Best Buy Wants Amazon to Be Its Showroom

Discussion
Oct 04, 2012

Every time the subject of Best Buy’s struggles comes up, it takes all of two seconds for someone to mention the term "Amazon’s showroom" as illustrative of the challenges facing the consumer electronics chain.

In the latest move to address the Amazon problem as well as numerous other challenges in front of it, Best Buy announced it has hired Scott Durchslag, former president at Expedia Worldwide, as its president, online and global e-commerce.

Mr. Durchslag, based on initial comments, appears to see price as a major issue if Best Buy is ever going to push back Amazon’s advances on its customer base.

Consumers, Mr. Durchslag told Bloomberg News, are unwilling "to pay more than they need" and competitive price is "the price to play" for merchants in the consumer electronics space.

"I am very excited to have Scott on the Best Buy team and leading a critical growth area of our Best Buy business," said Stephen Gillett, president, digital, global marketing and strategy for Best Buy, in a statement. "He’s a seasoned tech veteran whose passion, talent and experience will add tremendous value to Best Buy as we build upon the broader digital and online experience for our customers."

Is price the biggest challenge that Best Buy faces in beating back competition from Amazon.com and others? How do Best Buy’s online, mobile and social efforts compare to other retailers?

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21 Comments on "Best Buy Wants Amazon to Be Its Showroom"

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Paula Rosenblum
BrainTrust

You know, Amazon’s former CEO started hammering the industry with the term “Showrooming.” There’s no data to support it (beyond the obvious…anyone buying a big ticket item does price comparisons as they always have) and it’s good to see a shift. That’s just the space the company lives in and I’m glad to see it more or less embraced.

I’m not crazy about having bestbuy.com and Best Buy stores as separate organizations — I think it’s an antiquated model, but it’s not my company.

Max Goldberg
BrainTrust

It’s easy to compete on price, and easier still to lose. If that’s Best Buy’s strategy, they will lose. Just because someone is a tech guy does not mean that he will be able to turn around the fortunes at Best Buy.

To compete effectively, Best Buy needs to staff the store with experts to answer consumers’ questions and help them find the products they are looking for. They need to have exclusive products that are significantly different from what is offered by other electronic retailers, not just nearly identical models with different model numbers. And they need to differentiate their brand by offering value to consumers that an online-only retailer cannot; perhaps bundling Geek Squad service with purchases.

Best Buy has a long way to go. Just competing on price will not grow their business.

Bob Phibbs
BrainTrust

We’re in a landscape of Vulcans. If retailers don’t get out of the analytical, price, price, price mode, they will be gone. Going all the way back to the 50’s any salesperson learned that price was never where you wanted to try to compete. There will always be someone cheaper. And if you play the price game, why would a company have a salesperson? Buying in a store has to be much more than a logical decision. It’s not science fiction, the best retailers are doubling down on retail sales training that doesn’t push warranties, but creates exceptional experiences for customers that move merch.

Ryan Mathews
BrainTrust

When I was a kid I used to watch all those classic Dracula movies. For the uninitiated, at the end of every film the forces of good would drive a stake through poor Dracula’s heart which was removed in the beginning of the next film by a gypsy or mad scientist or some such individual forcing the jaded old Count to once again run around trying to suck the life out of everyone around him in a futile battle for survival which ended with yet another ambassador of goodness driving yet another stake through his heart.

It was a successful formula for films. It is a terrible formula for a commercial entity.

The biggest challenge Best Buy faces is its own nature. Time and technology have moved past it. Its internal challenges dwarf the external ones. It needs to reinvent its entire model, not just worry about Amazon.

I hear the villagers moving toward Castle Big Box. Their torches are bright and their eyes are feverish. They have breached the parking lot, stakes sharpened and at the ready….

No need to finish. I’m sure we’ve all seen this movie before.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
4 years 8 months ago
Price is always a major consideration for customers, but Best Buy has advantages that I believe the new management team will start exploiting. A true omni-channel approach means you have options for customers to enter a store and buy locally (instant gratification option). Best Buy suffered this past year because they did not take advantage of promoting instant gratification and in-person assistance as a major benefit. A possible scenario for Best Buy moving forward: Customer comes into the store, spends 20 minutes with a Best Buy Associate (who is very knowledgeable) about the 50 inch Plasma TV they are looking to purchase. The customer takes out their phone and checks the price on Amazon. It’s $50 cheaper and shipping is free. Best Buy Associate says we can match that price on our bestbuy.com web site and better than free shipping you can leave the store today with your TV. Even better, let me have you speak with our Geek Squad about installation, wires and possible other cool accessories you may want. Best Buy matched Amazon and closed the sale including some accessories and possibly earned some income on installation. More importantly, the customer left telling friends that Best Buy is… Read more »
Camille P. Schuster, PhD.
BrainTrust

Best Buy appears to be setting up another online entity to compete with its stores — its own online store! Consumers do not perceive Best Buy’s online store as separate entity, but Best Buy does. It is not a good thing to be out of sync with your consumers.

Adrian Weidmann
BrainTrust

When all else fails…always offer the lowest price. This seems to be a recurring pattern as brands and retailers try to address all of the challenges they face in the world of the digitally empowered consumer. If Best Buy believes that beating back price will change their plight then they should simply embrace the role of being Amazon’s showroom because they’re simply empowering Amazon. They should at least then establish a business relationship with Amazon! Best Buy’s vendor partners are not going to continually reduce their margins to support Best Buy’s business model to be in the distribution chain without providing a value in that chain. Best Buy needs to focus on what, where and how they can bring value to the consumer electronics customer other than simply having a minimal value in the distribution chain — regardless of the channel — mobile, online, social, and in-store.

Ken Lonyai
BrainTrust

Price is the number one issue for Best Buy, but there’s many other problems too. It’s all well and good that BB wants to compete on price, yet it’s a hard to understand how it can operate physical stores on top of a distribution layer and match a sophisticated online juggernaut with excellent supply chain skills and no showrooms/retail staff to maintain. Maybe the margins on electronics are bigger than I think and it can be done, but I doubt it.

You can always get premium pricing if you clearly delineate your brand from cheaper competitors by adding other value. This statement is not mentioning anything like that (and it’s probably way too late for BB to convince consumers it offers additional value), so if they go with a pure price matching play, it sounds like this might be the last nail in the coffin.

Tina Lahti
Guest
Tina Lahti
4 years 8 months ago

Price is not the biggest challenge that Best Buy faces in beating back competition from Amazon.com. Their shopping experience is. Their stores are dark and dreary and it is difficult to find anything there. To top it off, many employees don’t seem interested in providing you information on anything but the extended warranty that Best Buy is still, in the year 2012, pressuring you to purchase.

Best Buy stores are a stark contrast to the high energy feel good experience of visiting an Apple store. Best Buy’s online shopping experience matches the in person experience. It is difficult to find what they are selling. Try a shopping search on Google for something like Apple TV or xbox 360. Best Buy will not come up in your search. Click on in stock nearby, your nearest Best Buy will likely not appear here either. This is the online equivalent of wandering around a Best Buy store trying to find what you need. Best Buy needs to improve the shopping experience, period.

Gene Detroyer
BrainTrust

If Best Buy is concerned that they are Amazon’s showroom, then they should concentrate on becoming their own showroom. Why let the business get away?

The more merchandise they move from a central warehouse, the better their bottom line will be. This is very simple economics.

The problem retailers have is that they don’t give the store financial credit for generating online sales.

gordon arnold
Guest

Best Buy is not going to be able to get their customers back from Amazon. The consumers that left stores like Best Buy to purchase from Amazon are now Amazon’s customers. Amazon’s market share of e-commerce customers is only threatened from other dedicated e-commerce companies. When brick and mortar companies attempt to compete with e-commerce companies their first move is to build a web site and have at it. This is always a site to behold simply because they have no idea how to get consumers on board with e-commerce.

Amazon is and remains very effective in it’s commerce war with the big box giants. Until another e-commerce venture is designed or redesigned and funded to go against them, they will be getting bigger, at least for the foreseeable future. The foreseeable future in IT is 3 – 5 years.

Ed Rosenbaum
BrainTrust

I happen to be a good example of this. I needed to purchase a new piece of software for our business. I shopped Best Buy among others. I purchased from Amazon and saved $80.00 including the shipping costs. This equates to approximately 33%. A savings well worth having to wait a day to get.

Ed Dennis
Guest
Ed Dennis
4 years 8 months ago

Best Buy should forget about mobile and social efforts. Both are fads and will not replace great execution at retail. Price is a key component at retail, especially in an environment that allows consumers to compare service from a variety of providers. When I order something from Amazon and I don’t like it — for any reason — the return is very easy. Best Buy wants to hassle you and charge a restocking fee! Why would I want to put up with that?

Best Buy should think about its relationship with the consumer. No retailer should initiate policies that make its customers mad. They won’t survive, and unless Best Buy changes its policies, they won’t survive. No amount of mobile/social will fix this!

Lee Kent
BrainTrust

I really think Best Buy is missing the boat with this move. First off, Paula is again right that this model is yesterday and is not the answer. Best Buy is a brand that I believe needs to be around. A place to go and ‘experience’ the product. Best Buy needs to rethink how the consumer wants to do this and what they expect then reinvent themselves to deliver! Piece of cake, huh!

Doug Garnett
BrainTrust

I love the article headline — because it shows the kind of reverse thinking that’s important for retailers on these Amazon questions.

But I’m disappointed in the answer that “price is everything.” Outlet after outlet has shown that fighting on price for consumer tech is the fastest way to closing down the store. (Even 800.com couldn’t pull off an all online price strategy.)

What retailers need to do is focus on their strengths: the store. How can Best Buy leverage it’s one unassailable advantage in floor space in order to fight Amazon? That’s where the strategic win will lie.

Bill Hanifin
BrainTrust

Price is not everything, thank goodness for that! IMHO, consumers still place value on service and advice from human beings.

To elaborate, I direct any interested readers to a research paper I have just co-authored with Rick Ferguson, Knowledge Director AIMIA on Showrooming.

Our conclusions seem to be aligned with Best Buy’s moves as outlined by Mr. Anderson. Retailers should not run scared and plan for liquidation, but use technology and consumer behavior trends proactively in their favor to compete more effectively.

Kai Clarke
BrainTrust

Price and selection. These are BBY’s biggest hurdles. Walk into any BBY and you will see the 3 worst words for any retailer; Out-of-stock, everywhere in the store. To maintain these size stores, BB needs to have price and inventory to support them. They clearly do not and this needs to be their focus.

Mark Price
BrainTrust

Price is an important factor, but Best Buy should not lose sight of the benefit that retail stores can have over online — that being customer experience. In the absence of a compelling customer experience, consumers will retreat to price as the determining factor. But given superior support, knowledge and treatment, consumers have demonstrated a willingness to pay slightly more.

Best Buy must be competitive on pricing — meeting price is probably a good idea for this holiday season to “hold the fort.” BUT, they must proceed to develop compelling customer experiences for different segments to win out in the long term — after all, they still have those leases to pay for!

Mark Goldsmith
Guest
Mark Goldsmith
4 years 8 months ago

Oh dear. Sounds like they will keep on doing what isn’t working. Why don’t they realise that online has the lowest cost base, so can always be cheaper and still make profit than they ever can?

Best Buy needs to attract shoppers based on a different model — one that doesn’t focus on Amazon’s key strength of low prices.

Instead, they could offer a quick and worry-free way to find the product that is exactly right for the shoppers’ needs — just like Apple stores do, which are packed full of happy shoppers without a low price message in sight.

Bobby Martyna
Guest
Bobby Martyna
4 years 8 months ago

They need to take the battle online and put it on their terms. Search results for price competitive electronics BBY carries should emphasize “store value,” which include the product + service + support, etc. If you end up on the BBY site, that is pretty evident. But not so on the comp shop sites (e.g. Google shopping).

Second — tech savvy customers are far more likely to know what they want and therefore will comparison shop and buy online. This is not the ideal segment for BBY to address — the average buyer can be marketed to on their terms and enticed to come into the store for the hand hold. And upselling and cross selling are MUCH easier in a store.

Christopher Krywulak
Guest
Christopher Krywulak
4 years 8 months ago

Price is definitely not the biggest challenge Best Buy is facing when it comes from staving off competition from online retailers like Amazon. Best Buy needs to drive in-store sales and convert in-store sales. To do this it needs to deliver on its “Connected Store” concept: offer a better, more efficient, more helpful in-store experience, which (as implied by your question) integrates mobile and social channels to make things easier for the customer. For example: Customers who use social media to refer friends (sales) to Best Buy get a gift card. Or purchases made on the Best Buy mobile site can be picked up at the nearest store. Beating Amazon in convenience is crucial for Best Buy.

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