As reported in the WSJ, Best Buy’s interim CEO, G. Mike Mikan, sees ending the trend towards “showrooming” as the company’s number one priority. To do this, he plans to invest heavily in retraining Best Buy’s workforce. It is a worthy aspiration—the big box electronics retailer is sputtering as customers increasing use it as a place to browse merchandise before buying it at Amazon or some other online rival. But Best Buy's fight against showrooming is doomed to fail, for three reasons:
1.Poorer service. Stories of bad customer service at Best Buy are legend. To get a flavor of the prevailing customer attitude, just scan the reader comments on almost any article on Best Buy—such as Larry Downes’ widely read article here are at Forbes. The vitriol is hard to spin in any way other than there’s a lot of room for improvement. It’s hard to imagine, however, that even sending 50,000 workers through intensive training, as Mr. Mikan promises to do, will change what the American Customer Satisfaction Index surveys show to be a long standing problem. Could it be that Best Buy management didn’t previously value customer service? How much gain is possible given the operating model and DNA of the organization? As the below chart shows, Best Buy's customer satisfaction index is consistently and dramatically lower than Amazon's. The challenge is likely insurmountable, given that customers generally prefer Internet retail to specialty stores, as the chart also shows.
2. Higher prices. Even if Best Buy can surmount the customer service challenge, it won’t likely overcome its pricing disadvantage. Best Buy, with it higher cost structure, cannot compete on price—and customers know it. So, unlike other retailers that hide behind unique brands (or at least use unique UPC codes) to lower price transparency, it is easy for shoppers to find cheaper prices for Best Buy’s commodity products. And, since customers know this, they will surely look for them. This might not matter for small items for which there might be some urgent need (like overpriced cables), but customers will surely take the time to research prices for the big ticket items upon which Best Buy’s success depend.
3. Insurmountable trends. Best Buy must contend with the fact that dominant trends will increasingly conspire against its business model. Technology trends, such as mobile devices and big data, will make showrooming easier. Online retailers will get increasing sophisticated, enabling even better online shopping experiences and faster fulfillment. Customer behavior will change to Best Buy’s disadvantage, as shoppers become more comfortable with online-only shopping, lessening the need to “touch and feel” that underpins showrooming.
All this doesn’t mean there isn’t some near term upside for Best Buy through rationalization or financial engineering. But, it is doubtful that it can do much about showrooming. And, in the long term, it is hard to foresee a viable path for Best Buy’s business model.
–
Chunka Mui is the co-author of “Unleashing the Killer App” and “Billion-Dollar Lessons.” Follow him at Forbes or on Twitter @chunkamui
