BEST BUY IMPLODES: Is Your Retail Store Strategy NEXT?

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UPDATE - 10/13/2012
Best Buy to match prices of online rivals
Best Buy to match prices by Amazon.com, other online competitors ..
IT's ABOUT TIME...we wrote about this months ago, in March 2012, that they needed a 3 prong strategy...ARTICLE BELOW
http://www.social4retail.com/best-buy-implodes-is-your-retail-store-strategy-next.html - maybe they listened, I doubt it, but regardless, this is a smart move: 

ALL retailers MUST adopt some sort of strategy to make their brick & mortar store more relevant than on-line predators....if not, you WILL BECOME IRRELEVANT. We've written a ton of articles on this subject at: http://www.social4retail.com/our-retail-blog.html 

As the all-important holiday shopping season approaches, Best Buy is getting aggressive with its online rivals. 

The nation’s largest electronics retailer is planning to match the prices of Internet competitors such as Amazon.com, according to a report in The Wall Street Journal. 
Best Buy also plans to offer free home delivery on merchandise that is out of stock in stores, the Journal said. 

The move follows a similar one by Wal-Mart earlier this week, as the world’s largest retailer looks to counter the ascendance of Amazon.com. Wal-Mart said it would test a same-day delivery service in select markets for customers who buy popular items online during the holiday shopping season.
Read The Article Here

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BEST BUY IMPLODES: Is Your Retail Store Strategy NEXT?

BEST BUY IMPLODES: Misses Revenue, Firing 400, Closing 50 Stores  

 http://www.businessinsider.com/best-buy-closing-2012-3?goback=%2Egde_4233005_member_88158412%2Egmr_4233005%2Egde_4233005_member_104334824%2Egmr_4233005%2Egde_4233005_member_104334824#ixzz1qVd7Seka    

 In December 13th, I started a discussion about Best Buy …and other big box retailers… becoming “IRRELEVANT” on my LinkedIn Discussion Group: Internet Strategic Marketing Group For Retail & Manufacturers…. this was one of our first discussions based off this article: http://www.businessinsider.com/best-buy-the-tech-giant-unable-to-right-itself-2011-12?goback=%2Egde_4233005_member_88158412 .

The problem is that Best Buy got in the game to late, they had a reactive strategy to the internet and let Wal-Mart, Amazon & Google-Shopper lead in a category they once dominated in. Show-rooming is the new shopping platform and again they are reacting instead of leading. Guaranteeing low price, a strong internet/web platform, sales people that actually know something instead of trying to sell me Direct TV or other nonsense products will help revive them....maybe...but I think it's too late. I would look at a 2-tiered price platform:

1.) See it, buy it, wait for it and save $$$$ - Price tier #1. Use their suppliers to perform "direct ship" options to the consumer from the supplier’s warehouse by passing handling/stocking and incremental shipping costs. The suppliers can essentially "cross dock" the product....Best Buy takes the online order, filters it to the supplier and the supplier ships.....YIKES, isn't that the Amazon Model?

2.) Buy it today - take it home today - Price tier #2. Charge consumers a bit more for the convenience of having it in-stock. Show the consumer at the POS how much more they will pay vs. buying on-line and waiting

3.) Guarantee the pricing formula. Consumers will shop around, BUT of they believe the low price guarantee platform, they will gravitate to what/who they know and trust first, especially if they can see/talk/interact with a real brick and mortar platform should they have a concern, problem, etc. No one wants to be put on hold, go through the ubiquitous PRESS #1, etc, especially on a big ticket item.

I could write a book on this, but the big take-away from the Best Buy Debacle should wake up “Big Ticket Retailers”….especially furniture manufacturers and brick & mortar retailers. They should embrace an "open" platform and let consumers decide HOW they want to purchase. This is how they could do it:

1. Manufacturers need an awesome website that consumers can shop and engage with their products as do the retailers. In the furniture industry, 90% of furniture companies suck at this strategy much less the tactics to implement anything internet based!
2. They need to control their distribution so when the consumer “likes” a product, they can click on “where to buy” and it will show the retailer(s) that have access to the product. It would be even more awesome if the “where to buy” link showed that the retailer had it “on-display” in their store.
3. Go ahead. Let the consumer touch it, sit on it, etc…and again let them buy it “Their Way”…. “buy it today” at 1 “tier #1 price” at their normal margin.
4. Or buy it on-line, wait weeks for it and save money – “tier #2” price. Yep, this may be at a 32%-35% margin….BUT they made the sale! The manufacturer takes the sale, gives the retailer a margin percentage, the retailer takes delivery and interacts with the consumer…etc….hopefully developing a relationship for future interactions.
5. Either way the manufacturer and/or retailer make money. On the tier #1 pricing, normal margins are made to cover all the Gross Margin costs – GMROI- BUT at the tier #2 cost, the retailer virtually has no additional costs except cross docking, delivery, etc….($100.00 of something is better than $300.00 of NOTHING)

This isn’t the perfect solution, but the industry must transform. Retailers do not want to give up those juicy margins and think outside of the furniture box, which is allowing the national shippers, who by the way embrace the tier #2 model, take away their potential sales.

Up here in the Midwest we have a saying: 

“Pigs get fat….Hogs get slaughtered”.

Just some thoughts….comments please?   

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