Bloomberg television ran a brief segment in which they posited that Best Buy (BBY) has effectively become Amazon’s (AMZN) biatch.  And I think there’s some truth to that.  This is no doubt one of the consequences of a population that walks around with smartphones running barcode scanning applications that allow us to see, touch, examine, try out a potential purchase and then, if it is to our liking, immediately search the web to find its best price — possibly (probably?) elsewhere, and maybe even order it before we leave the site at which we went to go see it in the first place.  Unless it’s an impulse buy — walk in for a $12 thumb drive, walk out with a $700, 50″ flat panel? — why wouldn’t you:

  1. Pay a lower price
  2. Pay no tax
  3. Probably get free shipping
  4. Have your purchase in just 2-3 days

And the proof of the pudding seems to be in the performance:

I’d postulate this trend is a contributing factor to this news item about weaker BBY sales in general, but which contained this interesting tidbit (I’d guess the sale of mobile devices has a much higher immediate, on-site close rate than, say, digital cameras or other higher-end electronics) :

The chain is also pushing hard to open smaller stores. The company is opening 150 smaller-format mobile only stores by the end of the year, nearly doubling its total to 325.

“We are exploring and redefining what the optimal big-box footprint is for us,” CEO Brian Dunn said on a call with analysts.

And yes, I’m aware of Amazon’s far more diverse offerings — consider this post as applicable only to electronics.

~~~

BR adds: I have been playing with the Amazon PriceCheck barcode scanning app — it spells the end of retailing as we previously knew it . . .

Category: Consumer Spending, Markets, Retail, Technology, Web/Tech

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Best Buy (BBY): Amazon’s (AMZN) Showroom?”

  1. Guillermo says:

    Absolutely. I’ve been doing this for years. When I first got a digicam i used to carry it with me to B&N and sit around reading and checking out computer books, which were very pricey for my budget at the time. I would just find the ones I wanted, take pics of the covers and then take them home to order on AMZN. Then it was DVDs and CDs. Eventually electronics.

    Camera phones and now smart phones with barcode readers (comes with every bberry) just make this process more efficient. My little sister, to avoid renting a a truck for a day, even managed to order her living room furniture on AMZN. For many people, just having big items delivered is worth ordering online.

    It’ll be interesting to see if retail shrinking will negatively impact online retailers. I suspect the Sony stores were way ahead of their time and products displayed at Apple stores will hugely benefit. Products that can’t be seen / touched /played with in a store are likely to lose exposure and sales to those that are.

  2. wally says:

    Maybe Best Buy ought to build very small stores and just pass orders on to Amazon for a percentage fee. Let Amazon do the warehousing for them.

    I think that the ‘no tax’ part is likely to change very soon. The states have a right to the tax, but individuals dodge it by not reporting such purchases. This is too large a loophole to go on much longer.

  3. Greg0658 says:

    hey what happened to the YellowBook ad? when your on the hunt for something weird – well not really – rainbow wind sock (company colors) I gotta get 1 a year (they wear out) – and how many times have I bounced from store to store and can’t find – and I claim out loud I shoulda let my fingers do the walkin

  4. KidDynamite says:

    i completely agree, Invictus – I buy everything on Amazon, and I don’t even need the BBY showroom.

    and to Wally’s point: Jeff Matthews wrote about this today: BBY’s CEO thinks that when Amazon custys have to pay tax, which might happen soon, that it will level the playing field. I don’t really think so, but it certainly won’t hurt BBY

  5. BBY has, also, been substituting they own (“Private Label”) goods (G*rabage) into their selling line-ups..

    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Best+Buy+private+label

    AMZN’s range of offerings, just, might be a larger factor than BBY wants to admit..

    and, “it’s the Tax-Cheats’ will sound correct, until it’s (easily) disproved..

    BBY’s CEO, whoever s/he is, is an Idiot…wait until he starts dealing with .. http://financialsense.com/contributors/russ-winter/chinese-exporters-going-down-western-importers-ambushed

  6. O, re: BBY

    get used to this picture..

    http://finviz.com/quote.ashx?t=BBY

    upper-left-to-lower-right..

    (Invictus, nice post~)

    Invictus: Thank you. Appreciate that.

  7. forwhomthebelltolls says:

    I like this model that Lululemon has been using.

    Go to a demographically appropriate retail area, rent a space on a one year lease, open your showroom, conduct some classes, open houses, etc. get people buying your products and move on to another space in another town.

    No retailer in their right mind is going to tie themselves to a big box location any more.

  8. Irwin Fletcher says:

    Amazon, what a great company.

    I buy just about everything there. My kids NEVER go to retail stores. There is your future.

    Regarding Amazon, here are some cool things we buy in case any of you haven’t done it.
    1. Used books. I buy all “used” books these days. Amazon has them all really cheap. They were brilliant in creating the exchange for people to sell their books through the clearing house.
    2. Movies. For those of you who collect DVD Movies, buy them used through Amazon. They are cheap cheap.
    3. Watches.
    4. Golf clubs.
    Pretty much anything you want. It’s there.

  9. dead hobo says:

    Agree that no-tax is going to end soon. BBY charges too much. I bought my Slingbox from Amazon not only because it cost under retail, but BBY charged OVER retail. I can buy DefTech on eBay under retail. Ditto with receivers. Returns through Amazon are easier than driving 15 miles to BBY.

    I still find good buys on computers there although accessories are costly. TVs are a commodity. I got my 50″ plasma (new model for that year, too) for free somewhere else when I bought some furniture, which was also reasonably priced.

    They need to analyze their fixed costs in order to cut them to the bone and adjust their stores accordingly. And they need to stop pissing people off by charging less online than in the stores unless the customer catches it first and complains.

  10. Ted Kavadas says:

    Good post…this type of thing speaks to increasing price sensitivity of consumers…

  11. econimonium says:

    Absolutely agreed. The worst part about it is BBY doesn’t get it! Witness the “we don’t want people who are buying just based on price, we are offering more services”. What service? They stink, they stink, they always have, and no one cares. What they care about is price and these apps will totally end retailing as we know it. Internet == disintermediation. That’s all anyone has to remember when it comes to down to one thing.

    Also BBY is missing out on something with price. It’s OK to be around $50 higher if I can get it NOW and don’t have to wait for shipping. I’ll pay that for a TV say. But when they are, literally, $300 more, then I won’t. And it’s proportional to the price of the item. So call it a 10% NOW premium and I’ll take it. But for most electronics I do what is described…I go to BBY look at it in person, go to my app and see what the prices are. If BBY is out of line and doesn’t meet my NOW premium, I simply but it on line.

    What companies don’t realize is that, since they have no loyalty to employees any more, customers have no loyalty to them. It works both ways. They made it this way. So BBY really shouldn’t act like customers want service plans, geek squads, etc. They don’t. They care about one thing: price. That’s what big box stores started their premise on. Now they are the victims of their own strategy. When I was in school, we used to say about WalMart “I wonder what the long term plan for a company is who’s customers yearn for the day they can move upmarket?” Think about it.

  12. DC says:

    BBY is in a no-man’s land. I can get it cheaper from Amazon, B&H, Newegg, Tiger Direct or, for some items, Sams or Costco. The bonus with Costco for my TV purchase last summer was an additional year of warranty (on top of Amex’s extra year when using Costco’s Amex). Extended warranties can make the sales tax savings a wash but there’s an extra element of security with the warranty.

    Best Buy also made a big wager on Geek Squad. But “tabletization” and easier home networks will render PC geeks irrelevant for the masses, and the guys who build water-cooled super gaming machines don’t need the Geek Squad in the first place. I feel a little guilty using Best Buy as my try-before-I-buy-elsewhere store, but at least I give their staff someone to talk to.

  13. I’m surprised the stores are letting people scan barcodes. I guess they don’t have much of a choice because folks will just walk out but I would suspect a desperate move would be to ban the barcode scanner so at least not to ‘teach’ other customers how to do it

  14. Stuart Douglas says:

    ““I wonder what the long term plan for a company is who’s customers yearn for the day they can move upmarket?” Think about it.”

    I read that, and then I thought to myself about the last time I was in Wally World, and realized Walmart is in no immediate fear of most of their customers moving that far “upmarket”.

  15. Forget Apple; forget Facebook; forget Groupon (huh?); forget Tweeter, and especially, forget anything that is or resembles Best Buy.

    Amazon.com is the bomb. It is the one internet/technology retailer that adds real value (not just cool as in Apple or banalities per minute, as in Tweeter and Facebook).

    Hell, with Amazon’s bookstore, you could just forget college, too. Just buy the best-rated books on the subjects you’re interested in and read and learn and then sell them back.

    This is not a recommendation to buy stock. It is just the opinion of one fairly-constant consumer of Amazon.com-sold products that has stepped his last into Best Buy, refuses to even begin using Twitter or Facebook, but does have an iPod though nothing else with a bitten apple on it.

    If you want stock advice, always follow the herd of cool people. They’d be owning Apple about now. It’ll be something else in a few months.

  16. The people who buy at Bestbuy usually want the item right away and don’t care about saving a few bucks.

  17. Also, the no tax issue is definitely a nice to have when purchasing anything over $100 (which is pretty much everything now). As Amazon keeps increasing their ship center locations, the shipping times will become less of an issue. As for the barcode scanning, I was once in a Silo (remember them?) and I was writing down a product number and the guy asked me what company I was from. I told him I wasn’t with any company and he said I still couldn’t do that. So I never went back there and we all know what happened to Silo. :)

  18. Redcoat75 says:

    I would agree with some of the posters’ suggestions about the service at Best Buy, and I would add that it’s only gotten worse since they put Circuit City out of business. In my little town, Modesto, CA (yes, the fourth most miserable city in the US according to Forbes), there used to be at least four or five decent places to buy electronics. Now Circuit City and The Good Guys are gone, and RadioShack is a shell of its former self. Best Buy is pretty much the only game in town, and it is flexing its muscles. I think the only real competition they have now is Amazon.

  19. Data Room says:

    Its amazing that they are offering bar-codes scanning. I think Amazon can do a good job for Best Buy. Through this they can touch a wider audience..

  20. Livermore Shimervore says:

    I’d love to see a break down of which folks are buying the higher ticket items at Best Buy and Amazon.
    Young consumers are hurting in this recovery…the ones most likely to opt for the online retalier vs the old school gymnasium full of cd’s no one buys. Meanwhile the boomer by and large are not using multiple Apple products to finalize their purchases, or are they? I’m guessing th guys in the middle the 30 somethings who are doing a little better probably are abandoning Best Bust. But this is also the same group that just made big committments on home purchases and new cars and leaves little room for a fourth Apple product or the newest Xbx accessory. The gray hairs still want to go into a store and fondle a new tech toy or front-loading washer.

  21. Eric Sebille says:

    found the macbook pro and demo’d it at best buy then bought through amazon. saved me about $70 alone on sales tax. The REIT market sure disagrees though as all stocks have moved up exponentially.

  22. investorinpa says:

    There are 2 occasions where Best Buy has come in handy in a pinch:
    1) Had to get a last minute holiday gift
    2) had to buy a computer because my current one stopped working (hard to buy off of Amazon when you don’t have a working computer!)

    In my area, HHGregg is popping up and they seem to be making a Circuit City out of Best Buy.

  23. VennData says:

    We need to keep the Dodd-Frank fees on card purchase at the Durbin levels. Frictionless capitalism.

    I don’t care about “Rewards” make things cheaper.

  24. tude says:

    Interesting. I use Amazon for a lot of things, but not electronics. For that I go to Costco, which for me has the benefit of getting it now, getting to touch and feel and play with it, and usually has as good a price if not better than Amazon, and a great warranty/return policy!

  25. lalaland says:

    I think Best Buy should change it’s clerk model. Do away with the cheap labor and hire people who know their shit and offer free service on what you sell. The problem is there’s nobody with a solid in-store customer service model except Apple – they get it. If BBY put it’s effort into finding – or training – salespeople to know their sh*t instead of clerks you might get somewhere, but a bigbox version of Amazon? There’s that whole sales tax thing of course, plus it’s just obviously a bad idea.

  26. Greg0658 says:

    1st – its still cool to shop in stores – its called 3D shopping with fellow humans

    2nd – I’ve shopped Amazon* (some) and when I’ve been on there I get the feeling they are an aggregator
    http://en.wikipedia.org/wiki/Aggregator
    so who’s to say the supplies don’t come via a BestBuy – in a generic box tho – a sale is a sale with www cut in

    * you suppose theres an Ebayer “Buy It Now” corridor of order fillers ?

  27. Jojo says:

    For those price shopping through your browser and who use Firefox, there is a great add-on called Invisiblehand. When you go to sites like Amazon, IH puts a banner at the top showing you the price at other sites and allowing you to see if the site you are on has the lowest price.

    You can get the add-on here:
    https://addons.mozilla.org/en-US/firefox/addon/invisiblehand/

  28. RC says:

    “pay No Tax”

    - this is the key.
    - Depending upon the state and county this is almost 8% margin right there.
    - Why in the world is AMZN allowed to CHEAT on taxes ???
    It is grossly unfair to every other tax paying business. This is an outrage.

    AMZN must be made to play fair and pay its fair share of taxes. The inter state commerce, or whatever applicable laws need to be upgraded to the realities on the internet age. It is high time.

  29. blakwolf says:

    I suspect RC and possibly others are possibly misunderstanding who is cheating on taxes. Amazon does not have to pay sales tax when they sell a good, it can only be accused of being guilty of not collecting sales tax that the CONSUMERS are not paying. It is the responsibility of each consumer to pay state sales taxes for the state they live in. Currently, the way this is supposed to work is that consumers are supposed to report the sales tax they owe for online purchases when they file their taxes. The fix the states would like to implement is to have Amazon collect taxes for them at the time of sale. This has always been a historical advantage of catalog sales over local stores.

    The only unethical players in this discussion are the consumers who are not reporting sales taxes owed on online purchases. I’d suspect there needs to be a change in the model for sales tax collection or interstate commerce regulation. Perhaps sales tax collected at the national level would be the logical solution, but then the turf wars over who gets to keep the money would have to be decided.

    FYI, there are areas where sales tax can almost hit 10% nowadays.

  30. honeybadger says:

    “pay no tax”…

    Am I wrong? I did not think an individual had to pay state sales tax on goods purchased out of state. In the great day of mail-order calalouges, one of the features was no sales tax. I do not see how putting the business on-line is legally iis any different– instead of mailing a form into the company, you send it electronically.

    Unless RC is suggesting that the US institute a national V.A.T?

    Regarding COMPANIES not paying their taxes, may I suggest that RC reads today’s post regarding GE?

  31. RC says:

    I am not suggesting a VAT at all. All that needs to happen is that the online retailer should charge tax based on the state that the goods will be delivered to. Now this is easier said then done because the law requiring such change has to be at federal level.

    Proposal #2,
    Make AMZN and others pay taxes @ rates of tax in state where their warehouses are. In case of AMZN their warehouse is equivalent to a BBY store. Only difference is AMZN doesnt need retail employees and sales staff.

    GE finding all kinds of loopholes to not pay taxes is actually a bigger outrage. Immelt is now on some kind of Obama administration Job commission… so no ones going to try to address these loopholes.

  32. kaleberg says:

    We live in Washington, so we pay tax on Amazon stuff. We shop at Amazon all the time. They usually have good prices. They have a good selection. They usually have things in stock. They have a good no hassle return policy. They have editorial and user reviews which are amazingly helpful and surely more trustworthy than what the guy at Best Buy would tell me. With Amazon Prime, we get two day shipping included, so we’ll buy things like tables, printer paper, brazil nuts and lawnmowers. Having to pay tax just doesn’t make enough of a difference. Besides, we like stuff like roads, schools, prisons, health departments and the like. It’s not like the wealthy or big corporations like Amazon are paying for any of this stuff.

  33. You have to be very careful buying things from Best Buy. If you purchase a laptop, they will try to up-sell you with things like overpriced antivirus software.

    Another trick Best Buy engages in is overpricing accessories and other small items. They will run ads and have some good deals to get you into the store. As soon as you need an accessory like an ethernet cable or a memory card, they are usually far more expensive (sometimes double!) than Amazon or WalMart.