Daily Dose of iQ: How Amazon has Stolen Best Buy's Business

Apr 20, 2012 — Kevin Wong

On Wednesday (April 18), ReadWriteWeb published an enlightening report on Amazon's impact on Best Buy's recent struggles.

Amazon has long been considered the “Best Buy killer,” with particular emphasis on its “showrooming” effect on Best Buy’s profits of late (see Is Best Buy Doomed?). RWW's stats (and divergent growth curves -- see above graph) illustrate that effect.

Amazon's poaching of Best Buy's business is not surprising at all.

As the general population becomes more and more comfortable with purchasing items online, Amazon is in a perfect position to take advantage of this shift with their high brand awareness and ever-expanding product selection. (Did you know that they even sell toiletries?!)

Their low operating costs allow them to offer customer-friendly services such as Amazon Prime, which provides attractive benefits like free two-day shipping. No longer is there a significant difference in "convenience" between the online and offline worlds.

Does Best Buy still have a chance?

Best Buy is in a transitional period right now. On the heels of announcing its new "Connected Stores," the company's CEO Brian Dunn suddenly resigned (April 10).

Also, Best Buy recently hired Starbucks’ former CIO Stephen Gillett to help guide the company toward more modern, mobile/social and “omnichannel” retail strategy. He is faced with an uphill battle. However, in Best Buy's favor is the fact that most manufacturers want Best Buy to succeed in the war against Amazon, so this may provide them with some unique advantages such as exclusive products, or other promotions.

The take-home message: Consumers are now aware that there are better alternatives available (usually online) and that they don't necessarily need to shop at stores that don't value their business and focus on putting their needs first.

As we've said in the past, in order to survive, brick-and-mortar retailers need to offer things online retailers cannot: the convenience of personalized service, face-to-face product knowledge and advice, and the ability to walk out of the store with the purchased product in hand.

Topics: Retail Operations, Wireless Trends, Mobile Industry, Customer Experience, e-Commerce, Retail Marketing

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