Can Best Buy Beat Wal-Mart?

The holiday shopping season is officially under way, and following soft sales over Thanksgiving weekend, the International Council of Shopping Centers has cut its November forecast for same-store sales. However, ICSC chief economist Michael Niemira noted that in a recent poll, fewer shoppers have completed their shopping in November (42%) compared with last year (48%), so holiday buying this month could boost December's numbers.

Still, with the economy in recession and the unemployment rate rising to 10.2% -- the highest since April 1983 -- big-box retailers such as Target (NYSE: TGT  ) , Wal-Mart (NYSE: WMT  ) , Best Buy (NYSE: BBY  ) , Sears Holdings' (Nasdaq: SHLD  ) Sears stores, Costco (Nasdaq: COST  ) , and Kohl's (NYSE: KSS  ) will need to step up the competition, or they could be in trouble.

Speaking of competition, Fool writer Alyce Lomax points out that Wal-Mart recently "threw down the gauntlet" for the holiday season, in announcing that it won't be beaten on price. In addition, the retail giant has apparently announced that, for the first time, it's offering installation as an extra on TV and computer purchases. That move steps directly on the toes of Best Buy, which has consistently offered this service.

Best Buy plans to handle the new competition through "connectivity," which means connecting all the electronic gadgets in your life (mobile services, satellite TV, and digital photography). According to Best Buy CEO Brian Dunn, connectivity carries higher margins and has more potential than sales of consumer electronics, which are expected to fall by 7.7% this year.

Does Best Buy have a chance this holiday season, or will Wal-Mart once again stomp out the competition? And for the long term, is Dunn on to something with this idea of connectivity?

Let us know what you think it the comments box below.

Claire Stephanic owns no shares of any companies mentioned in this article. Best Buy and Costco Wholesale are Motley Fool Stock Advisor recommendations. Best Buy, Costco Wholesale, Sears Holdings, and Wal-Mart Stores are Motley Fool Inside Value picks. The Fool owns shares of Best Buy and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 02, 2009, at 12:19 PM, juangonz wrote:

    I believe bestbuy will with stand walmart do to its workforce that is more knowledgeble than walmarts, Bestbuy selection is far more greater than walmarts and the pricing its even. If im going to buy a product i want someone to tell me about the product, what can i do this product, how is my family going to use the product and how is it going to make my experience better.

  • Report this Comment On December 02, 2009, at 1:34 PM, bigtay6187 wrote:

    After working for Best Buy for years I have a solid understanding of what they do on a daily basis that will trump Walmart. Best Buy stores are very customer centered, even the worst Best Buy stores that you go into there is always someone that is ready and waiting to answer a question or to provide you with help of some sort. From the first day you walk into work putting the customer and their needs first is ingrained in you.

    This is something that you will NEVER find in a Walmart store. At no point in the near future are you going to see Walmart spend money to train their employees to be able to properly explain to customers what kind of electronics will work best for them.

    At the end of the day the 2 dollar price difference that people are saving going to Walmart for comparable models isn't going to make up for the difference that you get with the customer service before and after the sale that you are provided for by Best Buy.

  • Report this Comment On December 02, 2009, at 3:25 PM, thetucket wrote:

    I've got to disagree with bigtay6187. While it is certainly true that Best Buy generally has more knowledgeable customer service reps than does WalMart, not everyone is interested in obscure electronics tutorials or the prospect of being sold up a few price points. In those product categories in which Best Buy and WalMart really compete (and certainly they do not do so in every electronics category, since WalMart's selection is generally less robust and lower-end) WalMart will continue to offer at least marginally lower prices, and that's hard to beat.

    Never underestimate the casual and uninformed electronic consumer's thirst for the sign that reads $0.99 cents over the one the reads $1.00--especially when nervously Christmas shopping for some wish-list gadget for her son that won't eat too far into this week's unemployment check.

    The shoppers drawn to WalMart are bound to be less interested in all of the techie details and more interested in getting a good deal; and these days, I think people have no choice but to go for the deal.

    I think at the slightly higher end of the market (for the slightly more sophisticated yet still budget-conscious electronics consumer) Best Buy should definitely make some inroads with their "connectivity" model, especially as life morphs into a growing web of vital gadgets and e-services that we'll increasingly need to seamlessly interface with one another. That kind of product and service bundling will have to become standard industry practice, and Best Buy is right to lead the way.

  • Report this Comment On December 02, 2009, at 3:26 PM, thetucket wrote:

    I've got to disagree with bigtay6187. While it is certainly true that Best Buy generally has more knowledgeable customer service reps than does WalMart, not everyone is interested in obscure electronics tutorials or the prospect of being sold up a few price points. In those product categories in which Best Buy and WalMart really compete (and certainly they do not do so in every electronics category, since WalMart's selection is generally less robust and lower-end) WalMart will continue to offer at least marginally lower prices, and that's hard to beat.

    Never underestimate the casual and uninformed electronic consumer's thirst for the sign that reads $0.99 cents over the one the reads $1.00--especially when nervously Christmas shopping for some wish-list gadget for her son that won't eat too far into this week's unemployment check.

    The shoppers drawn to WalMart are bound to be less interested in all of the techie details and more interested in getting a good deal; and these days, I think people have no choice but to go for the deal.

    I think at the slightly higher end of the market (for the slightly more sophisticated yet still budget-conscious electronics consumer) Best Buy should definitely make some inroads with their "connectivity" model, especially as life morphs into a growing web of vital gadgets and e-services that we'll increasingly need to seamlessly interface with one another. That kind of product and service bundling will have to become standard industry practice, and Best Buy is right to lead the way.

  • Report this Comment On December 02, 2009, at 3:40 PM, plange01 wrote:

    walmart has very little in the way of electronics and is no match at all for bestbuy in this area.these two companys dont compare they are in differant business...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1056870, ~/Articles/ArticleHandler.aspx, 11/25/2014 6:33:02 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement