices, or absorb the rising costs.
Each of these choices led to more expensive merchandise, the costs of which were inevitably passed on to customers.
ABC News reports that higher shipping costs can lead to higher retail prices, and that is exactly what has happened to Best Buy’s prices.
As shipping costs have continued to rise, economists have started to notice their vast effects on consumers, who have had to absorb the 205% increase in shipping costs.
Another factor is the consequences of the pandemic (mentioned below).
COVID had an enormous impact on transporting merchandise across the globe.
It led to shipping ports becoming congested, which drove up the costs of moving merchandise.
These were additional costs that were passed on to the company’s customers.
Best Buy gets the majority of its merchandise from overseas venues. In fact, most of their electronics are manufactured in Asia.
The shipping costs are enormous, so naturally, this is reflected in the price tags on their merchandise.
Inflation has caused consumers to limit spending on more essential goods like food and shelter, rather than non-essential or luxury items.
It is only logical that Best Buy, which sells more non-essential items, would feel more impact when consumer dollars were being spent on the things that they really cannot do without.
One of Best Buy’s best-selling categories is its stock of televisions.
This is one of the store’s largest departments and one for which it is best known.
The store carries a wide variety of different brands, styles, and prices.
Computer sales are also a primary sales category.
Add to this that customers experiencing higher gas prices, more expensive food, higher interest rates than in the past, and the war in Ukraine, and it is understandable why Best Buy sales went down and shopping for essential items went up.
When Best Buy was forced to raise its prices, it also experienced increases in the manufacturing costs of its merchandise and increased physical overhead, another cost hike that was absorbed by its consumers.
While the company did absorb some of the costs, the bulk of the increases was experienced by Best Buy’s customers.
There is no way around the fact that consumer purchasing power erodes with the rise of inflation.
Of course, uneven economic development was transpiring at different rates from many different sources, so Best Buy consumers began experiencing notable price increases in certain parts of the country, but prices rose to some degree in all 50 states.
3. Trade Wars And Tariffs Equal Higher Taxes
During the previous Presidential administration, almost $80 billion in new taxes were caused by the tariff policies on many imported products.
This increase resulted in a $52.6 billion tax increase in 2021.
The tariffs caused price increases from 15% to 10% on billions of dollars worth of Best Buy’s Asian imports.
These included some of Best Buy’s top sellers, such as certain TVs, smartwatches, and video game consoles.
Retaining the tariffs put into place in 2018 reduced economic output.
This included income and employment rates, which affected consumer purchasing power.
Retail establishments, such as Best Buy, had to raise taxes on their merchandise, which caused consumers to pay more for each item purchased.
As a result, buying temporarily dropped to new lows.
The economic well-being of the entire country adversely affected consumer prices when retaliatory tariffs were placed on the United States by the foreign countries that had been affected.
As a result, production was reduced, and the resulting loss of jobs resulted in lower income levels.
These lower levels meant fewer customers for Best Buy, which had to raise its prices again.
4. Quality Of Merchandise
In its guide for shoppers of Best Buy merchandise, the company states that it offers “high-quality, brand-name consumer electronics and other merchandise.”
Naturally, high-quality merchandise costs more to manufacture than lower quality items.
This is another example of how costs must necessarily be passed on to the consumers who purchase higher quality, non-essential items.
Although the prices that vendors charge are a factor, Best Buy does not necessarily deal only with those vendors that have the lowest costs.
The company only purchases its merchandise from vendors that meet its high standards of doing business.
Best Buy only buys its merchandise from like-minded vendors who follow global trade laws and who have fair business practices.
The company avoids doing business with vendors that are into bribery and corruption, so they may end up paying more for this than if they dealt with unethical manufacturers who cut corners and behaved in unethical ways.
Even returned and refurbished items fall under strict quality control standards.
The company has set up a program that hires team members to shop undercover to order used and/or refurbished items from Best Buy.
Each item must pass 40 different points on a checklist to determine whether they meet Best Buy’s high standards of quality.
Hiring mystery shoppers and assuring that each piece of electric equipment meets all 40 points listed in their guidelines is an expensive endeavor.
These are more costs that are passed on to the customers.
The silver lining, however, is that the customers are rewarded with better equipment that lasts longer than items of inferior quality.
Taking this into consideration, Best Buy customers have the best deals, even if they do have to pay more.
5. In-Person Shopping
With the onslaught of today’s online shopping, Best Buy has maintained their brick and mortar presence that enables customers to examine the merchandise firsthand.
This option helps customers make better-informed choices and can help determine things about the products that cannot be gleaned by seeing pictures online.
However, keeping brick-and-mortar stores open is an expensive endeavor.
Best Buy stores are not small.
They are, in fact, sprawling warehouse structures with high overhead.
It costs Best Buy considerably more money to maintain a presence in the real world (as opposed to the virtual one), so to remain open and offer these advantages to their customers, they must charge higher prices to pay for the increased overhead.
According to Macrotrends, the company’s annual overhead operating costs were as much as $48,722 billion, an 8.5% increase from the year before.
Many customers consider this worthwhile, as it helps them choose exactly what they need and helps cut down on merchandise returns.
Online shopping experiences cannot offer the same thing.
Any business worth patronizing has two goals of equal importance.
First, profitability helps the company stay open and available for the customers who want to purchase the merchandise they sell.
Second, customer satisfaction is of vital importance to the success of any business.
This goes hand in hand with Best Buy’s commitment to offering high-quality equipment and addressing customer needs after the sale has been completed.
There is nothing worse than purchasing an expensive, high-quality electronic component only to find that it doesn’t operate properly once it has been installed.
For this reason, Best Buy has implemented teams of highly qualified technicians who provide after-sale service for any merchandise purchased from the company.
Profits from sales must support this service, however, which is just one more reason Best Buy is more expensive these days.
Like many businesses in the U.S. and across the world, with the onset of the COVID pandemic, Best Buy faced an unprecedented situation.
When the seriousness of the pandemic became obvious, the company had to make crucial decisions resulting in higher consumer prices.
They had to cut back on merchandise and rearrange their sales model in order to survive.
In doing so, sales of certain items, such as mobile phones, home theater systems, digital imaging, and some of their services fell.
Best Buy’s owners decided that, for the safety of their customers and employees, they would implement curbside-only services for a while.
At the same time, the company also decided to suspend its delivery, installation, and repair services.
They were then forced to furlough close to 51,000 store employees in the United States who worked for hourly wages.
Their sales dropped by 30%, and the company was forced to close 40 of its stores temporarily.
During this time, Best Buy was forced to raise its prices to make up for the loss in revenue.
7. Establishing An Online Presence
In joining the burgeoning online sales revolution, Best Buy had to establish a competitive sales model to utilize online.
This took expert opinion, specific marketing plans, and a lot of elbow grease to make the company stand out from its stiff competition.
It also took a lot of money to make the company a key player in the online world.
This involved major marketing plans that differed from traditional methods of advertising.
Among the many decisions that were made was the one to sell more small electronic items that were easy to ship.
This helped increase the efficiency of the online business and also helped cut down on the huge overhead expenses associated with Best Buy’s brick-and-mortar establishments.
In addition, it helped the company expand to virtually all areas of the world.
In taking this step, Best Buy was able to maintain its competitive pricing.
However, because of the previously-mentioned inflation, competitive pricing still meant higher prices everywhere, a problem that the company has not yet been able to overcome.
8. The Chip Shortage
Almost all businesses that have an online presence have been adversely affected by the global chip shortage.
Best Buy is no exception, especially since chips are included in many of its retail products.
The demand for these tiny, fundamental manufacturing components has increased faster than the number of chips that are available.
Since the majority of Best Buy’s merchandise is of the electronic variety, this has caused many of its best-selling products to become unavailable.
Money cannot be made on products that are unavailable.
This requires markups on their more easily available merchandise items, another cost that is passed along to the consumer.
9. Employee Numbers
As of 2022, Best Buy employs 105,000 people, which is a 2.9% increase from the previous year.
Each employee gets extraordinary benefits.
The company pays for medical coverage that includes prescription drugs, dental and vision insurance, as well as supplemental coverage for critical illness and accident coverage.
Disability insurance is also covered in the package.
It also supplies its employees with no-cost mental health coverage.
In addition to this, Best Buy provides incentive pay, competitive pay, employee discounts, and extra money for personal hardship and disaster relief.
Each employee also wears a uniform.
This and the additional benefits offered to employees cost the company a good deal of money per employee.
The list of employee benefits goes on and on, as does the cost to the company to cover those benefits.
The company continues to invest in its employees in order to effect better customer relations.
However, this is expensive and the costs are reflected in the prices that customers see in the company’s merchandise.
10. Best Buy Techies (The Geek Squad)
One of Best Buy’s most notable assets is its dedication to after-sales service.
In accommodating its customers’ needs, the company staffs a full technical staff to deal with any problems that may arise after their electronics have been purchased.
At almost $20 an hour, this is quite an investment for the company but is one that has helped Best Buy rise to the top of the retail electronics industry.
Of course, the customers are the ones who absorb the cost of this important department, but it is considered a worthwhile investment.
A membership to their TotalTech club entitles customers to receive unlimited service for all electronic devices sold at the store for up to two years after purchase.
This is a pretty good deal, considering the cost of having each item repaired independently, and the club offers additional benefits as well.
Even though it costs more, customers seem to think it’s worth the extra cost.
How To Save Money At Best Buy
Even though Best Buy prices have risen, there are still plenty of ways in which you can save money when you shop there.
1. Codes And Price Tags
Customers can save money on many store items simply by learning the codes that the company uses on its price tags.
For instance, if the price on the tag ends with “.96,” this indicates that the price has been lowered to match the price of a competitor for that particular item.
Likewise, if the tag has the letter “C” inside the corner on the lower right side of the price tag, this indicates that this particular item is no longer stocked and has gone on clearance.
Some great bargains can be found using this method.
2. Customer Requests For Lower Prices
Yes, in some cases, Best Buy will meet customer requests to lower the price of a curved screen TV if the customer also purchases a soundbar, wall mount, stand, or BluRay DVD player.
This is called “bundling” and must be requested by the customer at the time of purchase.
This trick can also be used when purchasing two major computer products, such as a printer and the computer itself.
For example, if a customer requests a specific discount for the two items, they might not get the exact discount that they request, but it is common for those who request it to receive up to 8–10% savings.
It should also be understood that when making large purchases, it is a good idea to ask a manager who might be open to price negotiations.
Yes, when a salesperson leads customers who are interested in buying new TVs through the different models and points to specific models, this indicates that these are the models that are more likely to be negotiable in pricing.
Paying close attention to this fact can end up saving customers a lot of money on their purchases.
4. End-Of-Month Shopping
Customers who shop at Best Buy stores on the last two days of the month are most likely to receive negotiable prices because this is the time of the month that sales goals may not have been met.
There are also certain times of the year, such as August or September, when Best Buy prices are lowered just before the beginning of a new school year when parents are most likely to be buying new computers and related electronics for their children.
The store also has sales during Cyber Mondays and Black Fridays as well as on the days directly preceding the Super Bowl.
These are the times of the year when the best prices are offered at Best Buy.
5. Scratch And Dent Items
Yes, scratched and dented items can result in major discounts.
These are the items that are usually left out as floor models.
Best Buy is willing to let these items go at considerable discounts, but the customer must request them.
The store does not advertise these items at lower prices.
6. Open Box, Unboxed Items, And Returns
Similarly, customers who happen across a merchandise box that has been opened or that is sitting unboxed on a shelf as a demo item is a great target for a request to lower the price If the customer spots a price tag on a demo item, this is also a good indication that the manager is willing to lower the price considerably.
Sometimes, items that have open boxes are on the shelves because they have been returned by customers for reasons other than that they are defective.
For instance, prices can be lowered in the case of a color not being the one the customer originally ordered, or simply because a customer is dissatisfied with the purchase.
Best Buy App And My Best Buy memberships
One more thing that you can do to save money at Best Buy is to download its app.
App users get to enjoy being notified about real-time bargains, are issued money-saving coupons, and can receive discounts on some impressive items like cell phones, household appliances, and cell phones.
The store also offers My Best Buy memberships that offer exclusive money-saving deals to its members and allows them to have early access to all the best sales.