The Critique That Best Buy Is Just An Amazon Showroom Is Staid And Boring

Every year, for what seems like the past 10 to 15 years, some news article gets printed that claims Best BuyBBY
has no long-term future because it is essentially Amazon’sAMZN
showroom. One of the last headlines of note like this came from Bloomberg this past March, when it penned, “Best Buy’s Offerings Look Too Much Like Amazon’s.”

Unfortunately, this fun, hot take is about as boring as a segment on 60 Minutes about watching paint dry at this point.

Best Buy has faced this same critique for decades now, and, yet, there it still stands like a hardened old prize fighter in the 15th round, ready to go the distance.

Frankly, anyone that still espouses this argument misses the point of what 21st century omnichannel retailing is all about – namely, that the key to the physical side of retailing is answering the question, “Why come to a store at all?”

Is “showrooming,” i.e. the practice of a consumer going into a store to look at a product, only to buy it on Amazon later, a thing?

Sure. Of course.

But the entire industry is way beyond it at this point. The impact is already felt year-over-year in the comp store sales base.

This same showrooming argument that continues to plague Best Buy could also be made about countless others – TargetTGT
, Best Buy, WalmartWMT
, and even department stores like Macy’s, to a degree. But, over the last 10 years, retailers, en masse, have gotten wise to the dilemma and instituted concepts like price match guarantees and the convenience of curbside pickup to do what online shopping can’t and thereby to ward off any further impact from the showrooming phenomenon.

Best Buy has long understood the new age customer, having been one of the first retailers to roll out buy online, pickup in store over 12 years ago, and then, once the pandemic hit, being one of the first retailers to shut down its stores completely and to turn them into curbside pickup hubs, both for the psychological convenience the idea provided for its customers and also likely as a serendipitous experiment to see how high is high in terms of the revenue the company could still generate from that type of store interaction model.

Not stopping there, Best Buy in May 2020 then opened stores up only for one-on-one “in-store consultation services,” whereby customers would call or schedule appointments online with in-store Best Buy sales associates, again taking advantage of the pandemic conditions for further experimentation.

These experiments illustrate that Best Buy gets the punchline to the joke – that the reason customers still go to physical stores is for the convenience of not having to wait for a package to arrive on their doorsteps and for the in-store service that gives them confidence in the purchases that they are making.

This ethos is what has kept Best Buy ahead of the omnichannel experimentation curve ever since the “showrooming” argument first emerged, and it doesn’t look like Best Buy has any plans to slow down its innovation efforts anytime soon.

In the last six months, Best Buy has unveiled two quite novel concepts:

1) A small 5,000 square foot concept store in North Carolina that is itself a showroom – that is, with the exception of a few items, the majority of the assortment carried in the store is for display only, and customers scan what they want with their mobile phones, and then Best Buy associates bring the goods out to them for purchase (think Service Merchandise but WAY better because of the mobile element).

2) A 40,000 square foot “virtual store” inside of an existing warehouse that acts as a centralized bridge to provide consumers shopping online with the same great Best Buy service they have come to expect in store by way of live video product demonstrations.

Both of these concepts show that Best Buy is willing to do what it takes to out showroom “showrooming” and to think beyond the box of its store to simulate something that Amazon can never touch – specifically, recreating the feeling of talking to a trained Best Buy associate online – because Amazon has almost no physical stores within the electronics space and, therefore, no customer precognition about such a service experience upon which to draw.

Back when Bloomberg again made the showrooming argument, the main contention at the time was that Best Buy was only trading at a multiple of 11, which was a “20% discount to its five-year historical average” and that “valuation multiples tend to stay low unless there are signs of sustainable growth.”

Well, don’t look now but Best Buy exceeded earnings expectations last quarter, raised its forecast for the end of the year and is now trading at a P/E of 12.35 as of 12:30 EST on Dec 9th, 2023.

Or said another way, the long, given up for dead prize fighter appears to have once again picked itself up off the canvas.

So stop the “showrooming” argument. The take was hot back in 2010. And, it clearly has not aged well.

If showrooming alone were going to kill off Best Buy, its days would have been numbered long ago.

For if Best Buy has shown the retail world anything, it is that it is one hell of a resilient retailer and one that will do its damndest to find a way to live on and fight another day.