Discussion – Best Buy

reply to a classmate’s post regarding Read the Showrooming at Best Buy case., you must provide insights to help them improve their consultation.

** Before helping the classmate, please read my post to the class; that way you know what was my suggestions before you add a comment to the classmate.

Classmate:
Option 1 – Olivia

Same day pick up – online ordering from local Best Buy stores

Pros

Fulfills customers need for same day purchasing, no shipping fees while still allowing online price & product quality comparisons.
Retains store employees & increases individual store sales even with the declining percentage of retail foot traffic
Doesnt disrupt the indirect distribution that already exists between product manufacturers and the retailer (Best Buy). May even increase business by allowing more movement of products.
Increases channel coverage by reaching more customers who prefer online shopping. Between 2008-2012 a 42% increase in online sales shows the trend that customers do prefer the convenience of online shopping.
Cons

Cost of implementing technology (new channel partner) that allows for online orders to be efficiently and effectively transmitted to stores.
Cost of training employees on new technology

Option 2

Free deliveries and returns on Best Buy exclusive products purchased online

Pros

Fulfills customers need of price competitive, convenient online shopping that allows for price/product comparison
Increases Best Buys brand awareness while competing with Amazons Prime. Membership. Amazon typically has a -8% price difference compared to in-store Best Buy products. Best Buy exclusive brand products could be priced to ensure they match Amazon prices.
Gives Best Buy more control over product design, quality, and influencing customer purchases
Decreases the severity that showrooming has on store profits. Even if the 37% of customers visiting Bust Buy only come to showroom, they will have the opportunity to see Best Buy products in person. This will allow customers to see first hand the quality of Best Buy exclusive products in comparison to name brand products.
Cons

Increasing Best Buy exclusive brand products would entail bringing another channel partner into the distribution. Best Buy would have to partner with manufacturers willing to produce products for a Best Buy exclusive brand. This will require Best Buy to mitigate any conflicts that arise with a new manufacturer and ensure that both distribution channels have their goals in alignment. Best Buy must also provide support to the manufacturer willing to make Best Buy exclusive products.
Analysis

Both options increase Best Buys online presence which is critical if the company wishes to remain profitable and competitive as an electronic retailer. With 37% of customers showrooming in Best Buy stores, store sales in 2011 fell by over 5% and stock prices fell by 25%. On the contrary, the online retail market continues to increase at a 17% rate. Additionally, over 60% of online shoppers surveyed say that consumer electronics are what they typically engage in showrooming for prior to purchasing the product for a cheaper price online (Teixeira & Watkins, 2015).

Option 1 allows Best Buy to compete with online retailers while increasing individual store sales and retaining store associates. This is a win-win scenario. The customers needs are met by allowing them the convenience of online price and product comparison and having same day product purchase. Customers could order products online and pick up at their local Best Buy the same day. This avoids shipping costs and doesnt disrupt the indirect distribution in place between product manufacturers and Best Buy retail stores. This option also increases channel coverage by reaching more customers who prefer online shopping (Rangan, 2015). However, there would be a cost associated with implementing a new technology that allows online orders to route to the correct store and also training store associates on filling online orders in a timely manner.

Option 2 also allows Best Buy to compete with online retailers, especially Amazon.com and their Prime membership and counterattack the effects of showrooming. If Best Buy partnered with a manufacturer to produce Best Buy exclusive products the company could offer these online with free shipping and returns. This would increase brand awareness while also allowing customers the online price and product comparison they enjoy. Another marketing tactic could be to price Best Buy exclusive products comparable to similar products found on Amazon.com. This would eliminate the -8% price difference Amazon.com products have compared to in-store Best Buy products (Teixeira & Watkins, 2015). Having products only found at Best Buy would also minimize the effects that showrooming has on store sales. While customers visit the store they can witness the quality that Best Buy brand products have compared to name brand products. The major dilemma with this option is the investment required from Best Buy to work with and support the manufacturer willing to create products exclusively for the company. Rangan 2015) explains conflict can arise between channel distribution partners. It would be Best Buys responsibility to ensure both parties have their goals aligned in order for the venture to be profitable.

Even though both options increase online visibility for Best Buy, I think option 1 is the better option. Option 1 seems to make sure that the customers needs are met more so than option 2 which focuses more on promoting Best Buy as a company. Option 1 also prioritizes that individual sales at stores are not compromised and that job security for employees is not jeopardized. Option 2 requires more upfront costs and investments in product manufacturers that will create products available only at Best Buy.

Resources

Rangan, V.K. (2015 Oct 16). Developing and managing channels of distribution. HBS No. 8149. Boston, MA: Harvard Business School Publishing.

Teixeira, T. & Watkins, E.A. (2015 Dec 18). Showrooming at Best Buy. HBS No. 9-515-019. Boston, MA: Harvard Business School Publishing.