Best Buy Tablet Going Up Against the Big Boys

Discussion
Oct 18, 2012

It’s not that Best Buy has no chance introducing its own tablet against the likes of Apple, Amazon.com, Barnes & Noble, Google, Microsoft, Samsung, etc. Let’s just say that the company better be bringing its "A" game if it’s going against these competitors that are rolling out new tablets heading into the holidays employing record setting advertising budgets to drive sales.

So first things first. According to Reuters, Best Buy’s new "Insignia Flex" tablet will be priced somewhere between $239 and $259 and is intended to compete directly with rival Amazon’s Kindle Fire HD tablet and perhaps even Apple’s new smaller sized iPad, expected to be introduced next week.

The Insignia Flex, which will be sold exclusively by Best Buy, will operate on Android software and come with "a dual-core 1GHz processor, 9.7-inch screen and 10-hour battery life," according to Reuters.

A Washington Post article questions the pricing of Best Buy’s new tablet, suggesting "the best strategy for Best Buy would be to head for the $200-and-under crowd." The piece accurately points out, however, that Best Buy does not have content to sell to help it in lowering its price, as do some of its rivals.

One thing is sure, rivals will be spending big on new tablets and smartphones to gain share.

"We’ve got an unprecedented number of significant launches from vast global players in a short period of time and the combination of those three things is creating this tsunami of advertising," says Shaun Collins at the mobile research specialist CCS Insight, told The Guardian. "It’s as big a quarter as we’ve ever seen. The level of commitment each of these players is willing to put behind a mobile launch shows how valuable it could be if they get it right."

Why do you think Best Buy has found it necessary to introduce its own tablet? Given the competition, what will the retailer need to do to succeed?

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17 Comments on "Best Buy Tablet Going Up Against the Big Boys"

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Tony Orlando
BrainTrust

A little late in the game? This iPad war will continue until only the strong 2 or 3 companies survive. This new Best Buy tablet better be awesome, as Apple, and Amazon already have a huge following for their own products, and now Microsoft with their deep pockets is getting in as well. The high tech industry makes grocery sales look easy in comparison, due to the short shelf life of these products. Maybe 99 Cents Only will be selling these same tablets in their stores in a couple of years?

Max Goldberg
BrainTrust

Best Buy wants to lose money. That’s why they are producing their own tablet at a higher price point than the Kindle or the iPad mini.

Evidently, the company feels that tablets are enough of a commodity that a store brand will sell as well as branded competitors, like they have done with Insignia TVs. The difference is the Insignia TVs are usually priced below competitors’ similarly sized models.

Jason Goldberg
BrainTrust

It’s a well publicized strategy for Best Buy to have a significant private label business. Brian Dunn used to say he wanted to see 50% of their sales coming from Private Label. Owning your own SKUs is clearly an anti-showrooming tactic.

The tablet is a good target for a private brand, as the hardware for Android tablets is largely commodity executions of a standard reference design, running the Google-provided OS.

So I don’t think we are going to see Best Buy creating huge demand for this device, but I do think they will have a reasonable SKU that many in-store tablet consumers will include in their consideration set.

Dick Seesel
BrainTrust

To some degree, tablets are displacing not only desktops and laptops but also TVs. It’s not news that consumers watch movies on tablets, but consumption of TV series and other cable content is growing rapidly. So Best Buy needs to get into the game, just as they carry a credible assortment of private-brand TVs under the Dynex and Insignia labels. I agree with the assessment that $199 (not $250) is the magic price point — otherwise, why not buy a Kindle Fire or other branded tablet?

Gene Detroyer
BrainTrust

The latest moves by BB have been strategically positive. However, this one is puzzling. Unless they have a secret weapon in their tablet…. What can they do to succeed? Turn their attention to something else.

Ed Rosenbaum
BrainTrust

The best thing Best Buy might do is consider not getting in the game so late next time. They are so far behind that their tablet might only get attention if the cost is significantly lower than the others. Good luck!

W. Frank Dell II
BrainTrust

Two words: “Private Label.” Some may remember the old phrase “Don’t try to out Walmart Walmart.” Best Buy believes they have become the showroom for Amazon. Selling private label reduces this direct competition just like supermarkets did with Walmart.

Ken Lonyai
BrainTrust

Props to Max Goldberg for the best synopsis of this article. “Best Buy wants to lose money. That’s why they are producing their own tablet at a higher price point than the Kindle or the iPad mini.”

Let’s be real here. Unless they have secretly been making a huge investment in a hardware development team/facility (extremely doubtful!), they are buying some Chinese made tablet that they may have a small bit of feature influence on. That approach has no possible chance of making a significant dent in the market against companies with huge ecosystems, focus, and budgets around their tablet efforts. Best Buy may get some traction with loyal(?) customers, and if the price drops significantly with uneducated buyers looking for a bargain. Beyond that, there is absolutely no incentive to purchase what is otherwise an undesirable product.

One more wild thrash in the wrong direction as the coffin lid gets tighter….

Carol Spieckerman
BrainTrust

I’ve said for a while that private brand development is an under-exploited opportunity for Best Buy (just because they have them doesn’t mean they have built equity for them). Consumer electronics is the last bastion of national brand domination (hence its vulnerability to showrooming)…with one exception: tablets and readers. Interesting choice, then, when those resources could have been plowed into carving out clearer niches for existing private brands such as Dynex, Insignia and Rocketfish.

Will Best Buy’s tablet come pre-loaded with apps that pull purchasers into a Best Buy-fueled content ecosystem? If so, then I get it.

Martin Mehalchin
BrainTrust

It’s a totally unecessary waste of management time and shareholder money. This product is dead on arrival.

Warren Thayer
BrainTrust

1. Panic and desperation.
2. Successful prayers for a miracle.

Adrian Weidmann
BrainTrust

Best Buy launched its own brand, Insignia, some time ago so from that point-of-view, introducing a tablet is a natural progression of that strategy. The challenge for BBY is to continually balance its private label marketing and merchandising with vendor partners with competitive products. Various marketing, merchandising and promotional funds flowing into BBY from the various brand vendors should be used to advertise and promote their specific product and services, whereas BBY will typically use those funds to promote the category where they have a competitive product. This is a delicate balance and one that I believe provides tremendous fuel and incentive for brands to design and activate omni-channel communication strategies to establish direct communication with their shoppers and customers.

Brands MUST become publishers and reach their target audience directly. Who is better poised and qualified to tell their brand story? BBY is at least not completely undermining their brand vendors by pricing their own product at the lowest price option. That would certainly further infuriate their brand partners.

Craig Sundstrom
Guest

I think it’s only a matter of time before BB introduces its own line of personal care products…. Really though, just as a drowning person will grasp at straws, floundering companies will try any and everything in hopes that one of the ideas will end up being a branch (so to speak); will they succeed? Probably not, but what is the alternative?

Janet Dorenkott
Guest
Janet Dorenkott
4 years 8 months ago

I haven’t heard a single kid ask for an Insignia Flex. I just don’t see it working.

Best Buy has become a show room for electronics. Maybe they should change their business model and charge the manufacturers for leasing the space to display their items. They could carry no inventory and just and take orders. People still want to see their expensive items before they buy them, they just don’t want to spend retail. Best Buy could turn this whole thing around and start focusing on what their business has actually become… a show room.

Joe Nassour
Guest
Joe Nassour
4 years 8 months ago

You have to look at their move as a private label strategy, giving just their customers a private label option. This is no different than going to Walmart or Kroger and purchasing a private label milk or soda. It is not meant to be a national brand like Tide or Coke. No difference.

Jeff King
Guest
Jeff King
4 years 8 months ago

Agree with the majority of the thread here, minor impact and not strategic. Amazon can do this on strategy because they are innovating in retail/digital distribution of their core business. I’d rather see Best Buy continue to innovate in the retail experience, clienteling, social, omni-channel, like they have with Geek Squad, financing, warranties etc.

Mark Price
BrainTrust

The biggest reason to sell a tablet is that Amazon is using their tablet to establish a direct pipeline to their customers, preempting communications and offers from companies such as Best Buy.

What I do not understand is the price point. I believe that BBY can justify a lower price point, even at or below cost, based on incremental revenue from customers who will increase their “share of wallet” by purchasing technology on that tablet.

A $99 tablet with strong features could rip the market open and create a solid base of customers locked to BBY in the future. We will have to see what happens….

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