The popular joke, if you choose to indulge in that sort of thing, is that Best Buy is little more than an Amazon showroom. Essentially, the theory is consumers go to Best Buy to check out the latest technology in-person, and then, once they decide which TV would look best in their living room, they go online—most often to Amazon—to find a cheaper alternative. Just google "amazon showroom" and you will see what I mean.
After all, how can Best Buy compete on price with such significant brick-and-mortar overhead? The general thought was that Best Buy will eventually go the way of competitors like Circuit City.
But that doesn’t seem to be the case. Last week, Best Buy celebrated its 50th anniversary, and, according to Fierce Retail,
“The company reported stronger-than-expected sales for the second quarter, increasing top line sales, comp-store sales and digital sales. Online sales grew 24 percent during a quarter that included Amazon's Prime Day.”
That’s pretty remarkable.
But what is it about Best Buy that has allowed it to succeed when conventional wisdom dictated that the company’s days were limited? We have an idea:
1. Meeting the Market
One of the first undertakings Best Buy took was to reevaluate how they priced their products. This happened in two ways. First, they generally lowered their prices across the board to be more inline with e-commerce competitors. And second, they offered a price-match policy, guaranteeing that they would match the price of any competitors’ advertised price should Best Buy’s product be priced higher. And it worked.
As we’ve written about before, consumers generally prefer to shop in-store, especially when it comes to making larger, more expensive purchases, such as TVs or entertainment systems. And when it comes to this sort of thing, the only real motivation for shopping online is price. The convenience factor (i.e., not driving to the store) is largely negated by the desire to see an expensive product in-person prior to purchase. So, essentially, Best Buy eliminated one of the largest impediments to getting consumers to buy from them.
2. Embracing Stores of the Future
We’ve also covered in the Celect blog the trend of “concept stores” or “stores of the future” that are largely fueled by retail analytics. While they vary in execution, the general idea is to create a unique, more personalized customer experience that cannot be replicated outside of a brick-and-mortar location. Think of Staples’ work bars, Targets’ Internet of Things (IoT) showroom in San Francisco, or Burberry’s digital “fitting rooms.”
Best Buy has now done the same thing with its “Tech Home” concept.
According to Fierce Retail,
“New technology is also front and center, and Best Buy has put connected home devices on display at a temporary store in the Mall of America, near the retailer's Minnesota headquarters. The Tech Home concept features a variety of smart home devices and will be open to the public through Sept. 17.”
3. Using Streamlined Fulfillment to Drive Sales
As recently as 2013, Best Buy’s e-commerce offerings were abysmal. Despite having 1 billion visits to their website, they only generated $2.3 billion in revenue. This was largely due to product assortment, availability, and fulfillment challenges.
So, to fix the problem, they drastically overhauled their product assortment and supply-chain practices. According to The Motley Fool,
“Best Buy's solution was the implementation of a ship-from-store initiative, with which its 1,000-plus retail stores act as mini-distribution centers, with store employees packing and shipping online orders. This program accomplished two things. First, it opened up store inventory to the online channel, vastly increasing product availability on the website, including clearance items and returns that would have previously been stuck at an individual store. Second, it reduced shipping times substantially…The company's average shipping time was faster than that of Amazon.”
And as you probably guessed, e-commerce sales have jumped.
The success of Best Buy in the wake of such long odds illustrates that with the right strategies, data, and analytics, brick-and-mortar stores can hold their own against e-commerce giants.