Greenberg: Why Best Buy, on the Margin, Can't Win
This article appeared at 1:50 p.m. EDT on RealMoney Aug. 25.
SAN DIEGO (RealMoney) -- When Best Buy
Best Buy is an interesting case, because, like other retailers, in-store it matches prices from Amazon.com
I'm proud to say I use the price-matching every time I go into a Best Buy (and other places, such as Staples
I like giving salespeople the sale if they help me, but like everybody else I also like getting the best deal, even on a pack of batteries. Once I get the sales pitch, the first thing I do is whip out my iPhone and go straight to Amazon. Once I find the lower price, I go to the checkout, tell them I want to price-match, and the cashier calls over the manager to get approval. During the wait, I always ask the cashier how many customers price-match. The answer, so far, has been a consistent "Not that many," or around 30%.
And therein lies the rub: "Not that many" shows how much price-matching can grow, or how many more items Best Buy can lower to at or near cost. One reason the number isn't higher, especially on high-ticket items, is that Best Buy really is the Best Buy, or at least on par with Amazon. It's in a rough spot in a world that is rapidly being disintermediated.
Reality: Negative comp-store sales would be bad; good comp-store sales will be suspect. Key will be gross margins, and the story Best Buy tells over the past year or so is that of a company that has to run faster just to stay in place. Makes me want to resurrect a story I wrote two years ago, that Amazon should purchase Best Buy. But I won't -- and it won't, either.
At the time of publication, Greenberg had no positions in stocks mentioned but positions can change at any time.