Executive Briefings

Best Buy v. Amazon: Holiday Edition

There are a lot ways to judge retailers during the holiday season. Is store inventory overflowing, as it was a couple of years ago? Are chains discounting like crazy? But what really matters for most retailers is whether they are successfully fighting off Amazon.com Inc.

Best Buy Co. has been a model for how to fight the e-commerce giant. It invested in its e-commerce capabilities. It made its stores do double-duty as warehouses, speeding up shipping times and giving consumers who buy online the option to pick up in store. It also invested in its stores, creating mini, branded “shops” by Samsung Electronics Co. and Microsoft Corp., staffed by trained salespeople.

Clever as all of this has been, it probably wouldn’t have mattered if Best Buy hadn’t taken the most crucial step: making its prices competitive with Amazon’s.

To prevent consumers from “showrooming” — the practice of researching products in stores and then buying them cheaper online — the company brought its prices in line with Amazon’s. It reached its most competitive pricing ever in September, when products were on average just 0.6-percent more expensive than Amazon’s, according to a study by Loop Capital Markets.

Yet keeping up with Amazon is tricky — not least because the company deploys data mining software that constantly tracks prices on competing sites. That means it can adjust its own prices at a pace that is difficult for other retailers, who lag behind in such tech savvy, to match.

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Best Buy Co. has been a model for how to fight the e-commerce giant. It invested in its e-commerce capabilities. It made its stores do double-duty as warehouses, speeding up shipping times and giving consumers who buy online the option to pick up in store. It also invested in its stores, creating mini, branded “shops” by Samsung Electronics Co. and Microsoft Corp., staffed by trained salespeople.

Clever as all of this has been, it probably wouldn’t have mattered if Best Buy hadn’t taken the most crucial step: making its prices competitive with Amazon’s.

To prevent consumers from “showrooming” — the practice of researching products in stores and then buying them cheaper online — the company brought its prices in line with Amazon’s. It reached its most competitive pricing ever in September, when products were on average just 0.6-percent more expensive than Amazon’s, according to a study by Loop Capital Markets.

Yet keeping up with Amazon is tricky — not least because the company deploys data mining software that constantly tracks prices on competing sites. That means it can adjust its own prices at a pace that is difficult for other retailers, who lag behind in such tech savvy, to match.

Read Full Article