Best Buy launches risky price-matching plan

The struggling chain can't hide from its larger, nimbler rivals.

By Jonathan Berr Oct 12, 2012 12:53PM
Kate Kunz, CorbisBest Buy (BBY), which has been cornered by larger, more nimble rivals such Amazon.com (AMZN), is fighting back as it looks to match prices on goods sold online and is set to offer free home delivery on goods that are out of stock in its stores, according to The Wall Street Journal. This is a risky but necessary move.

The company has seen same-store sales fall in eight out of the past 10 quarters, a trend that is not sustainable. Many consumers, including this one, go to Best Buy to check out gadgets and gizmos that they will buy from a rival website at a much lower price. The practice has been dubbed -- grammarians, avert your eyes -- "showrooming." This happens at other chains, such as Wal-Mart (WMT), though it's more of an issue in sales of bigger-ticket items.

Founder Richard Schulze wants to take the chain private, and it's unclear whether he is keen on the price-matching idea. Crafting a price-matching policy will be tricky because it will cost Best Buy lots of money. Some goods will be excluded, though it's unclear which ones. Moreover, it could backfire easily.

Fewer consumers may go to Best Buy if they know its prices are no better than what they can get online. The bigger problem, however, is that Amazon can easily lower prices even further  because it does not have the overhead of large numbers of stores. Best Buy will have difficulty maintaining its profit margins.

Investors are demanding a better performance from the company, given that its shares have slumped nearly 25% this year. Consumers are feeling better about their financial futures as the real-estate market rebounds and unemployment drops. The question is whether they will spend their hard-earned cash at Best Buy.

Jonathan Berr is long Wal-Mart.  Follow him on Twitter@jdberr.




60Comments
Oct 12, 2012 1:35PM
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The problems with Best Buy are not just with their inflated prices, ridiculous shipping,  and being sold out of everything.  It's the complete lack of product knowledge and a staff that will run right past you then ask you if you need any help.  They need to completely overhaul their employees in order to help them stay in business.  If  a store lacks customer service and has high prices, then why in the world would I give them my money?


Oct 12, 2012 1:17PM
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If I could go to a brick and mortar store and get an item (immediately) for the same price as, say, Amazon or other online retailers, then I would definitely buy from the brick and mortar store.  However, even though we are a nation of consumers, I have to wonder if Bestbuy can still pay their bills.... and employees.... by doing this....
Oct 12, 2012 2:15PM
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When Best Buy first opened back in 83 I was an overjoyed buyer. Lower prices, great customer service, well stocked and clean. They are presently non of those things. After their hand in the demiss of  Circuit City and other local retailers in my area, they have lost their position as a premier electronics retailer. They are expensive and just don't have that customer service touch.

I don't feel sorry if they go out of business. 

Oct 12, 2012 1:29PM
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If you don't adapt you will die.  
Oct 12, 2012 1:19PM
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Very good idea. Too many box stores always give the excuse.."well that price is a internet price and we can't match it."... We will see what hoops B/B makes people go through to match it though. I bet there will be a lot indeed.
Oct 12, 2012 1:56PM
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People who showroom are like parasites.  If they kill the host, then they themselves will also die.  If Best Buy gets put out of business by this practice, then they will no longer be able to showroom.  And if Amazon encourages this, Amazon will ultimately lose some sales because people will not buy stuff they haven't seen in the showroom.  They need to work out some sort of symbiotic relationship.
Oct 12, 2012 1:30PM
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Almost all of my electronics (phones, tvs, computers) have been bought at BB over the years.  Recent visits to the local (Jacksonvile) store have proven to be a negative experiences.  The store has far fewer employees.  One rep in each area on a recent Friday. I had to wait to ask questions, while another customer kept the rep's attention for 20 minutes before leaving.  The employees are no long knowledgeable about items I ask about.  I noticed that every time I look at some electronic device, I am asked:  "Have you looked at Samsung's model?"  They do "push" Samsung, which is not a bad product, but I now realize that Samsung has a partnership with BB.  Lack of knowledgeable employees, long "hold" time on the phone, and poor customer relations has driven me away from them.  I "shop" at BB, but do not purchase from them.  It is cheaper to buy most electronics on-line.
Oct 12, 2012 1:26PM
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I hate these companies that will "match" there competitors. I dont want the hassle of filling out paperwork at checout or even having to ask them to match it. I'll just go to the place with the best price and reward them. I stopped going to bestbuy because of their extreme markups. So Bestbuy shouldnt match a price, they need to beat it.
Oct 12, 2012 2:08PM
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Best Buy's problem is not limited to pricing. Their lack of customer service and enough floor sales people will be their ultimate demise. I am willing to pay a little more knowing that I have a physical address to return something that may not be what I expected. They should take a lesson from Bed, Bath and Beyond. Their customer service should be the model to follow in the retail industry.
Oct 12, 2012 1:27PM
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You still have to deal with the neanderthals who work there. :(
Oct 12, 2012 1:11PM
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i good way to fix bestbuy's problems,is stop making the prices so damn high,i live next to bestbuy in sacramento,and i go to a place called frys,cause it;s 100times cheaper,and way more in stock,bestbuy cost 30 percent more then frys,so its worth spending 5 bucks in gas to go to frys,rather spending 800 on a tv like i idid,an dit only cost 500 at frys,come to find out bestbuy,has to high of prices on everything,allthough,i did buy a ipod from bestbuy lasweek,cause the lady was really nice and worth it.
Oct 12, 2012 4:45PM
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I actually prefer to buy at a Best Buy at least over Walmart. I onced bought a monitor at Walmart and when I got to the car i realized the box had been tampered with. I looked in only to see some lowlife swapped out his old monitor then returned it to get a refund. As far as online being slightly cheaper, yes it is. But that doesn't quite matter to me because a) I am usually saving up for the big ticket item and when I have the money I want it  or need then, not having to wait around for it to be delivered and b) I am one of those people that likes to look at an item, front to back and top to bottom and if its a hand held item see how it feels in my hand. Online I can't really do that. So for the convenience of getting the item when I want it and knowing how it looks to my eyes and feels to my hand I will be sad when there is only Walmart and Target to go to.
Oct 12, 2012 2:15PM
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I've purchased a few items at Best Buy. I don't why people are having a problem with service there cause their service is much better than Wal Mart, Target, or Kmart. Returns are easy now as well and quite easily done at Best Buy. Ever try to return an item at Wal Mart like a computer, TV, or other electronics? It can be a nightmare to return these items at Wal Mart.

The problems I have at Best Buy are:

1. They quite often don't have the item in stock I want when it's on sale.

2. Some thing are overpriced like cables and other items that should be included or at least cheaper when I buy a DVD player or a camera.

3.They don't have a lot of the accessories that go with a purchase. e.g. Camera lens, lens filters, and a assortment of choices.

Amazon beats Best Buy hands down on choices for accessories on many items. I just purchased a Sony Alpha camera from Best Buy at a good price lower than Amazon, but I bought almost all my camera accessories online from Amazon simply becuase Best Buy didn't have them.

Oct 12, 2012 2:12PM
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This is going to be the BestBye ever! All you are to BestBuy is a number, they could care less about customers. Morning store meetings were ALL about (numbers)  selling you more junk than the day before, not improving customer service!  Thanks to POOR management/corporate pork this is a sinking a ship. I was an insider, a former "special" employee @ 221 who saw all this coming. After me attempting to tell a district manger, "...you'll lose more customers than you make with these tracking sheets....wrong economic  environment..." Oh well he knew more than I (LOL)
Oct 12, 2012 5:21PM
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This is great news.  I saw this coming last week though.  Went in to get the new Avengers Bluray which I had preordered.  I had just checked on Amazon to see how much they were selling it for and saw the extended 5 disc set for $19.99.  I went into bestbuy and asked at the counter if they would price match.  Sure enough, there was zero problem.  Was told then that they will price match anything Amazon sells.  So not only did I get the price match and the metal storage case that bestbuy gave for preorders but I got to walk out, pop it into my bluray player and watch the movie that evening without waiting 3-5 days for Amazon to deliver it.  Didnt have to worry about a broken case (as I've gotten from Amazon on occasion) a scratched disc or anything.  Fantastic news.  Always have and always will like Bestbuy.

 

Oct 12, 2012 4:46PM
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prices are high, the company itself seems to have the opinion they are the only retailer in the field which has turned a lot

of customers off.

Oct 12, 2012 2:35PM
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One of the reasons all retailers are failing right now is consumers dont want to pay a cent over mark up How can anyone stay in business that way there is more to life than what something costs.  If you are down to your last dime to make a purchase maybe yous hould wait till you can afford it.  There is barely ANY mark up.  And for those of you complaining about applainces instock I get it,but Best Buy has had to cut back on their leases and cannot afford to stock applainces.  If you don't like BBY fine but please don't waste time if you are not going to buy.  This is why China owns us is America is so dam cheap and has a gotta have it now attitude.  If you cant afford it work harder to get it don't low ball the retailer.  And for those of you that love walmart I feel bad for you there is much more to life than eating cheese balls and Nascar. 
Oct 12, 2012 7:06PM
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My largest concern with Best Buy over the years and why I prefer to shop elsewhere is there terrible return policy and long lines to return items. I don't have time to jump through hoops for punishment for doing business with your store.
Oct 12, 2012 1:49PM
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Do not buy from Best Buy they have been taking advantage of you for all these years. They Do not stand by products they sell and they even have some Co. make sub par electronics model just for them to sell to see a big name cheap price when its just cheap product.  I believe inventors of restocking fee not sure but definitely one of first to do it! They should offer products for 50 to 100$ off before I  or you buy anything from them! These practices are why we are where we are!  And even Healthcare  follow these selfish un healing keeping you on a leash and extracting cash with a smile business practices disgusting! Do Not Reward Them! That's how you fight back! And put them on there bums!
Oct 12, 2012 1:14PM
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...well, duh - who doesn't want the best price they can get on the same item. Of course you have to jack up the prices to maintain the stores & pay employees - what don't the exec's at BB get about that?
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