After many assumed that consumer electronics retailer Best Buy (NYSE:BBY) was doomed last year, the company has surged back,with its stock nearly quadrupling from its 52-week low. This holiday season is extremely important for Best Buy as investors need to see some serious improvements if the company wants to keep the stock from falling apart. There's plenty of competition, from online retailer Amazon.com (NASDAQ:AMZN) to big-box retailer Wal-Mart (NYSE:WMT), so the company needs to be at the top of its game. Here are three reasons that Best Buy will dominate this holiday season.
1. In-store pickup for online orders
While online shopping is convenient, waiting for items to arrive is not. Amazon's Prime service is nice, giving subscribers free two-day shipping and cheap next-day shipping, but often shoppers want their items immediately.
Best Buy allows shoppers to order items online and choose to pick up their orders at the nearest store. If the item is in stock at the store, pickup can occur almost immediately. This allows people who prefer to do their shopping online to do exactly that while eliminating the multiday wait for their items.
Wal-Mart offers a similar program. For obvious reasons, Amazon does not. This gives traditional brick-and-mortar retailers a distinct advantage over Amazon and other online retailers.
2. Price-matching and promotions
Best Buy has implemented a price-matching policy that ensures that the company can offer the lowest price available. The policy was announced around the same time that Amazon began charging sales tax in many states, removing a built-in advantage enjoyed by the company for many years. Amazon has been so successful because it's been able to undercut traditional retailers, but this price advantage is now a thing of the past.
Best Buy's aggressive price-matching policy has effectively killed showrooming: customers browsing in-store and then later buying online. With no real price disadvantage anymore, there's little reason not to buy directly from Best Buy. On top of that, the company has been doing plenty of promotions. Last month it offered a $100 credit for those who traded in any working smartphone and purchased the Apple iPhone 5S or 5C. Just recently, the company announced the "Ultimate Epic Gaming" membership which gives members a 20% discount on new video game purchases, along with bonus trade-in credit and some other perks. The membership costs $120 for two years.
Best Buy has a key advantage over Amazon when it comes to video games. While Amazon ships preorders so that they arrive on the release dates, the timing is at the discretion of UPS or FedEx. Midnight launches for popular games, such as Call of Duty: Ghosts, are something that Amazon simply can't do. Best Buy puts games in the hands of gamers faster, and that's a big positive, especially with the next console generation right around the corner.
3. Stores within stores
Best Buy struck deals earlier this year with both Samsung and Microsoft to put mini-stores in hundreds of Best Buy locations. These mini-stores allow specially trained associates to explain the benefits of each company's devices to consumers, creating significant retail presences for Samsung and Microsoft without these companies having to build stand-alone stores.
Best Buy is marketing itself as the ultimate holiday showroom, a brilliant strategy in my opinion, because these mini-stores greatly differentiate the company from other brick-and-mortar retailers like Wal-Mart. Many consumers know little about gadgets and technology, and these mini-stores give Best Buy the unique ability to allow customers to try out the full gamut of devices in an environment designed specifically for exactly that.
The Microsoft stores within Best Buy essentially replace the PC department, and new Windows 8 devices hitting the market this holiday season should generate plenty of interest. With Intel's new low-power Bay Trail processors, 2-in-1 devices running the full version of Windows 8 will be available for just a few hundred dollars. The Transformer Book T100 from Asus is already on the market, and for $349 you get both a solid tablet and an attachable keyboard for full-on laptop use. Trying out products like this in person is critical, and Best Buy offers the perfect platform.
Wal-Mart and other big-box stores simply can't match Best Buy in this area. Having an associate explain a Windows 8 device, along with all of Microsoft's services that go along with it, is something that you won't see at Wal-Mart. The fact that Microsoft signed the mini-store agreement in the first place is a testament to the power of Best Buy as a platform, and this gives Best Buy an edge over other retailers.
The bottom line
Best Buy has put itself in a position to have a very strong holiday season. Marketing itself as the ultimate holiday showroom, coupled with price-matching and attractive promotions, should not only draw in customers but also compel them to buy. New gadgets like Windows 8 2-in-1 devices and tablets from Apple and Samsung should drive sales higher, and same-store sales growth, which has been negative for quite some time, could finally turn positive.
Fool contributor Timothy Green owns shares of Microsoft and Best Buy. The Motley Fool recommends Amazon.com, Apple, FedEx, Intel, and United Parcel Service. The Motley Fool owns shares of Amazon.com, Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.