Best Buy Co. (BBY) is daring bargain hunters to use its stores as showrooms.
With four weeks to go before Thanksgiving, the big-box retailer is running television ads that tout its stores as "the ultimate holiday showroom," playing on the phenomenon in which shoppers visit traditional retailers to check out products and then leave to buy them online for less.
That's a big reversal from last year. Concerns that Best Buy was losing sales to online retailers at alarming rates sent its shares plunging toward single digits. Analysts warned that the company's 1,400 stores were becoming little more than a testing ground for Amazon.com Inc.'s (AMZN) customers. And Best Buy interim Chief Executive G. Mike Mikan made it his top priority to combat "showrooming" before handing the reins to current CEO Hubert Joly.
Mr. Joly began his tenure in September of last year, claiming to "love showrooming." These days Best Buy executives are embracing the term with even more swagger, saying they have put in place strategies from price matching to customer-service improvements that will convert more shoppers into buyers. In the past year, Best Buy's profit has increased and its shares have soared.
The stock traded at $42.93 on the New York Stock Exchange at 4 p.m. Friday.
"A year ago, people said that showrooming would kill Best Buy," Mr. Joly said in an interview. "I think that Best Buy has killed showrooming."
Recent results suggest that last year's fears over showrooming were overblown. Still it might be a little early to declare the phenomenon dead. Best Buy's sales from online channels and U.S. stores open at least 14 months have been weak all year, shrinking 0.6% in the latest quarter from a year earlier.
Nevertheless, Best Buy isn't alone in trying to co-opt the term. Wal-Mart Stores Inc. (WMT) says it is benefiting from "reverse showrooming" as shoppers explore products online before buying them in stores. Target Corp. (TGT) says it installed Wi-Fi at its stores partly to encourage customers to browse products on their phones.
"As my colleagues and I have said several times: We love showrooming—when Target gets to book the sale," Target merchandising executive Casey Carl wrote in a blog post.
But their optimism doesn't mean there isn't cause for concern. The Internet's share of overall purchases is still growing. Industry researcher NPD Group found that more than 27% of U.S. consumer-electronics spending took place online last holiday quarter, excluding mobile-phone and videogame-hardware sales, up from 24% three years earlier.
About 40% of U.S. shoppers say they have tested products in stores before buying them online, according to an April survey by Harris Interactive. Best Buy, Wal-Mart and Target were the top victims of the trend, according to the poll. B
Best Buy last year estimated that one in five of the nearly 600 million people who visited its stores did so with the intention of making the purchase online, though a spokesman for the company said its price-matching pledge has likely changed that math since then.Matt Xi is part of Best Buy's problem. On a recent afternoon at a Best Buy in Manhattan's Flatiron District, the computer programmer browsed a line of Android phones. "I wanted to come to the store and take a look at how they feel, because you can't do that online," said Mr. Xi. He said he intended to make the purchase online because "you get a better price."
Promoting Best Buy as a showroom comes after the chain put in place a permanent price-matching plan to prevent online rivals from undercutting its prices. Analysts estimate that less than 10% of shoppers take advantage of Best Buy's price-match offer, but executives have said the pledge is enough to keep the company from losing customers to sticker shock.
"We love the traffic on our site, in our stores, and we don't want to lose a customer because of price," Mr. Joly said in August. "But we don't feel that we need to be lower than competition. We just don't want to be beat."
The company's latest marketing push highlights one of its turnaround plan's top priorities: wringing more business out of each square foot of floor space. With no plans to close or open a significant number of stores this year, the onus falls on attracting more traffic.
Even so, Best Buy sales haven't increased this year, slipping in the third quarter amid weak consumer demand for electronics, in line with the overall industry. The Consumer Electronics Association predicts the entire sector will eke out a 0.2% increase this year as shoppers snap up fewer personal computers, TV sets and digital storage drives.
Meanwhile, Amazon's revenue rose 23% from a year earlier for the nine months ended in September.
All things being equal, analysts expect sales to also improve at physical stores this holiday season.
"If people don't feel they are being ripped off on price, they are more likely to buy from a physical retailer," said John Tomlinson, head of retail at ITG Investment Research. He said Best Buy also is now better able to compete on price with Amazon because the Web-only retailer now has to collect sales tax on purchases in many states.
Elizabeth Lazenby, a digital marketer from Valley Stream, N.Y., went into Best Buy's Manhattan store to purchase a laptop she researched online.
"I like the face-to-face interaction," she said.
As planned, she bought a Toshiba Satellite laptop for $629, even though she noted that online prices were slightly less expensive.
Posts
