Here’s How Best Buy Can Benefit From The Growth In Virtual Reality

The Virtual Reality (VR) market is expected to witness tremendous growth in the next few years and a Forrester report estimates that the demand for VR headsets will reach 52 million units by 2020. This new technology presents a huge opportunity for Best Buy (NYSE:BBY) as VR headset manufacturers launch their products in its stores. In May this year, Facebook’s virtual reality headset Oculus Rift was rolled out in 48 Best Buy stores across the U.S. where consumers could try the device and schedule demos. Best Buy is uniquely positioned to capture this opportunity where it has an advantage over e-commerce players such as Amazon. As consumers look to familiarize themselves with VR technology, first time buyers would prefer to try out the product and watch a demonstration before making a purchase. This could attract consumers to Best Buy’s offline stores positively impacting comp sales. While mobile phones and computing products dominate Best Buy’s revenues (nearly 50% in Q1 2016), high demand for VR devices can lead to a higher revenue from entertainment products (currently accounting for 6% of total revenues) and reduce the company’s dependence on smartphones to grow revenues in future.

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Virtual Reality Hardware Market Expected To Reach $15 billion By 2020

A number of players are investing heavily in VR technology and plan to use this immersive experience in many diversified areas, in addition to video games where it is currently being used the most. eBay recently launched its first virtual reality e commerce store and Alibaba has also followed suit with Buy+. Facebook is actively pursuing VR initiatives to make the social media experience more immersive and advertisers are keen to use this technology for more immersive product experiences.  The popularity of this technology is visible from the tremendous success of the Pokeman Go app which surpassed 100 million downloads.  Games based on augmented reality are now being touted as the future of video games.

As this market grows, with 2016 being the year when it becomes mainstream, demand for virtual reality headsets is expected to explode. While Forrester estimates put this at 52 million units by 2020, Super Data research expects Virtual Reality hardware revenues to reach $15 billion by 2020.

Best Buy is well positioned to capture a significant share in this market.  As most brands use it as a destination to demo its products, the new technology and its widespread use will no doubt attract customers to its stores. Furthermore,  the company is strengthening its e-commerce presence.  As virtual reality grows and becomes more familiar, Best Buy should benefit from the growing demand for these products online. We believe VR related products can become a significant part of Best Buy’s revenues in the years ahead as this technology moves from video games to retailers and thence online.

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