Wal-Mart Takes Another Shot at Best Buy

Best Buy (NYSE: BBY  ) has been beaten up by online competition in recent years and now it may have to fight off quick delivery from Wal-Mart (NYSE: WMT  ) as well. Wal-Mart announced yesterday that it would test locker storage for goods people order on the Internet. This would allow Wal-Mart to combine the ordering ease of Amazon.com with the quick delivery of any item while still eliminating the headache of shopping in the store.

Best Buy is the one retail stock that's down on the news today, falling more than 3% for a short period in the middle of the trading day, because it is affected the most by these retail innovations.

Losing the one advantage it has left
Best Buy used to rely on people coming into stores and turning knobs, testing TVs, and eventually buying something and walking out the door. But the comfort of online shopping has become more popular and the need to physically test items is diminishing. This has taken away Best Buy's biggest advantage.

To make matters worse, it is also fighting growing electronics footprints at Target and Wal-Mart, where you can also pick up bread and milk. If Wal-Mart is now combining the ease of online shopping with the speed of drive-thru shopping it puts Best Buy in an even further hole. In time, there's no reason Target couldn't do something similar.

Another hit to Best Buy
Best Buy can't seem to out-innovate its competitors, allowing them to eat up sales with a more convenient shopping experience. Meanwhile, management has been spending time fighting off takeover bids instead of finding ways to improve the business. I'm rooting for Best Buy to survive but Wal-Mart's latest innovation is another reason it might not.

More on Best Buy

The brick-and-mortar vs. 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 March 27, 2013, at 9:51 PM, RoscoePColetrane wrote:

    You do realize that when you order a product on bestbuy.com, it does give you the option of picking it up at a store near you? It tells you if the product is available and the distance to the store. That program has been in place for some time now. How innovative, huh?

    The "comfort of online shopping has become more popular." It has and Best Buy is the 11th largest on-line retailer in the U.S. that saw an 11% increase in sales in 4Q. Moreover with their new permanent price-matching policy and considerably larger selection of all consumer electronics products...just how exactly are they "in a hole?"

    Is it because you can't buy bread and milk there? Nice try. Some people would prefer to buy their multi-thousand dollar TVs outside of grocery stores.

    If you're going to bash BBY, do so with the usual "margin compression" talk...

  • Report this Comment On March 27, 2013, at 11:25 PM, mistacy wrote:

    BBY, margin compression. Short now.

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