The specter of showrooming has haunted the Best Buy (BBY -0.81%) boardroom for years. At every turn, the electronics retailer has run into suspicions and claims that it will never overcome the omnipresence of Amazon.com (AMZN -1.64%), which now pervades the everyday shopping experience. The only problem with the claim is that it's false. Best Buy is suffering, and it's suffering because of online sales, and it may even be suffering due to Amazon, but the problem is not showrooming.
Online doesn't equal showrooming
Online sales are taking up more of the retail pie than ever before. In 2013, the Census Bureau estimated that sales made online accounted for over 7% of total U.S. retail sales -- in 2010, it was just over 5% . The increase in online sales means that Best Buy isn't able to take advantage of the benefits of having a strong sales corps.
Showrooming -- going into a store, trying a product, then buying it online -- has largely been dealt with through Best Buy's price matching program. The retailer will sell an item for a cost equal to that of online retailers, including Amazon. The company instituted the program during the 2012 holiday season, and maintained it when it proved successful.
In its second-quarter earnings announcement this week, Best Buy even highlighted the trend. It said that traffic to its stores had fallen due to online sales, but that in-store conversions were on the rise. That's not a sign of showrooming, which would see in-store conversions falling as shoppers left to buy on Amazon, but the news reports still claimed showrooming was the problem. But by trying to treat the alleged showrooming issue, investors can overlook the real path to success.
What Best Buy can do about it
Right now, Best Buy is doing the right things. It is focusing on converting in-store traffic into sales and it is strengthening online sales. In the last quarter, domestic online sales were 22% higher than the same period in 2013. That's a good start, but it's not going to be enough to make up for the traffic shortfall in stores.
The company needs to push online sales even higher. One leading opportunity for doing that may be as simple as promoting its program that allows customers to make purchases online and then pick up the goods at their local Best Buy. The price match is still in effect and customers can avoid shipping costs and times. Not only does this increase online sales, but it also gets customers into the store.
Bringing those customers through the door is still an important point for Best Buy. While it has to compete with Amazon online, once the shopper is at the brick-and-mortar location, Best Buy's sales force can go to work. Studies have shown that knowledgeable and experienced salespeople can increase sales by a substantial amount. As about half of us still look for advice when we go shopping, there's ample room for Best Buy to move in and take advantage of these online sales.
The takeaway
Of course, it could all still go wrong. Amazon remains a major threat, and if Best Buy doesn't sort out its traffic and online issues, the crowd will just keep shifting Amazon's way. Luckily, Best Buy has a lot of levers, and plenty of opportunity to pull them this year. New phones, rising home sales -- affecting sales of appliances -- and the potential for further growth in the employment market are all good news. Best Buy may have gotten over its show-rooming hurdle, but there are still plenty of obstacles left.
