Best Buy Will Price Match Amazon? This Oughta Be Good

You can’t beat Best Buy’s prices this season… not even online. That’s because Best Buy announced this week that it will match any online price.

I’ve gotta hand it to Best Buy, this is a bold — yet potentially disastrous — move for a once-dominant electronics retailer that’s now become a showroom for gadget shoppers that go home and buy the same products online for less.

This “showroom” phenomenon is exactly what Best Buy is fighting against. Despite everything you can learn online, a certain segment of consumers want to touch/feel/compare products in person.

Best Buy obviously wants to make sure that they catch shoppers in that moment when they’ve made the decision to buy, before they leave the store. And a “price match” scheme seems like an obvious solution…

But is it sustainable? And even more important, will it even work?

According to PandoDaily’s Michael Carney, the price match offer could really hurt Best Buy. He downloaded InvisibleHand’s price comparison software and apparently found that Best Buy’s prices are, drumroll please… not the lowest. He found that approximately 75% of the items offered on Best Buy are cheaper on Amazon by an average of 17%.

Even if the price match offer works, it’s hard to image that it would be good fro the struggling bricks-and-mortar retailer’s bottom line. It may bring some more sales through the door… but lose money on each of them.

I mean, loss leaders are one thing — they pretty much drive the entire Black Friday/Cyber Monday phenomenon. But offering an online price match with Amazon opens Best Buy up to lose money on just about every item it sells.

About the author

Josh is the managing editor of Digital Marketer, as well an aspiring novelist. Find out more about what Josh is working on on Facebook, Google, or on his website.

Any idiot can sell things at a loss. The secret to succes in business is to offer unrivaled VALUE. That means offering the same products at a lower price or including significantly better service and warranties. Perhaps Best Buy could compete with online suppliers by offering free or cheapextended warranties on the goods it sells. the cost of meeting the claims may be less than the retail margins actually given up. Consumers will willingly pay a premium for extra value in quality of goods, extended warranties or excellent support services.

not the whole story. Just like money back guarantees, many people just like to know it's there, but never use it. Many people will simply be comforted by the price match guarantee and assume that means best buy prices are competitive with amazon. Also, there are still people that will continue to purchase at Best Buy because they got service and "touching" which they will never get from Amazon. So the price match guarantee may cause them to lose money on some things, but overall it may be just what they need.

Josh,
Though I agree there are risk with their decision, I do not believe your reasoning is completely right. Your post says "75% of the items offered on Best Buy are cheaper on Amazon by an average of 17%." This means they will only need to lower their prices by 17% on 75% of their items or 12.75%. Additionally, they are not pricing every item at the lowest price on the Internet or even Amazon's prices. Let's say 50% (which I think is probably way more than actual) take advantage of this offer. This means the net affect is less than 6.5%. I can assure you Best Buy's margins are greater than 6.5%. The statement "But offering an online price match with Amazon opens Best Buy up to lose money on just about every item it sells," is simple bad math. They will be losing margin on each product, but not "losing money" on the product. Ultimately, Best buy needs to increase sales enough to cover the margin decrease. Personally I beleive the net effect on their margins will be much less and from the fact your take is this is bad for Best Buy's pocket book should ultimately play out well for Best Buy. Perception that they are pricing as cheap as the Internet is a great "reality."

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Posted by Al Dunbar, at J — Reply

Any idiot can sell things at a loss. The secret to succes in business is to offer unrivaled VALUE. That means offering the same products at a lower price or including significantly better service and warranties. Perhaps Best Buy could compete with online suppliers by offering free or cheapextended warranties on the goods it sells. the cost of meeting the claims may be less than the retail margins actually given up. Consumers will willingly pay a premium for extra value in quality of goods, extended warranties or excellent support services.
Posted by Dave, at J — Reply

not the whole story. Just like money back guarantees, many people just like to know it's there, but never use it. Many people will simply be comforted by the price match guarantee and assume that means best buy prices are competitive with amazon. Also, there are still people that will continue to purchase at Best Buy because they got service and "touching" which they will never get from Amazon. So the price match guarantee may cause them to lose money on some things, but overall it may be just what they need.
Posted by John Moore, at J — Reply

Josh,
Though I agree there are risk with their decision, I do not believe your reasoning is completely right. Your post says "75% of the items offered on Best Buy are cheaper on Amazon by an average of 17%." This means they will only need to lower their prices by 17% on 75% of their items or 12.75%. Additionally, they are not pricing every item at the lowest price on the Internet or even Amazon's prices. Let's say 50% (which I think is probably way more than actual) take advantage of this offer. This means the net affect is less than 6.5%. I can assure you Best Buy's margins are greater than 6.5%. The statement "But offering an online price match with Amazon opens Best Buy up to lose money on just about every item it sells," is simple bad math. They will be losing margin on each product, but not "losing money" on the product. Ultimately, Best buy needs to increase sales enough to cover the margin decrease. Personally I beleive the net effect on their margins will be much less and from the fact your take is this is bad for Best Buy's pocket book should ultimately play out well for Best Buy. Perception that they are pricing as cheap as the Internet is a great "reality."
Posted by archeage gold, at J — Reply

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