Best Buy declares war on showrooming
Next month, the big-box retailer will start matching competitors' prices, including those of Amazon, which is the trend's biggest beneficiary.
For brick-and-mortar retailers, showrooming is an existential threat. It saps their life away when customers visit a physical store to look at products such as smartphones, but then buy online to get a better deal.
But now, Best Buy (BBY) says it has a solution to the problem: It's enacting a permanent policy to match the price offered by all local retailers and 19 online competitors. “They don’t want to lose more market share to online retailers,” University of Michigan business and law professor Erik Gordon told Bloomberg. The policy will go into effect on March 3 and includes price-matching against Amazon.com (AMZN), the biggest beneficiary of showrooming.
Best Buy has little choice. It's the top victim of the behavior, according to a December poll from market research firm Harris Interactive.
Among the consumers who said they showroom, Best Buy was their biggest resource, with 24% saying they stop at the big-box tech retailer to check out its merchandise before buying elsewhere. Wal-Mart (WMT) was the No. 2 resource, with 22% of showrooming consumers checking out products at its stores that purchase online.
The big winner is Amazon, with more than half of showrooming customers opting to buy from the online retailer after visiting a bricks-and-mortar store, the study found.
Best Buy's new price guarantee has a few catches, however: A customer has to ask the retailer to match a price. It's also limited to one match per identical item, and it doesn't include contract mobile-phone devices and plans.
The new policy follows Best Buy's temporary price-matching policy over the holidays. That helped the retailer exceed analysts' expectations when it reported holiday sales that were unchanged from a year ago, Bloomberg notes.
Nevertheless, the new policy could deliver a new set of challenges, especially if it proves popular with consumers. That's because lower retail prices could eat into Best Buy's margins, forcing the company to cut costs and protect profits.
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I thought "showrooming" went like this: (1) go to store & find item you like, (2) go online and find item for less money and (3) then buy item online.
BB's policy would only help if you're willing to go back to the store. I guess that works if you're in a hurry for the item, or can't get around the shipping charges, but I'm not so sure.
This is how the game is played. If you endanger someone else's marketplace position, it is tantamount to a declaration of war, it has to be that way or it is surrender.
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Reports say the generous benefactor behind the huge gratuities is a former PayPal executive.
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