Best Buy and Amazon expand their coopetition

Discussion
Jeff Bezos and Hubert Joly - Photo: Amazon
Apr 18, 2018
George Anderson

Best Buy may not be an Amazon.com killer, but in recent years the consumer electronics chain has earned praise for its ability to hold its own against the e-tailing behemoth when many others have failed. That’s what makes noteworthy the announcement that the two companies are banding together in an exclusive deal that will have Best Buy selling Amazon’s Fire TV Edition smart TVs in its stores and becoming a merchant on Amazon’s site.

Amazon’s TVs will roll out in Best Buy stores this summer. The items will also be available on BestBuy.com and Amazon where they will be sold exclusively by Best Buy as a third-party merchant on Amazon’s marketplace.

Amazon CEO and founder Jeff Bezos said the deal between the two companies is possible because of the trust they have built over years working together. Best Buy has sold Amazon products in its stores and online going back to the early Kindle e-readers.

According to a Wall Street Journal report, the deal will provide Best Buy with access to Amazon’s customers for the first time while “broadening Amazon’s potential audience for products that feature its Alexa voice assistant.”

“Our goal is to enrich the lives of our customers by offering them the very best products and services, whether they come to us online, visit our stores, or invite us into their home,” said Hubert Joly, chairman and CEO of Best Buy, in a statement.

Best Buy comes off a fourth quarter in which the retailer saw same-store sales increase nine percent. Its online business grew 18 percent during the period and now accounts for 20 percent of its total U.S. sales.

DISCUSSION QUESTIONS: What will the Best Buy/Amazon deal mean for the two companies as well as retailing rivals? Do you expect to see more cooperation between erstwhile competitors within the retailing business?

Braintrust
"The adage, “if you can’t beat them join them” applies here and it’s smart."
"Take the top retailer and the top electronics chain, put them together and you get a true electronics superstore."
"This dynamic duo allows us to recognize something important for retailers — Amazon does not have to be your enemy!"

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18 Comments on "Best Buy and Amazon expand their coopetition"


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Art Suriano
BrainTrust

The adage, “if you can’t beat them join them” applies here and it’s smart. Best Buy has confidence in its ability to provide customers what Amazon cannot and the same with Amazon. Best Buy will maintain the in-store opportunity for customers to come and see for themselves what they wish to purchase. Amazon for the moment does not have that luxury. Hopefully, partnering with Best Buy will satisfy Amazon enough so that they don’t invest in opening their own appliance/consumer electronics stores. But without this alliance, there is a higher chance at some point Amazon would.

I would expect to see more retailers partnering with Amazon because there are advantages for both parties an at least in the short term a chance to do more business.

Max Goldberg
BrainTrust

Take the top retailer and the top electronics chain, put them together and you get a true electronics superstore. In an era where consumer electronics are a commodity, the deal helps Best Buy through exclusive merchandise and a prized position on Amazon, and it helps Amazon gain an important brick & mortar foothold where consumers can try its products. For now, it’s a win-win.

Celeste C. Giampetro
BrainTrust

It’s a great deal for Amazon as it enables them to expand their physical footprint without the pain e.g., real estate, employees, etc. Also good upside for Best Buy as consumers who prefer to buy in-store can test out products and potentially increase purchase through that physical location. 90% of retail purchases are still made in store despite ecommerce’s growth. Seems pretty smart of Amazon to me.

Brandon Rael
BrainTrust

Best Buy is building momentum and has very effectively navigated some very rough seas for the past few years, as they have empowered their sales force to evolve into beacons of knowledge, and trusted advisors, providing a compelling reason for consumers to shop in their stores. The Best Buy/Amazon deal is a win/win for both organizations, as Amazon will take full advantage of Best Buy’s physical locations, and at the same time, Best Buy will have the ability to expand their reach to the Amazon prime customers.

Increasingly retailers are taking the bold step of strategic alliances with Amazon and their vast marketplace. It’s hard to exist in today’s digital-first commerce world, without directly or indirectly competing with Amazon, as their reach is far and wide.

The key for Best Buy in this scenario is to drive traffic to their stores, expand their digital reach, and play well in the sandbox with one of their bigger competitors. It will be very interesting to see how this plays out.

Paula Rosenblum
BrainTrust

The world is now filled with frenemies. Vendors and retailers, retailers and other retailers. Is it a good idea? In some cases, I guess it’s necessary. Together they are stronger.

Dave Wendland
BrainTrust

Frenemies and unique mash-ups are occurring across the retail supply chain. In particular this one is of interest.

For quite some time I’ve predicted a relationship that provides “showrooming” at Best Buy’s brick-and-mortar and fulfillment by Amazon. However, I’ve also suggested that it would evolve from partnership to a marriage. The ingredients seem right to me.

Shep Hyken
BrainTrust

Art Suriano stole my line! “If you can’t beat them, join them!” That the first thing that I thought of when reading the headline. For many years it looked like Amazon and other online retailers would be the reason for the fall of Best Buy. Their CEO had the strategy that if there was a customer in the store, there would be no reason to lose them to any other retailer, online or brick-and-mortar. It was a lot of good work that built back up the Best Buy brand. Now the two companies recognize the opportunity to work together for mutual benefit. That’s good news for them as well as consumers.

The concept of competitors working together is nothing new. We’ll be seeing more of that in the future, when companies realize it’s better to sometimes work together, at least in certain areas, than to fight each other.

Bob Amster
BrainTrust

We are seeing that necessity of the times makes strange bedfellows. There was a time when Macy’s would NOT tell Gimbels!

Shelley E. Kohan
Guest

Amazon and Best Buy is a collaborative partnership of shared intelligence which is a prime example of one of the retail trends happening in the industry. Best Buy offers personalization and in-store enabling technologies that provide personalized service to customers and Amazon offers supreme personalized service from a digital perspective. The learning will come from each other in “collaborative mentoring” with the ultimate winner being the customer.

The industry will see more and more examples of shared intelligence and unlikely partnerships. The key is aligning overall strategies and similar views on customer experience. The partnership allows both companies to expand their market reach.

Herb Sorensen
BrainTrust

This will guarantee the survival of Best Buy, just as Whole Foods is now guaranteed survival — not that either of these two chains were in imminent danger from the “grim reaper.” But it also means another shot in the arm for Amazon.

Neil Saunders
BrainTrust

Best Buy is a distribution channel for Amazon; Amazon products generate sales for Best Buy. There’s no reason the two should not work together and do so on a friendly basis.

In my view, heightened competition is actually driving more cooperation.

Lisa Goller
Guest

In 2003, media convergence (TV, internet, wireless services) seemed like a far-off fantasy. Now it’s almost here — with voice, too. We can soon say, “Alexa, watch Game of Thrones” and, eventually, “Alexa, I want to buy the same shirt Anderson Cooper is wearing” — and buy it right away on Amazon.

Smart TVs (and Best Buy) gain greater relevance in the age of streaming on laptops and phones. Plus, Amazon brings greater convenience and ease to our homes by integrating smart devices. Further becoming part of our daily habits is a powerful strategic differentiator for Amazon.

Sterling Hawkins
BrainTrust

I like that increased competition is driving better consumer experiences through cooperation. There’s no stopping Amazon and Best Buy’s strategy of staying close is the right one as long as they stay laser focused on where they’re providing unique value.

Ricardo Belmar
BrainTrust

This dynamic duo allows us to recognize something important for retailers — Amazon does not have to be your enemy! Their brand undeniably represents something profound for most consumers and retailers should take the opportunity to leverage this consumer trust where possible. Best Buy has sold Amazon products for quite some time and there’s no doubt this drives foot traffic into the store — a great benefit for them. For Amazon, this strengthens Best Buy as their distribution partner for their hardware products.

I’m sure Amazon didn’t plan on displaying Fire TVs in Whole Foods stores! There is absolutely mutual benefit in this arrangement. It’s also noteworthy that this is another retailer in a long line of retailers now partnering with Amazon that we’ve seen in the last year!

Dave Nixon
BrainTrust

It’s tough to make the final decision on products as adored as those TVs from simple online recommendations without physically seeing the differences between them. Amazon cannot conquer physical retail without partnerships like this on products that have such subtle differences. Best Buy could use the extra traffic for add-on sales with new shoppers in their stores. Great for them both.

Lee Peterson
BrainTrust

Classic case of, “if you can’t beat ’em …” Certainly a good amount of white flag from BBY going on in this arrangement.

Mike Osorio
BrainTrust
My reaction is win-win-win — for Amazon, for Best Buy, and for the customer. I believe the quote where Bezos states that the partnership is possible due to the trust built over many years. Another possibility would have been Amazon simply purchasing Best Buy. However, with this deal, they avoid more scrutiny on becoming “too big,” and the high capital cost of maintaining hundreds of physical locations. This doesn’t preclude an eventual purchase, but for now they gain Best Buy’s excellence in execution and service without buying them. Best Buy of course benefits by extending their trust relationship to being a preferred retailer of electronics and the only place you can physically experience Amazon’s Fire TV edition smart TVs. Which brings me to my final point: The key lesson here for me is that Amazon continues to take actions that demonstrate their understanding that there is a reason 85+% of retail sales are still in physical stores. The customer will always desire to interact physically with product and sales professionals (at least often enough to… Read more »
Min-Jee Hwang
BrainTrust

Would you buy a TV without seeing it first? Unless it is a brand you’re very familiar with, chances are, you need to see it in action before forking over hundreds to thousands of dollars. Amazon’s TV will be one of many in Best Buy, while Best Buy locations will provide Amazon with the essential aspect of letting shoppers experience their products first. I think this deal shows that Amazon understands their limitations and is willing to do what it takes to get their products out there to the proper market. Shoppers already trust Best Buy for TVs, so it is a natural fit. Other retailers who are in need of brick and mortar exposure are likely to follow this model, but only if they are successful enough to withstand any potential negative side effects.

wpDiscuz
Braintrust
"The adage, “if you can’t beat them join them” applies here and it’s smart."
"Take the top retailer and the top electronics chain, put them together and you get a true electronics superstore."
"This dynamic duo allows us to recognize something important for retailers — Amazon does not have to be your enemy!"

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