Best Buy says it has killed 'showrooming'
The rejuvenated electronics retailer is even embracing the term with swagger, advertising itself as 'the ultimate holiday showroom.'
With four weeks to go before Thanksgiving, the big-box retailer is running television ads that tout its stores as "the ultimate holiday showroom," playing on the phenomenon in which shoppers visit traditional retailers to check out products and then leave to buy them online for less.
That's a big reversal from last year. Concerns that Best Buy was losing sales to online retailers at alarming rates sent its shares plunging toward single digits. Analysts warned that the company's 1,400 stores were becoming little more than a testing ground for Amazon.com's (AMZN) customers. And Best Buy interim Chief Executive G. Mike Mikan made it his top priority to combat "showrooming" before handing the reins to current CEO Hubert Joly.
Joly began his tenure in September of last year, claiming to "love showrooming." These days Best Buy executives are embracing the term with even more swagger, saying they have put in place strategies from price matching to customer-service improvements that will convert more shoppers into buyers. In the past year, Best Buy's profit has increased and its shares have soared.
The stock traded at $43.41 on the New York Stock Exchange Monday.
"A year ago, people said that showrooming would kill Best Buy," Joly said in an interview. "I think that Best Buy has killed showrooming."
Recent results suggest that last year's fears over showrooming were overblown. Still it might be a little early to declare the phenomenon dead. Best Buy's sales from online channels and U.S. stores open at least 14 months have been weak all year, shrinking 0.6% in the latest quarter from a year earlier.
Nevertheless, Best Buy isn't alone in trying to co-opt the term. Wal-Mart Stores (WMT) says it is benefiting from "reverse showrooming" as shoppers explore products online before buying them in stores. Target (TGT) says it installed Wi-Fi at its stores partly to encourage customers to browse products on their phones.
"As my colleagues and I have said several times: We love showrooming -- when Target gets to book the sale," Target merchandising executive Casey Carl wrote in a blog post.
But their optimism doesn't mean there isn't cause for concern. The Internet's share of overall purchases is still growing. Industry researcher NPD Group found that more than 27% of U.S. consumer-electronics spending took place online last holiday quarter, excluding mobile-phone and videogame-hardware sales, up from 24% three years earlier.
About 40% of U.S. shoppers say they have tested products in stores before buying them online, according to an April survey by Harris Interactive. Best Buy, Wal-Mart and Target were the top victims of the trend, according to the poll.
Best Buy last year estimated that one in five of the nearly 600 million people who visited its stores did so with the intention of making the purchase online, though a spokesman for the company said its price-matching pledge has likely changed that math since then.
Matt Xi is part of Best Buy's problem. On a recent afternoon at a Best Buy in Manhattan's Flatiron District, the computer programmer browsed a line of Android phones. "I wanted to come to the store and take a look at how they feel, because you can't do that online," said Xi. He said he intended to make the purchase online because "you get a better price."
Promoting Best Buy as a showroom comes after the chain put in place a permanent price-matching plan to prevent online rivals from undercutting its prices. Analysts estimate that less than 10% of shoppers take advantage of Best Buy's price-match offer, but executives have said the pledge is enough to keep the company from losing customers to sticker shock.
"We love the traffic on our site, in our stores, and we don't want to lose a customer because of price," Joly said in August. "But we don't feel that we need to be lower than competition. We just don't want to be beat."
The company's latest marketing push highlights one of its turnaround plan's top priorities: wringing more business out of each square foot of floor space. With no plans to close or open a significant number of stores this year, the onus falls on attracting more traffic.
Even so, Best Buy sales haven't increased this year, slipping in the third quarter amid weak consumer demand for electronics, in line with the overall industry. The Consumer Electronics Association predicts the entire sector will eke out a 0.2% increase this year as shoppers snap up fewer personal computers, TV sets and digital storage drives.
Meanwhile, Amazon's revenue rose 23% from a year earlier for the nine months ended in September.
All things being equal, analysts expect sales to also improve at physical stores this holiday season.
"If people don't feel they are being ripped off on price, they are more likely to buy from a physical retailer," said John Tomlinson, head of retail at ITG Investment Research. He said Best Buy also is now better able to compete on price with Amazon because the Web-only retailer now has to collect sales tax on purchases in many states.
Elizabeth Lazenby, a digital marketer from Valley Stream, N.Y., went into Best Buy's Manhattan store to purchase a laptop she researched online.
"I like the face-to-face interaction," she said.
As planned, she bought a Toshiba Satellite laptop for $629, even though she noted that online prices were slightly less expensive.
—Serena Ng and Paul Ziobro contributed to this article.
More from The Wall Street Journal:
- FAA's Gadget Rule Opens Yakking Debate
- Google's Schmidt Slams NSA Over Spying
- Comparing the Online TV Pioneers: Netflix v. Amazon
I took my PC to their geeks and was told they would fix it for $200. I had to sign four different forms and pay up front. A week later they called and said it would cost another $200. At that time I could have purchased a new one for $400. I picked up my PC and it was fixed a month later for $30 by my daughters boyfriend. I hope they choke on the $200 and it was worth it to find out just what bottom feeders they are.
How many times have you found something on best buy's website, you go to the store, and for some reason it's a higher price in the store?? Then you actually have to argue with them to give it to you for the same price as what they have online?!?! That's enough of an indication for me that this company is screwed up and I'd rather spend my $ elsewhere.
The Service Merchandise model that died over 10 years ago would probably work today if it was tweaked to be an internet catalog showroom. A lot of people will pay more than the bare internet price to be able to see what they are getting and to be able to get it right now instead of waiting for it to be shipped. I am much more a reverse showroomer. When I search for something on the internet, I am usually looking to find out where I can see it and buy it today for a reasonable price, not where I can get the absolute best price but have it shipped.
I love going into Best Buy to see the latest gadgets. That's the problem. I didn't see the latest gadgets. I was specifically looking for a gaming computer. All they had were computers with I5 processors. Really Best Buy. Not one I7 in the whole store on display. I hope you get that fixed before Christmas shopping starts in earnest this month. That's really lame. Maybe there's no showrooming because no one is seeing the stuff they want.
Best Buy has horrible service and here is a case in point, before I go any further the unit I ordered was as a backup for navigation and I have also a crew of five people awaiting, so this is not only me.
I went into the Newport News VA store last Wednesday to oreder an Asus MeMO 302C and was told there was one in Christianburg VA, after not hearing anything I called the store to be told that the Tablet had been in for several days, I went to the store yesterday and picked it up, when I asked why hadn't anyone called I was told that there were calls placed only to a different phone number than the one I had given them, on the way home I looked at the small print on the box and discovered the model number was 301T not 302C, so I took it back only to find out there will be another six days wait oh I was furious, when I got home I called the home office and the first question was did I pay for expedited shipping? I swear to goodness, I also found out that even though one may pay for expedited shipping Best Buys pick system does not honor that so it makes no difference one way or the other, so now it is getting colder, and I have a crew of five people waiting, best buy is absolutely horrible.
Calling BS. Ok they have no choice but to say they have beat "showrooming" but until I can walking and feel I am getting the best price WITHOUT having to look at every ad or Amazon.com it is not going to happen.
Almost 100% of the time I can go to Amazon and purchase an item at a better price, faster, have it delivered within 2 days, not have to drive ay least 30 minutes to the nearest Best Buy, try to find a salesperson that would like to help me instead of talking to other employees, check out load my car, drive home, unload the car etc.....
Ok now that I am looking this I would maybe pay a bit more at Amazon for the convenience.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
'Headline pay' vs. 'realized pay'? Cash bonuses and stock awards? It's harder than ever to decipher compensation within the sector.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.