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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Call me old fashioned, but I like the immediate gratification of buying something and having it immediately in-hand to enjoy. I've purchased from BB for that very reason. My computer... upgraded keyboard, cell phone, a microwave, a camera, and a stereo. I purchased these items at BB because they were good products at good prices. I've also purchased BB-type items from Target, WalMart, and Sears. I can't say that their salespeople are any better or worse than at all the other stores. I don't get people who gripe about the quality of the sales staff but then buy off the internet where there is no sales staff.
Maybe BB's model has seen it's time and it needs to do something else. This is a great start. Maybe look at your departments and weed out the less than stellar ones. I see people browsing the music/video/software section, but I rarely see anyone buying. The audio section also seems to get little action. Why not focus on TVs and such, cameras, appliances, and phones. And kill the small appliances... I can always find the same or better pricing at any other store. Focus, BB, focus.
And train your staff on the floor to be experts in 2-3 areas rather than so-so in one. Develop some online training modules and ensure that your staff has ample time to train, say, 30 minutes of each shift until a solid base of knowledge is acquired. Employees with real knowledge who are able to advise buyers, along with your new pricing model, with knock that pants off of internet stores.
"Lower retail prices could eat into Best Buy's margins"
Not as much as no sale at all.
It’s a curious dilemma. I can understand people wanting to get the best price. On the other hand, I would never pay $2000+ for flat screen TV, computer, or anything online sight unseen. I want to touch, feel, and see it for real before I lay out that kind of money.
I think Best Buy should lean on the manufacturers rather than their customers to recover the cost of show-rooming. I’m sure the manufacturers can appreciate that if nobody did it, customers won’t buy anything unless their friend already has one.
Bye Bye Best Buy.
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