Best Buy Gains Where Amazon Collects Tax

Discussion
Jan 14, 2013

Is Best Buy’s gain Amazon.com’s loss?

An article/discussion last month on RetailWire explored the why’s behind Amazon’s continued sales growth in states even after it has begun to collect sales tax. Now, a Best Buy financial report shows that while its physical stores didn’t get a huge boost in states where Amazon has started to add sales tax charges to purchases, its website has seen a pickup in dollar volume.

"In California, Texas and Pennsylvania where Amazon.com recently started collecting tax, it is very early, but Best Buy has seen a four to six percent increase in online sales observed in aggregate versus the rest of the chain," spokeswoman Amy von Walter wrote in an email to Reuters last week.

Best Buy’s improvement can’t just be attributed to the Amazon tax factor. In an effort to be more competitive during the holiday season, Best Buy not only cut prices, but engaged in price matching, as well.

"One of the first priorities of our ‘Renew Blue’ strategy is to stabilize and then begin improving our comparable store sales. During the most important period in the retail calendar — the holiday sales season — we were able to improve our domestic comparable store sales trends compared to the performance of the last several quarters and continue our strong traffic growth in our online business. Our holiday selling strategy, backed by a compelling assortment, increased employee training and price match policy, allowed us to deliver these results," said Hubert Joly, president and CEO of Best Buy. "While it will be a journey with ups and downs, we are focused on becoming an increasingly effective multi-channel retailer and engaging with the tens of millions of consumers who shop us online and in-store."

Best Buy same-store year-over-year sales for the nine weeks ending Jan. 5 were unchanged.

To what do you attribute the gains made by BestBuy.com in states where Amazon.com is now collecting sales tax? Do you think Best Buy has stabilized its business and, if so, what must it do to move in a positive direction?

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5 Comments on "Best Buy Gains Where Amazon Collects Tax"

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Ken Lonyai
BrainTrust

Who knows? “it is very early” and there can be any number of factors that at this stage can’t be realistically attributed or measured. Maybe it’s the immediate gratification of getting something without the wait—given the same price, maybe the price sensitive shoppers that Amazon attracted are coming back since price sensitivity is leveling out, maybe it’s a coincidental blip?

Best Buy has not stabilized it’s business and Amazon likely jumped on these reports as soon as the news broke, did an evaluation, compared it to their numbers, and will come back hard if they agree that they lost ground to Best Buy.

Ed Rosenbaum
BrainTrust

It is too early to tell what the effect will be. Amazon seems to always figure out a “work around” that eliminates the potential loss. Let’s wait and see what happens.

Marc de Speville
Guest
Marc de Speville
4 years 5 months ago

Hard to believe it can be a coincidence, given that the Best Buy sales uplifts are cited as being relative to the aggregate of the rest of the chain. Also, no matter how much easier it may still be to buy at Amazon compared to Best Buy online, adding sales tax amounts to a significant price hike (7% average in the US according to some estimates). Since when did a 7% price hike on consumer electronics not hurt market share?

Kai Clarke
BrainTrust

Lies, damn lies and statistics said Samuel L. Clemons (Mark Twain). The same applies here. To compare online sales rises without comparing the online sales of the company you are referencing distorts the number. BB just indicated that where there were online taxes paid, AND they price matched AND reduced prices, puts 3 differentiated factors in their statistical equation.

What the article fails to mention is how did the products sell for Amazon? How many products did they measure and how many categories were considered in their sample? These are critical questions which any statistical analysis should have and this article conveniently does not. Hmmmmmm…perhaps Samuel L Clemons (Mark Twain) is closer to the truth….

Brian Numainville
BrainTrust

I think it would be hard to draw any sort of direct connection to Amazon.com collecting sales tax and an increase in Best Buy’s business. Not to say that it couldn’t be, but it is very early to draw this sort of conclusion.

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