For several years, investors and consumers have been pondering whether the technology retail company Best Buy can carry its own weight in a market increasingly dominated by online bargains. The answer is simple, and it can be seen by visiting a Best Buy (NYSE:BBY) store today.
There is a key type of consumer that Best Buy will continue to serve: the type that must touch, feel, and try the product before buying deciding to purchase. Major technology makers, including Samsung, Apple, and Microsoft, understand the large how large of a segment this type of consumers comprise. They also understand the need satisfy this segment to ensure a successful launch and a continuation in demand for their products without investing in major infrastructure and retail overhead retail costs.
As you walk into the newly designed Best Buy stores, you will quickly see the partnership the retailer created with the manufacturers to build a store-inside-store that is staffed knowledgeable professionals. Additionally, and to ensure that the consumer does not walk empty handed in hopes for a better deal online, Best Buy implemented a very aggressive price matching strategy that disarmed the competition of its main advantage. In the past, Amazon (NASDAQ:AMZN) has enjoyed Best Buy as its personal technology "product showroom." Customers examined products at Best Buy only to jump online and purchase them from Amazon or other online retailers. However, today Best Buy is ensuring that consumers are actually spending their money at the store.
Despite the anticipated negative effect on margins, this move was absolutely necessary to bring Best Buy towards the top of the technology retail food chain by creating a store where buyers do not have to sacrifice experience for a better price. The increase in sales will progressively help offset lower margins as more people walk into stores and leave with products.
Furthermore, Best Buy own another key consumer segment: the instant gratification type (the alphas of that group lined up overnight this past week in freezing temperatures as they hoped to lay their hands on Sony's PS4 and Microsoft's XBox One).
Best Buy today is very well positioned to become the leader in U.S. consumer electronics retail. The company's portfolio includes stores in premium locations, strategic partnerships, fast-growing online retail operations, and a recognized global brand.
Disclosure: I am long BBY.