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Best Buy (BBY -0.9%) will tackle "showrooming" in Canada by matching prices posted by Canadian...

Best Buy (BBY -0.9%) will tackle "showrooming" in Canada by matching prices posted by Canadian retailers, instead of losing out on sales as consumers test products at its stores only to buy online. A Best Best Canada exec says the strategy will show consumers that neither a pure brick-and-mortar retailer or a pure online seller will outweigh the advantages of a combination player. Is an all-out price war in the U.S. on tap for BBY?
Comments (5)
  • dividend_growth
    , contributor
    Comments (2878) | Send Message
     
    Best Buy is entering the same self-destructive circle as Blockbuster.

     

    Brick and Mortar retailer can't possibly hope to match the price advantage of online competitors.

     

    This is a replay of Netflix vs Blockbuster.
    9 Jul 2012, 11:19 AM Reply Like
  • Seeking Beta To Your Alpha
    , contributor
    Comments (450) | Send Message
     
    Maybe Netflix will make a buyout offer for Best Buy just like Blockbuster offered to buyout Circuit City a few years ago...
    9 Jul 2012, 03:49 PM Reply Like
  • Matt Blecker, CFA
    , contributor
    Comments (168) | Send Message
     
    I disagree. Best Buy's operating costs are equal to or lower than Amazon. Dont believe me? Take a look at the financials.

     

    The combination of Amazon's fulfillment, technology and content costs, and shipping costs (now 5% of revenue) are as much or more than BBY's operating costs. They even say in their SEC filings that they expect much of these costs to continue for the foreseeable future.

     

    As such, Best Buy's operating margin is far better than Amazon's. Stripping out the non-cash non recurring goodwill impairment charge related to Best Buy Europe, BBY had a 4.5% operating margin for its last fiscal year, far above Amazon's margin. Additionally, BBY's operating margin has been much more stable compared to Amazon's the past decade plus.

     

    In regards to your Blockbuster comparison, please provide some facts instead of broad generalizations created by the media. Blockbuster struggled with profitability way before threats like Neflix emerged and their leverage was much greater than Best Buy. Look at the 1999 and 2000 P & L and you will see far lower profitability than Best Buy. The company had to emphasize metrics other than EPS even in the late 90s b/c they struggled so much with consistent profitability.
    9 Jul 2012, 05:06 PM Reply Like
  • PATTIRISHA
    , contributor
    Comment (1) | Send Message
     
    This analysis makes more sense--facts and figures, current + past v. media-driven commentary. Good post.
    11 Jul 2012, 09:50 AM Reply Like
  • MStapp
    , contributor
    Comments (8) | Send Message
     
    Bless their hearts. Desperate people do desperate things. Glad I'm short!
    9 Jul 2012, 11:21 AM Reply Like
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