By Strauss Cooperstien
Best Buy’s sales increased 3.2% over the fourth quarter, distinguishing the electronics retailer from similar firms that posted lackluster results. To attribute this success to the holiday season alone would be unfair, as Best Buy has reported increasing sales for the last 12 quarters. In fact, over the last six years, Best Buy rebounded from falling sales and profits, with a stock price jump from $24.54 (2014) to its current $76.55 (2020). Its cause? A dramatic shift in pricing strategy and the adaptation of a new business model to compete with Amazon.
While BestBuy previously presented buyers with a mobile (that is, walking) shopping experience, the company has altered the purpose of their retail stores, turning them into flexible service hubs that communicate with customers and fulfill online orders. Whereas customers previously roamed freely, BestBuy now seeks to give their customers a more structured, “seamless shopping” experience. This service-oriented and customer-friendly strategy has proved effective in drawing in 70% of the US population that lives within 10 miles of a Best Buy store.
Of course, BestBuy still struggles with converting foot traffic into sales. A critical change in pricing strategy was needed in order to combat the increasingly common type of customer who visits Best Buy’s retail locations in order to browse products, only to buy them for a cheaper price on Amazon and other online stores. BestBuy’s strategy, far from novel, was to price-match its competitors, which proved effective in preventing customer loss. The company also struck a deal with Amazon to sell smart TV’s and later acquired senior-focused device giant Great Call Inc, which gives Best Buy a head start on healthcare monitoring products.
Considering the fate of Circuit City, Toys ‘R’ Us, and other big-box retailers, BestBuy’s continued success is an outlier, to say the least. Whereas Forbes stated in 2012 that “Best Buy is going out of business; it’s only a matter of time…”, the electronics retailer’s performance has far exceeded expectations. Its flexible, multipart business strategy, which adds services to reduce the company’s sole reliance on new product releases, should be seen as the secret to physical sales. If you can’t beat Amazon’s prices, offer the customer something Amazon can’t (yet) – the human touch.