Will Best Buy's Crazy Price-Matching Policy Pay Off?

If you can't beat them, join them. As painful as that adage might seem, Best Buy (NYSE: BBY  ) is embracing it wholeheartedly.

The big-box store chain is a common victim of so-called "showrooming," where consumers stop by their local retail store to see what a particular gadget can do -- and then order it cheaper from some e-tailer. Best Buy is stuck with the costs of stocking, staffing, and maintaining the store while somebody else collects the revenue. You can't really blame the customers for chasing a better deal, but Best Buy's high overhead costs nearly always leave the company at the losing end of the deal.

It's comparison shopping, evolved. The rise of ubiquitous smartphone access to online shopping deals only accelerates this trend.

Well, Best Buy has had enough of it. Its stores will soon accept price-matching requests against a number of popular online stores -- not just the local retail locations many retailers price-match these days. Yes, the list includes low-cost king Amazon.com (NASDAQ: AMZN  ) .

The idea isn't entirely crazy. If Best Buy is saddled with showrooming costs anyway, then why not at least deny Amazon and friends the pleasure of landing the deal? If nothing else, Best Buy will look generous for doing this, and then there's the convenience of not having to wait for a shipment. Just pick up your stuff and take it home right away. The combination just might be enough to make those margin-slashing deal seekers come back for other, more lucrative shopping trips.

It's a direct showdown between the "convenience is king" and "cash is king" world views. Since time is money, there's real value in these futuristic price-matching tactics. From there, it's up to Best Buy to keep its operating costs and supply chain management tight enough to make the whole thing work.

I'll note that Best Buy is not exactly the best candidate for such a potentially costly campaign. The company already reports negative earnings on a regular basis while fellow big-box champs Target (NYSE: TGT  ) and Wal-Mart (NYSE: WMT  ) sport positive profit margins. The all-around retailers have economies of scale that even Best Buy's nearly 1,500 stores can't match. In particular, I'd imagine that Wal-Mart's notorious efficiency would make the global retail king a natural platform for anti-showrooming price matches.

But Best Buy dives in first. The whole retail industry -- online and offline -- is watching with bated breath.

Should you buy Best Buy?
The brick-and-mortar versus e-commerce battle wages on, with Best Buy caught in the middle. After what might have been its most tumultuous year in history, there are now even more unanswered questions about the future for the big-box electronics retailer. How will new leadership perform? Will old leadership take the company private? Will a smaller store format work out for both the company and its brave investors? Should you be one such brave investor? To help answer all these questions, The Motley Fool has released a new premium research report detailing the opportunities -- and the risks -- in store for Best Buy. Simply click here now to claim your comprehensive report today.


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  • Report this Comment On February 19, 2013, at 4:48 PM, kyrifles wrote:

    This makes a ton of sense. As long as they're in the store anyway, they might buy a few accessories if they pick up the item from Best Buy. If they're buying it from Amazon, they'll get those accessories from Amazon. Anyone who takes the trouble to shop around gets the discount. Those who don't bother, don't, so BBY is no worse off.

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