Best Buy rewards are now going to cost you.
I was surprised today at 3:00 a.m. when a huge thunderclap woke me from my nightly slumber. It was so loud, it shook our house. Needless to say, I was wide awake while the storm raged outside. So, I picked up my phone to look through my overnight emails. Normally, it’s a bunch of emails I delete without even opening. But, one email caught my eye. The subject read: The My Best Buy terms are changing.
I opened it curious about what they were going to update. I subscribe to a lot of rewards programs because I find them to be a great perk — most of the time. Many programs don’t require anything extra of the customer other than making frequent purchases at their stores. It does, in fact, influence the way I shop.
When I started reading through the email, the first change notes that My Best Buy members will start receiving free shipping from bestbuy.com with no minimum purchase requirement. This change went into effect on January 9, 2023. Previously, Best Buy had a minimum purchase limit of $35 in order to receive free shipping for any customers.
The email continues to reveal a not-so-happy surprise to their rewards points program. Starting February 14, 2023, earning points on eligible Best Buy purchases will become an exclusive benefit of the My Best Buy Credit Card. You read that right. In order to receive ANY points from purchases at Best Buy, you will need to make that purchase using their credit card. This means that customers who want to pay in cash or use another form of payment will not receive any rewards benefits. Zero. Zilch. Nada.
I have experience as a marketing professional and have designed rewards programs for consumers in the past. The only reason I can see for doing this kind of change is to drive more people to sign up for and use the Best Buy Credit Card. It does not, however, encourage people to sign up for their loyalty rewards program anymore. You can read the full current program terms here alongside their upcoming changes. (This is a PDF created from their current webpage.)
Best Buy has not released their quarterly earnings statement for Q4 2022 yet (November ‘22-January ‘23) which would include their holiday revenue, but their third-quarter earnings show that the company’s domestic revenue was showing a 10.8% loss over the previous year. According to Best Buy’s 2022 Annual Report, approximately 25% of the company’s revenue for the past three years (2020-2022) was transacted through one of their branded cards. That is approximately $35,665,250,000 — from credit cards.
Make no mistake about this. Store-branded credit cards are a source of income for the retailer. They make partnerships with banking institutions (Citibank, N.A. in the case of Best Buy) to issue the card under their branding moniker, and then they receive a percentage of the interest the banks earn from the purchases made with the card. Here is an excerpt from Best Buy’s 2022 Annual Report about their Credit Card Revenue.
We are eligible to receive a profit share from certain of our banking partners based on the annual performance of their corresponding portfolio, and we receive quarterly payments based on forecasts of full-year performance.
In my opinion, this rewards program change is Best Buy’s attempt to increase their profits. Based on their Q3 report, they are trying to find a way to recoup losses they can’t change. In their Annual Report, they list out certain risks to the company’s success. Some of those factors, Best Buy has absolutely no option to change.
For example, they can’t predict whether or not another COVID outbreak might cause stores to close and they don’t have any sway over the Federal Reserve’s increasing interest rates which have an effect on the company’s operational expenses. What they do have control over is what programs they offer to customers and their product pricing. So, by shifting the rewards points program to Best Buy Credit Card purchases, they are attempting to increase the revenue they get from those third-party credit vendors.
From a business perspective, it makes sense. They think, “The customer is already going to make the purchase. Just ask them to make it using a Best Buy Credit Card.” The customer, on the other hand, is thinking, “I don’t want a credit card. I’ll just make my purchase and leave.” Then, the next time they think about purchasing their technology items, they will do it from Amazon or another retailer that carries similar products. Because if there is no added benefit for the everyday customer to take their purchases to Best Buy, why would they shop there?
Basically, I see this as a way to phase out their free My Best Buy program in favor of customers paying for the Totaltech program ($200/yearly) or signing up for a credit card, which currently holds an interest rate of 30.49% annually (terms can be found here).
Either way, you end up paying for something you once got for free. What kind of benefit is that?
1 Comment
Absolutely perfectly stated. I have a TotalTech membership to have a newlly-purchased TV installed. Continuing coverage on this device and a few others, I will likely only renew that membership for a year (we’ll see). Outside of this — why have I continued to shop BestBuy and not Amazon for electronics? Proximity to a physical store is one reason, but as you’ve stated — the added perk of getting back a *small* return on my spending was just enough to keep me sending my money to BestBuy. I don’t need another credit card, nor do I need some other paid-incentive to force me to remain a customer. The percentage points I received on “qualified” purchases, honestly, was no better than paltry. I’d rather get 1 or 2 percent cash back (or flight “loyalty” points) on other credit cards, so again, BestBuy sweetening the pot with a tiny bit of sugar was a sufficient motivating factor. The real question–and is again perfectly implied in your article–is how much business are they now going to lose to Amazon (and others) because they think people care enough to have to get a BestBuy credit card to get BestBuy points, versus how many customers will they gain for that different “perk”. Time will tell, but I think it’s clear how/where I’ll be spending $ on my own electronics and related merchandise from here on out.