By Anna Rose Welch, Chief Editor, Biosimilar Development
Company launches holiday campaign promoting low price guarantee, seamless multi-channel offerings in order to confront showrooming
Best Buy's change in strategies to combat showrooming seem to be working. The company released its 2014 third quarter results, which boasted a 15.1 percent in comparable online sales, while domestic online revenue reached $499 million. In addition, the company saw increases in domestic comparable store sales and domestic revenue, with comps increasing 1.7 percent and domestic revenue reaching 7.85 billion, a 2.3 percent increase over Q3 ’13.
Best Buy CEO, Hubert Joly, says that there is still work to be done, but that the quarter’s top line results prove the company is making progress with its Renew Blue transformation efforts. Initiated in August 2012, when Joly stepped in as the company’s CEO, the Renew Blue initiative was launched in order to cut SG&A expenses by $400 million. In particular, Joly hoped to accelerate online growth and improve the multi-channel customer experience. Over the past year, he has worked diligently to trim the fat from the company by closing underperforming stores, cutting 400 jobs over the past year, and improving store returns processes and logistics. Considering the increasing online revenue and comparable online sales in Q3’14, it would seem that the company’s strategies to improve its online presence are working.
Price Match Guarantee, Early Promotions Key To Compete Against Rivals
One of the most important and rather controversial attempts to draw customers to the Best Buy site was its price match guarantee policy. While some analysts were concerned about the price match guarantee that ensures customers Best Buy will match the price of any online competitor, Q2’14 — like Q3’14 — showed increased in online sales. This strategy was key for the company to compete against online retail giant, Amazon. Indeed, Belus Capital Advisors CEO, Brian Sozzi says that “the [online] sales number is even more impressive considering Best Buy’s entirely new website won’t launch until 2014, leading me to believe that price matching, and advertising of price matching, is closing the price perception gap with Amazon.”
In its Q3 earnings report, the company also outlined its holiday initiatives, which, along with continued Renew Blue efforts, will strengthen business and make the company the primary destination for technology products. Like many other retailers this holiday season, the company plans to open at 6 PM on Thanksgiving Day to compete against rivals and to meet customer needs when and where they want to be served. The company also makes it clear that it plans to amp up its promotional efforts in order to better match the volume of competitors’ promotions. According to Sharon McCollam, Best Buy EVP, CAO, and CFO, “We know we will be facing an increasingly promotional environment… First and foremost, we are committed to being competitive on price… So if our competition is in fact more promotional in the fourth quarter, we will be too and that will have a negative impact on our gross margins.”
Holiday Campaign Emphasizes Both In-Store & Online Experiences
Indeed, the company began its holiday promotions much earlier this year because, according to VP of marketing Scott Moore, it “seemed to be the right competitive thing to do.” The company launched a holiday campaign known as “Your Ultimate Holiday Showroom,” featuring a group of well known celebrities highlighting the experiences customers get by shopping both online and in-store at Best Buy. Ultimately, this campaign is the company’s attempt to combat showrooming — the practice that the media believed would bring about the end of the company when it was experiencing financial difficulties last year. As Moore says, “ The thing about showrooming is it’s not the ideal experience to do research at home, go to the store, do more research, then hit pause, go home and order and hope it arrives on time. There’s a better way.” And for Best Buy this holiday season, the “better way” involves the “low price guarantee,” and BOPS program initiatives, which the company is promoting in its new campaign. In addition, the store boasts the popular “Apple-like” experience that allows customers to interact with the technology they are considering purchasing. Coupled with the low price guarantee and multi-channel offerings, the company is optimistic that it will be the best “showroom for technology products” online and in-store, helping customers discover, choose, and purchase the best products this holiday season.
Check out our special report on how retailers are becoming more omni-channel to increase sales and better the customer experience.
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