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Showrooming has not killed Best Buy — yet

November 20, 2013

A Best Buy store in New York

Best Buy is beginning to make a turnaround after many assumed that showrooming would kill off the specialty electronics retailer. Although competitive pricing and a bigger focus on loyalty are steps in the right direction, the retailer is banking significantly on mobile to prove its worth this holiday season.

Best Buy’s third-quarter results announced yesterday show that the retailer is in better shape than it was a year ago, posting positive results. However, with the important holiday shopping season still to come, it remains to be seen if Best Buy can build on this momentum as smartphone-enabled price comparisons continue to grow.

“The big news is they are using their bricks to an advantage with marketing that drive to the store or online,” said Sheryl Kingstone, Toronto-based research director at Yankee Group.

“However, now employees need to engage and sell with value-added insight and trust,” she said.

Showroom stopper?
Mobile and digital are playing a big role in how Best Buy is trying to reinvent the in-store and online shopping experience with the holiday tagline of “Your ultimate showroom.”

Best Buy’s revenue brought in $9.36 billion during the third-quarter of 2013, which is down slightly from $9.38 billion a year ago.

However, the big box retailer’s domestic same-store sales increased .3 percent globally during the three-month period compared to last year. Same-store sales in the United States increased by 1.7 percent and declined 6.4 percent internationally.

Same-store sales are a key metric for retailers because it represents sales made within stores that have been open for more than one year. This points to the improvements that Best Buy has made with enhancing the in-store experience.

For example, Best Buy announced a partnership with Microsoft earlier this year to set up retail stores for Windows products in 500 stores in the United States.

As it becomes the norm for shoppers to price compare on their devices while in a store, these in-store retail areas might be paying off since consumers are able to ask Microsoft employees questions and test out the company’s products.

The Microsoft retail stores in Best Buy

Going forward, these are the kinds of partnerships that Best Buy should be pushing to keep the in-store momentum going.

The trick will be making sure that store employees are knowledgeable about products or have the tools to empower consumers, such as in-store tablets and smartphones.

Improved online shopping experience
Best Buy’s online sales grew during the third-quarter of 2013, driven partly by the increase in mobile.

Online revenue during the third-quarter of 2013 totaled $499 million, representing a 15.1 percent year-over-year growth.

Best Buy chalked up this growth to an increase in online traffic, a higher average order value and more online orders being placed from within a store.

Additionally, ship-to-store and a greater focus on expanding online distribution centers is triggering higher levels of online inventory, per Best Buy.

Part of the reason for Best Buy’s jump in online sales is likely due to the investments that the retailer has poured into its mobile loyalty program during the second-half of this year.

As part of Best Buy’s revamped loyalty program that launched in September, the retailer updated its mobile app with features that encourage consumers to check-in via their mobile devices to unlock points and exclusive in-store deals (see story).

Best Buy’s mobile app

Holiday plans
Similar to other retailers this holiday season, Best Buy is opening its doors at 6 p.m. on Thanksgiving Day to get a head start on Black Friday with aggressive offers.

Going into the holiday season, Best Buy has devoted marketing spend to a few different initiatives.

For example, Best Buy recently rolled out an SMS program that sends out a daily message everyday through the holidays to alert consumers about holiday deals (see story).

Additionally, Best Buy will offer free shipping for online orders more than $25 and will roll out an easier-to-navigate Web site.

Best Buy is also aiming to cut Amazon out with the ability to ship from more than 400 stores this holiday season.

Best Buy’s holiday slogan, “Your ultimate holiday showroom,” makes it universally clear that the retailer wants to remove price as a reason why a consumer would not shop in-store.

Television ads featuring celebrities Will Arnett and Maya Rudolph began rolling out in late October and center around Best Buy’s low-price guarantee.

“My recommendation would be to ensure they also have display ads or other linkage to their ecommerce site, ensuring that people who are showrooming eventually purchase the products from Best Buy and not another brand or ecommerce vendor,” said Rusty Warner, London-based senior vice president of marketing at SDL.

“They may also want to ensure staff are available to help people who are showrooming, and in my personal experience, Best Buy is quite good at that,” he said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York

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