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 13, 2012 10:02PM
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I dig Best Buy. America lets keep their lights on. Screw them home body's that buy everything on line. Best Buy is a great store. I've purchased all my electronics at B B. I will continue to do so. 

Oct 13, 2012 8:30PM
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I bought a 46 in tv  at best buy a few years ago i took it home and the picture was bad  it seems the early model plasmas should not lay flat in transit. I called the store and they delivered a new one 4 days later free of charge. They took the old one and set up the new one to make sure it worked fine. No problems here.
Oct 13, 2012 3:31PM
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I am no fan of Best Buy but it's about time to level the playing field between online merchants and local retailers.  Most local retailers would love to price-match Amazon even as they work on maintaining a showroom, which Amazon does not do.  The problem is that local merchants are required to collect sales tax in most states.  That gives Amazon and other online behemoths a 7-10% price advantage, even when the locals match prices.  Our state governments need to get with it and close the loopholes that keep Amazon and the rest exempt from collecting sales tax.  Who benefits when the public is encouraged by unfair tax laws to send their money out of state?  I can't think of anyone except Amazon and those that imitate them.  Certainly not the general public whose local economies suffer when their dollars are spent out of state.
Oct 13, 2012 11:09AM
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Hey Best Buy - Turn Out The Lights - The Party is Over !
Oct 13, 2012 9:37AM
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Now that you're paying tax at Amazon and they'll match prices again, why not shop at Best Buy.  I bought a Nikon camera there, because I didn't want to get into a hassle if I ordered online and the camera was broken or if it breaks while owning it.  Their prices were excellent and I got it the day I paid for it.
Oct 12, 2012 8:25PM
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Best Buy is a looser and a waste of time to shop there. Their sales staff are a bunch of jerks.
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 5:37PM
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I go to best buy for small things as its convenient or if I've shopped around online and they have the best sale going on. Otherwise, i'd rather drive the 45 minutes- an hour to the closest Fry's. The larger selection and the money I save is well worth the gas money.
Oct 12, 2012 5:21PM
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There's an old maxim in retailing that it even more true today. Three parts, Lowest Price, Best Quality, Great Service.... you can only choose two. It's that simple. Everything has a cost.
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 5:18PM
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The worst thing about shopping at Best Buy is the high pressure sales tactics the people on the floor and especially the cashiers take selling you extended warranties. I walked out of the place leaving the television set on the cashier's counter after I said NO four times to the high pressure extended warranty sales pitch. Buying anything from one of their stores isn't usually a pleasant experience.

If they would ask ONCE, then take no for an answer I would shop there more often.



Oct 12, 2012 5:16PM
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Ill take frys over best? buy any day.  maybe if the former owner takes best buy private they wont have to suck shareholder ballsack and inflate prices to get better earnings.  public companies all gouge because they have investors to hold their feet to the fire on profits.  frys is private, prices are lower and employees waaay better.  best...bye!!!
Oct 12, 2012 4:54PM
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Now I recognize why it is that the dinosaurs have become extinct...  They simply moved too slowly for the pressures of their environment.
Oct 12, 2012 4:47PM
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I haven't shopped at BB for years because two times in a row I was in the cell phone accessory section and instead of the employees asking if I needed help, they were eyeing me because they thought I was stealing something. I know this because I asked them why they were staring at me.  Ridiculous. Another reason they are failing is because they are unorganized. I ordered a TV there years ago online and they shipped it to me. Then I received an email saying my TV was ready to pick up, so I went and picked up a second TV - returned it, and kept the cash making my first TV free.  Serves them right.  FACE!
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 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 4:43PM
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To late, just bought my new phone from wirefly.    No shipping charge, no sales tax, got to use ebates and my Verizon upgrade discount.   

(Worst) Buy is just obsolete.
Oct 12, 2012 3:20PM
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I live near the Tenleytown Best Buy in DC.

 

I bought a computer there, rather than showrooming it, because they're in my neighborhood - I did them a solid because I want to foster a positive relationship with them.  15 months later, the keyboard stopped working for no reason.  I brought it back to them looking for them to fix it.  They said no, and I haven't been back since.

 

BB's only competitive advantage is the opportunity to form a relationship with their customer, and they've made it a confrontational relationship.

 

It's 100% certain that BB will fail.  I get boxes from Amazon twice per week.  I do all of my retail shopping online.  My wife and I buy a new electronics item at least twice per year - all of which are available from BB.  I'm right in their target demographic, in the same neighborhood, and I won't go back - they blew the layup.

 

If anyone from BB is reading this, don't bother reaching out to make it up to me - I don't need you - you need me.

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 2:20PM
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About Time ! Must have been done a long time ago ... but what will this do to their Margin ? How will this affect the bottom line ...
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