Best Buy (NYSE:BBY) has announced a new price matching initiative going live on March 3. This price matching seeks to counter the phenomenon of "showrooming", where customers go to Best Buy's physical stores to check out products in person, then leave and order from home or their smartphones. Customers mostly do this to take advantage of supposedly better online prices.
As it stands, there's a good chance that Best Buy's price matching will greatly counter showrooming. After all, if the customer is already inside the store and can get a price similar to what he'd get online later, he has no incentive to order online. Better yet, bricks & mortar retailing will offer immediate satisfaction, a greater ease of returns, more support services and sometimes even better warranty terms. This makes it likely that at least among customers who still frequent the stores, showrooming will greatly be curbed by the price matching initiative. Among those companies feeling a possible negative effect will be Amazon.com (NASDAQ:AMZN), Newegg.com, TigerDirect.com - a subsidiary of Systemax Inc. (NYSE:SYX) and hhgregg, Inc. (NYSE:HGG) through its hhgregg.com subsidiary.
There is, however, a notable exception in Best Buy's upcoming policy. Best Buy will purposely exclude marketplace sellers, as we can see below (Source: Best Buy's announcement, linked above. bold is mine):
The Guarantee is limited to one price match per identical item, per guest and does not apply to: Contract mobile phone devices and plans, the online prices of retailers not listed, the online prices of third party vendors (Marketplace vendors) on designated major online retailers websites, post purchase price match requests to competitor's prices,
This means Amazon.com 3P sellers won't see their prices matched, which somehow mitigates the impact on Amazon.com even if it also shows Best Buy's confidence in matching Amazon.com itself. It also means something else. It means eBay (NASDAQ:EBAY) is entirely excluded. It's not even present in the list of online sellers which Best Buy says it will match, as we can see here (Source: Best Buy's announcement, linked above):
At the time of purchase, we will match the current pre-tax price for new, identical, immediately available products from a local retail competitor's store and these designated major online retailers: Amazon.com, Apple.com, Bhphotovideo.com, Buy.com, Crutchfield.com, Dell.com, Frys.com, hhgregg.com, HP.com, HomeDepot.com, Lowes.com, Newegg.com, OfficeDepot.com, OfficeMax.com, Sears.com, Staples.com, Target.com, TigerDirect.com and Walmart.com. We will match prices between our stores and BestBuy.com ®. We will also match prices post purchase if we lower our price within 15 days of your purchase.
So while other electronics sellers might see some impact from Best Buy's initiative, eBay -- which trades at a giant discount to Amazon.com - won't even be matched.
Best Buy's move into price matching the online retailers permanently, Amazon.com chief amongst them, is bound to curtail showrooming significantly for those customers who have gone so far as visiting the stores. This policy adds to Target's (NYSE:TGT) recent similar policy, and thus creates another headwind for profitability-challenged online retailers like Amazon.com.
At the same time, the policy notably excludes third party sellers, and excludes eBay entirely, so at this point someone wanting to bet on online retail can get eBay at a cheaper valuation and with less headwinds both from sales tax (where eBay doesn't collect and even if new legislation comes, it's bound to exclude most of its sellers) and from price matching initiatives such as one being launched by Best Buy.
Disclosure: I am short AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.