Best Buy's Cure For Showrooming? Not Exactly
On February 15, Best Buy (NYSE:BBY) put out a statement saying it had ended showrooming, and the sword it said will kill this merged-channel dragon is a new price-match program. Despite quite a few reports that Best Buy was making the price-match it launched in 2012's holiday season permanent, the new program—set to kick in March 3—has very little in common with its holiday price-match effort.
First, this program will clearly not eliminate showrooming, and Best Buy knows it. The new program cuts in half how long regular shoppers have to return merchandise for refunds, from 30 days to 15 days. The rest of the changes are making the program much stronger, eliminating many of the non-shopper-friendly elements from last year, such as making the price-matches conditional on associate discretion, limiting price-matches to appliances and electronics hardware, and even exempting all electronics accessories.
Is it a better program (other than the strange halving of the time for a return)? Absolutely. Will it likely reduce Best Buy sales lost to showrooming? Yes. Will it eliminate all showrooming losses? Of course not. And the fact that Best Buy is trying to argue it will is mind-boggling.
The chain has done something good, and it can rightly brag about the changes. But why exaggerate it to the point of absurdity? One small restriction might give a clue as to Best Buy's thinking.
The restrictions on the new price-match program are generally quite reasonable: at time of purchase only; items must be "new, identical, immediately available" from a local retailer or from a list of 19 E-tailers; one price-match per identical item per shopper; and these additional exemptions—"Mobile phone devices and plans, the online prices of retailers not listed, the online prices of third party vendors (Marketplace vendors) on designated major online retailers websites, post purchase price match requests to competitor's prices, Best Buy for Business, offers that include financing, gift card offers, bundling of items, free items, pricing errors, mail-in offers, coupon offers, competitors' service prices, items that are advertised as limited-quantity, out of stock, open-box, clearance, refurbished/used items, our and our competitor's Deal of the Day, daily deals, special hour sale event items and credit card offers, BestBuy.com Clearance & More and Marketplace items, and items for sale Thanksgiving Day through the Monday after Thanksgiving."
As for those E-tailers that will be matched, the list is similar—but not identical—to the one Best Buy used in November. Gone from the new list will be CircuitCity.com and Compusa.com and added will be Frys.com, making the list one fewer than last year. (The full new list will be: Amazon.com (NASDAQ:AMZN), Apple.com (NASDAQ:AAPL), Bhphotovideo.com, Buy.com, Crutchfield.com, Dell.com (NASDAQ:DELL), Frys.com, hhgregg.com (NYSE:HGG), HP.com (NYSE:HPQ), HomeDepot.com (NYSE:HD), Lowes.com (NYSE:LOW), Newegg.com, OfficeDepot.com (NYSE: ODP), OfficeMax.com (NYSE:OMX), Sears.com (NASDAQ:SHLD), Staples.com (NASDAQ:SPLS), Target.com (NYSE:TGT), TigerDirect.com, and Walmart.com (NYSE:WMT).)
But one other requirement is that price-matches will only be offered to shoppers who think to ask for it. Given that it's the shopper who must produce the proof of the competitor's price and specs, it's obvious that the shopper has to bring it up. This also raises the obvious question: Best Buy already knows what that list of rivals is selling these products for. If the chain is prepared to match those prices, why not do it directly, sparing the shopper the effort and uncertainty? Wouldn't that send the strongest message that Best Buy will no longer be out-priced and that shoppers can trust them?
Also, this approach assumes Best Buy is the final stop—rather than the first. If shoppers are starting their purchase research at Best Buy, which is the essence of showrooming, the price-match policy doesn't help them. (Maybe if they are doing on-the-spot product comparisons by using a mobile device and hitting Amazon, this could help. But most shoppers will continue their price explorations at the office or at home, possibly days later, in an environment where note-taking and even frequent bookmarking is a lot easier.)For that typical showrooming shopper, the shopper will note the Best Buy price and will then gather rival pricing. Once that shopper has found what appears to be the best price, the shopper is likely to just make the purchase right there. Why make the trip back to Best Buy and hope to convince an associate to do a price-match, praying that the mobile screen captures or printouts are deemed sufficient? Again, Best Buy's offer is merely to match that price. If the comparison shopper finds the desired product for $24.95, why go through that hassle to get a $24.95 price when the site is offering that price right away with no hassle? It's not like Best Buy's lure will deliver a lower price.
This is not much different than the car deal gimmick of price-matching. "Test drive it here and then get bids from five other places, come back here and we'll match the lowest price—maybe." The consumer response is, "Thanks, but no thanks. Tell me now the lowest price you're offering on this car. If it's good enough, I'll sign right now. And if not, I'll try and do better. Only if I fail to do better will I come back."
The point of this is not that Best Buy would seriously do such a program. For starters, the chain doesn't use electronic shelf labels, which would be essential for this kind of frequent price changes. And tracking the prices of all local competitors is quite a challenge, especially if they are brick-and-mortar-only operations. Using your own shoppers to effectively crowd-source competitor pricing is not a bad strategy.
No, the point isn't that Best Buy should do this. The point is that this is the kind of extreme that would be needed for Best Buy to truly make a major dent in showrooming.
A Best Buy statement said this new program is "signaling the end of 'showrooming.'" Bloomberg quoted Best Buy Spokesperson Matt Furman as saying, "There is no doubt that this new policy ends showrooming for Best Buy customers." When we spoke with Best Buy Spokesperson Jeff Shelman, he echoed those comments, saying that the new program means Best Buy shoppers "won't have any reason to showroom."
Really? None at all? What if a shopper comes into Best Buy and the desired item is out of stock? No price-match. What if that shopper comes in and has yet to comparison shop? What if the shopper is already buying a half-dozen items from Amazon or Walmart.com and adding this one to the list will amount to free shipping?
Here's a critical question, which is much harder to address with a policy change: What if the shopper simply doesn't trust Best Buy as much as it trusts Amazon or Fry's? Showrooming is about factors well beyond price, and this policy doesn't even eliminate all of the price-only obstacles. (Although it certainly does a very good job, much better than it did in November.) This new policy is predicated on the theory that the lack of a decent online price-match program was the only thing fueling showrooming in the first place. It's quite a bit more complex than that, and Best Buy certainly knows that.
This Best Buy effort will likely make a meaningful dent in its showrooming losses. But to truly slash showrooming (reality: complete elimination of showrooming is simply not mathematically possible) will require making the Best Buy shopping experience a much more pleasant, profitable and easy experience than working with a rival.
That involves strong customer service to generate trust and brand loyalty, something Best Buy has lost much of in recent years.
It needs confidence-building return policies (think Costco [NASDAQ:COST] and Nordstrom [NYSE:JWN]), which are a huge part of this as well. And that is why the cutting in half of the return period sharply undermines this effort. (Best Buy couldn't have waited six months to do that, to give this program more of a chance?)
Huge inventory (which Best Buy does well on) and helpful well-trained associates (less so) are also key. Plus, pricing that is fair and does not smack of game-playing. Having high prices that will only be matched if the shoppers notices, asks about and has documentation to prove it, that hardly makes shoppers confident you're not playing price games.