Please ensure Javascript is enabled for purposes of website accessibility

Why Best Buy Is Literally Becoming an Amazon Showroom

By Daniel B. Kline – Apr 25, 2018 at 8:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retailer has completed its comeback and is no longer scared of its digital rival.

For a long time, the continued viability of Best Buy (BBY 0.31%) remained uncertain largely because of the growth of Amazon (AMZN -3.01%). Customers were using a practice called "showrooming" where they would visit the brick-and-mortar chain, get a look at the items they hoped to buy, take advantage of Best Buy's customer-service personnel, and then make their actual purchases online.

Effectively, Best Buy was carrying the expense of having stores, paying staff, and stocking merchandise, but Amazon was getting the actual sales. That formula could have been a quick path to bankruptcy for the physical chain had it not revamped its business model when Hubert Joly became Best Buy's CEO in 2012.

Now, perhaps in testament to how far Best Buy's turnaround has come, the retailer has just entered into a partnership with Amazon. That's a big step that shows that the brick-and-mortar chain no longer fears being supplanted by its digital rival.

An artist's rendering of what one of the new smart TVs will look like

Amazon is bringing out a new line of smart TVs with Fire TV built in. Image source: Amazon.

How are Best Buy and Amazon working together?

The companies will partner to sell a line of smart televisions with Amazon's Fire TV built in. More than 10 models will be sold in Best Buy stores starting this summer.

"Our goal is to enrich the lives of our customers by offering them the very best products and services, whether they come to us online, visit our stores, or invite us into their homes," said Joly in a press release. "Our partnership with Amazon is exciting because we believe Fire TV Edition delivers an incredible user experience and further strengthens the growing connection between home theater, home automation, and voice control."

The built-in Fire TV serves both as a hub for entertainment via streaming services and as a home-automation control center. It comes with voice control and Amazon's Alexa digital assistant. It can also be paired with an Echo device, which, among other things, allows for a hands-free TV viewing experience.

Why is this important?

Best Buy already sells Fire TV products as well as Kindle tablets and readers. For those devices, however, the retailer is really just secondary distribution for devices Amazon mostly sells itself.

In this case, Best Buy will be the exclusive retail home for these new TVs. It will also have exclusive sales rights to sell them on BestBuy.com and as a third-party seller on Amazon.com.

This is Amazon acknowledging that consumers want to see a television before buying it, and adding Best Buy to its sales chain to offer that. Basically, Amazon is forgoing being the sales lead on its own product, because the smart-TV line will sell better if people can get hands-on with the TVs in a brick-and-mortar location.

Call it full circle

In the showrooming days, Amazon simply used Best Buy to educate its customers and then made the sale itself. In this deal, the company is directing the sales to its sometime-rival. That makes sense because while the brick-and-mortar chain's primary goal is to sell products and services, Amazon's is to take over your home with Alexa.

This deal furthers both companies' goals. It will help Amazon get its smart TVs (and Alexa) into more homes, while Best Buy will sell more products and reinforce its place as a destination electronics retailer.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.78 (-3.01%) $-3.53
Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
BBY
$68.78 (0.31%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.