Best Buy Faces a Big Problem With Its New Loyalty Program

Best Buy just revealed a major overhaul of its loyalty membership program. And by overhaul, we mean that the consumer electronics retailer just made its loyalty program really, really complicated.

So the question becomes: who will explain all of these extensive changes to consumers when they visit stores? After all, Best Buy has laid off tens of thousands of employees over the past three years, including hundreds of store workers just last month.

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The paradox demonstrates the struggle Best Buy and other retailers face as they wean themselves off Covid-inflated sales and adjust to an economy marked by high inflation and reduced consumer spending, especially on discretionary goods like televisions, computers, and video game players.

But life goes on, even if there are fewer people to do the work.

Best Buy Adds Multiple membership levels

Instead of the poorly-named Best Buy Totaltech, the company is rolling three tiers of membership, each with its own annual fee and menu of benefits.

They are:

My Best Buy

• No membership fee
• Free shipping with no minimum purchase

My Best Buy Plus

• $49.99 a year
• Exclusive member-only prices on thousands of items
• Exclusive access to sales, events, and products
• Free 2-day shipping with no minimum purchase
• Extended 60-day return and exchange window on most products

My Best Buy Total

• $179.99 per year
• Geek Squad tech support — no matter where consumers bought products
• Priority access to VIP customer service via phone or chat
• Up to two years of product protection, including AppleCare+, on most new Best Buy purchases
• 20% off repairs
• Occasional promotional service offers like discounted in-home installation and haul away

And let’s not forget Best Buy’s credit card program.

The company probably unwittingly demonstrated My Best Buy’s complexity by adding seven extensive footnotes in its press release, which describes all of the terms and conditions associated with each tier. And there are a lot of them.

Best Buy said it discovered consumers wanted different things from the retailer so the company tried to accommodate all of those needs with tiered memberships.

“We’ve learned a tremendous amount from our members over the last couple of years, especially that different customers value very different benefits when it comes to their technology,” Patrick McGinnis, senior vice president of memberships at Best Buy, said in a statement.

“Creating these new membership options allows us to be there for all of our customers in the ways that are most important to them,” he said.

Best Buy May Be Confusing Its Members

But making so many big changes inevitably invites questions from Best Buy’s best and most loyal customers, the group it definitely does not want to alienate. And the overhaul comes at a time when the company has been cutting workers.

As of the end of January, Best Buy had more than 90,000 employees in the U.S. and Canada. That’s a drop from the nearly 125,000 workers that it had in early 2020, according to company financial filings.

And generally speaking, in retail, simple is superior to complex, whether we’re talking about loyalty programs, store design, or pricing. Walmart Stores Inc.  (WMT) - Get Free Report and Target Corporation  (TGT) - Get Free Report don’t offer the hodgepodge of coupons, clearance sales, and promotions that have doomed retailers like Bed Bath & Beyond and JCPenney.

And Amazon Inc.  (AMZN) - Get Free Report emerged as a giant thanks to its Prime Membership program, which offers the same benefits and perks to all consumers who pay $14.99 a month.

Best Buy is hoping that it can generate more loyalty and membership revenue while reducing the number of store workers who provide customer service. That’s generally not a recipe for success.