Best Buy CEO Corie Barry has to stay at least a few steps ahead of economic trends.
She has help, of course, but the CEO needs to know months, and sometimes even further, in advance where consumer sentiment will land. If customers want value and Best Buy has nothing but luxury brands, sales will falter.
When it comes to big-ticket items like appliances, computers, and televisions, the price range on a single item varies greatly. Last year during Black Friday, for example, Walmart had 65-inch televisions under $300, while top-tier models in that size sold at Best Buy for over $1,000.
It’s a challenge to predict not only the economic climate, but also consumers’ mindset.
People overspend on some items during trying economic times. Maybe they justify a new gaming laptop or higher-end TV by not taking the vacation trip they usually do each year, or maybe people just spend money they don’t have.
The reason doesn’t matter — Best Buy needs to know its customers, and Barry recently shared what she sees as an alarming trend.
The economic divide is growing
Barry’s deepest concern is the disparity between higher- and lower-income shoppers in the U.S.
That’s something she addressed during an Oct. 14 panel at the Fortune Most Powerful Women summit in Washington, D.C.
“That is probably what keeps me up at night most,” Barry told the audience, RetailDive reported. “That reliance on the high-income consumer, while it makes it feel like there is resiliency in the overall market, that’s an issue because your low-income consumers are really struggling.”
She also noted that tariffs are creating problems and opportunities.
“Everything, in some way, shape, or form since March, in essence, has been impacted by some kind of tariff,” Barry said.
That, she noted, does not have to be a negative.
“You come out of this a vibrant company, you come out of it actually with more capabilities and better partnerships,” she added.
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Best Buy is not alone in seeing a greater divide
McDonald’s CEO Christopher J. Kempczinski also addressed the struggles of lower-income consumers during his company’s second-quarter earnings call.
“Certainly, overall QSR traffic in the U.S. remained challenging as visits across the industry by low-income consumers once again declined by double digits versus the prior year period. Reengaging the low-income consumer is critical as they typically visit our restaurants more frequently than middle- and high-income consumers,” he shared.
That’s something that may not be keeping him up at night, but he’s consciously planning for it by upping McDonald’s value offerings.
“This bifurcated consumer base is why we remain cautious about the overall near-term health of the U.S. consumer. In this environment, we will continue to remain agile with respect to our value offerings to ensure the U.S. strengthens its leadership in value and affordability. Overall, we’ve made good progress with our value offerings,” he added.
Billionaire sees growing divide
Billionaire Ray Dalio also shared a dire warning about the growing economic divide.
He told Bloomberg the combination of swelling deficits, wealth inequality, and global flashpoints has created ‘plenty to worry about’ and an environment ‘very much analogous’ to the years before World War II.
Bank of America also shared hard numbers on the growing wealth divide.
“The institute’s research, based on aggregated and anonymized deposit and transaction data, reveals that after-tax wages for the lowest-income tercile grew just 1.3% year over year (YOY) in July, down from 1.6% in June. In contrast, higher-income wage growth accelerated to 3.2% YOY — its third consecutive monthly increase,” Fortune reported.
That’s troubling data.
“The result is the biggest gap between top and bottom earners’ wage growth since February 2021 — a warning sign for the economy, despite a strong overall spending picture,” it shared.
Bank of America Institute senior economist David Tinsley told Fortune in an interview: “In some sense, we had an improvement in lower-income wage growth since the pandemic, and now that’s gone into reverse.”
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