Just Ask Apple — Best Buy’s Business Model is DEAD
BWAH-HAHAHAHAH! That’s what Amazon’s (NASDAQ:AMZN) CEO Jeff Bezos and the late Apple (NASDAQ:AAPL) CEO Steve Jobs (in spirit) were thinking when reading the newest comScore survey revealing 63% of respondents now screw big box stores by showrooming. Meaning, this extraordinary number of browsers bought a consumer electronics item online after viewing it in a store. Yup, Best Buy’s (NYSE:BBY) business model is DEAD.
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I’ve already written about Amazon eating Best Buy’s lunch. But this is bigger than Best Buy completely missing the boat to the land of e-commerce milk and honey. Showrooming is worse. Much worse. If Best Buy was smart, they would price match their competitors online and at the very least utilize their big boxes as showrooms for their own products. Instead, their online pricing strategy is so abysmal, they’ve allowed their competitors to use their costly brick and mortar outlets to sell competitors’ products. OY!
Clearly, Apple destroyed Best Buy’s once dominant music retail business. Then Amazon came along and offered a better online experience for purchasing electronics. But those are just a couple of Best Buy’s problems. Personally, on more than one occasion, I have seen an item in Best Buy, tried the item in Best Buy, then ordered it on the spot for cheaper at Tiger Direct (NYSE:SYX) (via my smartphone).
If you think Best Buy’s management is blameless, think again. Competitor hhgregg (NYSE:HGG) has executed the strategy Best Buy should’ve been executing all along. Hhgregg has big box showrooms, but they offer the best possible prices on their inventory. Therefore, you try it there and buy it there!
Best Buy seems to suffer from the same disease which has destroyed many great companies: hubris. Executives sat through too many meetings juicing themselves up on emotional talk about their “brand value” and loyal consumer base. This is the same cancer evidenced at Research in Motion (NASDAQ:RIMM) where out-of-touch executives making mega-millions in salaries got distracted by the rear-view mirror.
I like Best Buy. I still think it’s one of the best brick and mortar shopping experiences. But if they can’t get their proverbial shit together, Darwin will wave his magic wand until they follow Blockbuster video down the path of failure.