How Best Buy escaped the retail apocalypse

Key Points
  • Best Buy shares surge after a solid earnings report.
  • There's more to the story: Best Buy is also a fun place to shop.
  • Best Buy also appears to be riding the wireless carrier wars.
Best Buy taking share from Amazon: Pro
Best Buy taking share from Amazon: Pro

Shares of Best Buy surged more than 20 percent Thursday after the company posted unexpected sales growth in same store locations.

Best Buy is a retail anomaly because it's an enjoyable place to shop.

Step inside one of the company's stores and it's like walking into the Willy Wonka Chocolate Factory for gadget-geeks.

This is all by design.

Best Buy has worked with partners like Google and Samsung to establish small sections of the store where each can show off new products. Visit a Samsung area, for example, and you'll find the latest smartphones and tablets, virtual reality headsets and accessories.

You might then walk over to Best Buy's gaming section, which has been boosted with plenty of enthusiast accessories over the past few years, from high-end mechanical keyboards (a favorite among PC gamers) to super-accurate mice and fancy gaming headsets with surround sound audio.

Gaming impacting business for Best Buy: Analyst
Gaming impacting business for Best Buy: Analyst

Or, just walking down the aisle, you might stumble across a display of Amazon Echo units and Google Home products, each luring you into the promise of a smart home controlled by voice.

Best Buy said on its earnings call Thursday that it will continue to evaluate and optimize its store footprints, improving this sort of experience.

Best Buy also knows how important it is to continue to have an improved online experience, particularly as it continues to compete with Amazon for buyers. Best Buy's digital sales growth increased more than 22 percent, far more than Wall Street expected.

Best Buy's Rewards program offers gift certificates and early exclusive sales to returning customers. It also extends the return period a loyalty customer has on some products, allowing them to test new items in their homes, like a TV, for a longer period of time before deciding if it's worth keeping. A program for gamers lets them to pay a one-time fee to partake in the "Best Buy Gamer's Club," which offers discounts on games and pays those members more for trade-ins.

Best Buy also appears to be riding the wireless wars to its own gains. The company said Thursday its first quarter sales were "better than we expected as new unlimited data plans offers from the carriers generated increased demand across devices."

Take a look at this chart, which shows Best Buy's gains riding right along with T-Mobile, which has been stealing customers from AT&T and Verizon by offering more aggressive pricing:

It shows that aggressive pricing in wireless is actually attracting customers into Best Buy stores where they can take advantage of the new deals. (Note, however, T-Mobile does not sell service at Best Buy, though customers can buy unlocked phones that run on T-Mobile's network.)

Best Buy faces its fair share of risks, too, with some shoppers coming into the stores to try products before buying them from other places. The company's aggressive price matching strategy has helped alleviate some of those concerns, however, providing immediate satisfaction for customers who would otherwise have to wait two days or more for a new product to be delivered from Amazon.

As tech continues to become a centerpiece of our lives, we need places where we can go to see and feel the products we're bringing into our homes, places where we can get a better idea of how they look, how they function and what they can do. Best Buy provides that and shows that it's also able to deliver online, too.

Watch: Best Buy hits all-time high

Best Buy shares hitting all-time high
Best Buy shares hitting all-time high