The news: Best Buy’s high-margin marketplace and retail media businesses helped lift its domestic gross profit rate 20 basis points to 23.7% in Q1 2026 while diversifying its revenue mix.

Marketplace gross merchandise value (GMV) reached $250 million in Q1 and is expected to top $1.2 billion this year. Meanwhile, Best Buy Ads is projected to grow about 10% to $1 billion, roughly in line with our forecast for Kroger’s retail media revenues.

Zooming in: The marketplace, which launched last year and features a curated assortment that aligns with Best Buy’s core offerings, is driving incremental sales. Domestic revenues rose 1.5% YoY to $8.25 billion but would have exceeded 4% growth if marketplace GMV were included.

• Gaming, computing, mobile, and services had strong results.
• Emerging categories like collectibles, 3D printers, and AI glasses roughly doubled YoY.
• Consumers continued to spend on big-ticket technology despite macro headwinds, though purchases are increasingly tied to value and promotions.

That dynamic underpins Best Buy’s bullishness on RGB TVs, with a full rollout planned for mid-June. The roughly 49 million TVs sold in 2020 are approaching the end of their five- to seven-year replacement cycle—creating a meaningful upgrade opportunity, especially with the new technology promising better picture quality as a catalyst.

The broader strategy: Best Buy is also rethinking its physical footprint, expanding its store count for the first time in over a decade and repositioning locations as “activation and experience hubs.” These stores allow customers to touch and feel products, while serving as vendor showrooms, service centers, and fulfillment nodes.

• Its small- and medium-format stores (small-format stores are 12,000 to 15,000 square feet, while medium-format locations range from 20,000 to 25,000 square feet) are designed to reach underserved or high-demand areas, while also acting as three-dimensional billboards that lift both online and offline sales in surrounding markets.
• In some large-format stores, Best Buy is repurposing space for the Meta showcase experiential zones where consumers can explore the brand’s AI glasses and VR, while in others it is showcasing Yardbird outdoor furniture, or its outlet assortments.

Implications for retailers: By leaning into high-margin revenue streams and investing in its stores, Best Buy is doing a lot of the basic blocking- and tackling that retailers can and should do in a challenging environment. That helped Best Buy beat analysts’ top- and bottom-line expectations.

But for a retailer that largely sells commoditized products, long-term success will depend on whether it can deliver on its vision of turning stores into “activation and experience hubs” by keeping them engaging, well-curated, and staffed with knowledgeable associates. That’s easier said than done but is critical since most US adults shop in stores at least as much as they do online.