Best Buy mulls new pricing strategy
After a rough holiday season, the retailer considers using Wal-Mart's model of everyday low prices.
For years, Best Buy was doing fine with its tactical pricing strategy. Yes, its regular prices were high, but the chain would offer blowout discounts on specific items to entice customers. The promotional strategy worked well, especially when Circuit City imploded.
But now shoppers are getting wise. They price-check on their smart phones. They know what deal they want. And they know that items will eventually get into Best Buy's sale rotation. So they wait.
Shoppers are so smart, in fact, that Best Buy is questioning its entire pricing strategy. "Why do we carry inventory when we train consumers only to buy it" on sale, executive Mike Vitelli asked at a recent staff meeting, Bloomberg reports.
Another executive admitted to Bloomberg that without the "everyday pricing" model favored by Wal-Mart (WMT) and others, shoppers will wait it out. "Our inventory sits and waits for that next promotional moment," said the executive, Rick Rommel.
Post continues after video:
And so Best Buy now finds itself in a quandary. It could go to everyday pricing -- a strategy whereby it offers a consistently low price -- the lowest price it can while still making money. But that carries new risks Best Buy may not be prepared to take on.
The thing with everyday pricing is that you need more transactions to make up for the discounts. Wal-Mart has perfected everyday pricing and brings in the volume to justify it. But Best Buy doesn't have that kind of traffic.
Which prompts a big question: If Best Buy sacrificed margins through everyday pricing, would it get enough customers to pay for the gamble? No one knows.
But it's clear that Best Buy needs to do something. And fast. In December, the company cut its profit outlook for its fiscal year to $3.20 to $3.40 a share -- down from $3.55 to $3.70. The reason, Bloomberg reports, is falling U.S. demand for TVs, notebook computers and video games. Those savvy shoppers turned to -- you guessed it -- Wal-Mart and Target (TGT) for TVs when those retailers cut prices over Black Friday weekend.
Best Buy didn't cut prices until December. And Best Buy only recently dropped its horrendous policy of charging fees to take back merchandise -- a turnoff for many shoppers.
Best Buy is losing market share, and its stock price is around $33.47, down about 30% from last April.
But I also hope Best Buy doesn't close. I like having their showroom close by so I can check out the things I am not going to buy from them before I go elsewhere.
15% restocking fee............BAH!
Dumb sales personnel who think they know it all (but clearly don't), double BAH!
I won't be surprised if Best Buy does go out of business. I bought a new charger for my laptop.. $89 for a universal charger which didn't last long. I then wised up and bought one on ebay for $15. I didn't think it was a good one because of the price difference.. but in fact, it works better and hasn't broke like the other one.
Toy story 3 DVD:
$19 in walmart
$8:78 in BestBuy
Cheaper in Target than Bestbuy
4 tires - Michelin
$512 in Walmart and with get one tire free it comes to about $419
Exact same tire from Sears is $378 for 4 tires
Now there are some stuff thats cheaper in walmart.
The price match gurantee is a gimmick for most purposes. Bigger manufacturers such as Sony, Sharp and Samsung (funny, all start with 'S') have been catering store specific models of their most desirable equipment . So when you compare that Costco TV with an apparently identical TV in Best Buy, they will tell you "it's not the same model, looky here, the number in ours ends with a 'B'... " - So, No soup for you.
Your best bet is to wait until your wishlisted model is a couple months old, and has been switched from the top bin for the next best thing, unless you have the extra bucks just for bragging about having the ultimate newest crap - which is exactly what they want from all consumers. - In that case, 'Happy Spending !'
By the way, BB's tech buyback is also laughable. Go sell your old stuff in ebay for 400% more.
@ WS6 Trans Am
if you call thier 1 888 number you can get a price match for sure. the store was bsing you id call and report that cause they do the price matches and price guarentees as well !!!
How about letting your employees negotiate prices. I used to shop at best buy and most recently I went in to see if Best Buy would price match Amazon for a $560 shelf system and they told me they dont price match.
So I walked out and bought it from Amazon. Saved over $100 off retail price.
Sure you may have made $100 less than 100% markup (msrp), but you would have sold an item. Last week I was in there and the same unit is still there and they still have 2 in stock.
Now I refer to the company as BAD BUY. Since Circuit City went out the prices have gone up and the sales discounts have moved from items a lot of people buy to the crap they can't rid of that nobody wanted to begin with.
Unless they do something major this company is in its decline of the life cycle.
Copyright © 2014 Microsoft. All rights reserved.
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.