Best Buy launches third-party marketplace as it looks for sales drivers

Scott Olson | Getty ImagesBest Buy is launching a third-party marketplace, as it tries to bulk up the variety of merchandise it offers and reverse slower sales.Starting on Tuesday, shoppers who go to Best Buy's website and app will see ducts and brands that weren't available there before, including more -related accessories custom game controllers and some non- items including seasonal decor and sports collectibles.The company's online marketplace riffs off those of other retailers, such as Amazon and Walmart, by relying on third-party sellers to stock, sell and ship inventory and taking a cut of their sales in the form of a commission."Everything we do is really centered around the customer and their nology needs, and we do see customers actually doing a lot of consumer electronics transactions through marketplaces," Chief Customer, duct and Fulfillment Officer Jason Bonfig said. "And as a result of that, we need to make adjustments to be where the customer's at."He said Best Buy noticed gaps in its asment that the new platform will help it fill

For instance, he said the company didn't carry batteries for some older cameras or cases for older smartphones

And it didn't offer some items that complement Best Buy purchases, such as furniture that goes around a big-screen TV or cookware to use with a new kitchen appliance.Along with adding those items, the marketplace makes it possible for smaller vendors with innovative ducts to sell on Best Buy's website when they're not yet big enough to make or distribute the volume needed for its stores, he added.Best Buy's marketplace launches at a time when its could use a boost

Its annual sales have declined over the past three years as the company contends with a sluggish housing market, selective consumer spending and a decline in device replacements after a spike in purchases during the Covid pandemic.The company cut its sales outlook in May and said it expects full-year revenue to range from $41.1 billion to $41.9 billion

That would be similar to Best Buy's annual revenue of $41.5 billion in the most recent fiscal year, but below the numbers it posted in the years leading up to and during the pandemic.Best Buy will its most recent earnings results and sales forecast on Aug. 28.Tariffs have complicated the backdrop for Best Buy, too, since the higher duties have added costs for consumer electronics vendors and distracted them from other priorities re and development that leads to new and innovative ducts, said Jonathan Matuszewski, a retail analyst for Jefferies

He said Best Buy tends to win sales instead of big-box or online competitors when there's a leap forward in nology.With the platform's launch, Best Buy joins other retailers that have jumped on the trend of launching or expanding third-party marketplaces

Lowe's and Nordstrom started marketplaces last year

Ulta Beauty plans to launch its own later this year

And Target said it will expand its existing marketplace, Target Plus.On Best Buy's earnings call in May, CEO Corie Barry described the third-party marketplace as one of the company's strategic priorities for the year

She said that new fit "is even more important in this environment" and will vide greater flexibility with the range of items and price points.Plus, she said the marketplace supports the company's growing advertising

Sellers can buy ads for their ducts, including by paying for better placement in results.Marketplaces and the advertising opportunities that come with them tend drive higher fits for retailers, said Justin MacFarlane, a managing director for the global retail group of AlixPartners

Sellers buy, stock and ship ducts instead of the retailer, and take on both the expense of buying inventory and the risk that they may have to mark down unwanted items, he said.Yet the model comes with risks, too, he said

For instance, sellers may not have the same standards as a retailer and it could anger a retailer's customers if they send ducts in torn boxes, with missing pieces or days later than expected

And he said retailers can flood their websites with so many different , brands and ducts that they overwhelm customers with choices that seem irrelevant to their company's identity."You get addicted to the growth and more is more until it's not," he said.At launch, Best Buy's marketplace will have 500 sellers, Bonfig said

He said the company vetted applicants and whittled them down to the ones who can vide a high-quality customer experience

The sellers must match Best Buy's return policy, he added.Customers can return purchases either directly to the seller or to Best Buy stores, he said.