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Showrooming at Best Buy Case Solution & Answer

Showrooming at Best Buy Case Study Solution

Executive Summary:

Best Buy is The leading retailer of electronics with a workforce of more than 160,000 employees who offered their services in different roles in nearly 2000 stores. In the retailing industry, the sales growth of Best Buy was worst among all because the stores opened the previous year represented a 4 percent decline. Although, it offered products that were only made available at Best Buy which mainly included the exclusive editions of Blu-ray movies. But, the internet retail share of Best Buy followed by total retail share slipped in the United States in comparison to a 10 to 16 percent increase in the share of Amazon. Best Buy is known to be the leading retailer who deals in the sales of consumer electronics products. Best Buy offers an in-store product selling approach. The pricing strategy of Best Buy was found to be competitive with the pricing approach of Walmart. The marketing campaign of Best Buy in response to the change in industrial dynamics mainly included eleven different commercials in which it featured celebrities like Maya Rudolph and Will Barnett. Most of the customers prefer visiting stores for the in-person experience to make sure that the product is appropriate but make a purchasing decision after comparing products online. Like other retailers, the product portfolio of Best Buy is not differentiated as it mainly focused on the sales of customer electronics. Best Buy is recommended to expand its product portfolio and bring a reduction in the probability of financial loss in all segments i.e. not all products industry experience declining growth at the same time.

Introduction:

The leading retailer of electronics – Best Buy, was founded by Richard M. Schulz and James Wheeler in the year 1966. The former chief marketing officer of the organization was Corine Barry. The organization offered points and discounts to the shoppers on the in-store or online purchase of any product. The offerings also included special discounts, contest sand access to the in-store events of the organization. In the year 2012, the organization posted a sales’ loss of around $1.7 billion in the fourth quarter. However, a big portion of the sales of the organization was found to be mainly tied to the holiday shopping season, which was greatly influenced by the sensitivity of customers towards price and fierce competition for dollars.

The workforce of the organization included more than 160,000 employees who offered their services in different roles, in nearly 2000 stores. The pricing of the in-store products at Best buy was relatively higher in comparison to Amazon, i.e. by around 8 percent in the segment of consumer electronics against percent of Walmart.Whereas, the displacement of computers by mobile shopping applications was considered as an opportunity by the former CEO,in order to steal the right sale in the market. (Thales S. Terapixel, 2014)

Problem Statement:

Despite of the modest increase in the in-store traffic; the growth of retail sales was declining,such as: Target, Best Buy, and J.C. Penney. The sales growth of Best Buy was worst among all because the stores opened the previous year represented a 4 percent decline. However, the global market of online retailing had been demonstrating the expansion at the rate of 17 percent per year. The approach of Best Buy for permanent price-matching with other online retailers having high operating cost, has turned out to be a challenge due to the impact of Showrooming by other retailers.

SWOT Analysis:

Strength

  • Best Buy is the leading retailer in consumer electronics with around 2000 stores and 160,000 employees.
  • Reward Zone – a loyalty program was offered by Best Buy to offer its customers with special discounts, points, access to in-store organizational events.
  • It offered products that were only made available at Best Buy which mainly included the exclusive editions of Blu-ray movies.
  • It led to the creation of its shopping application and partnered with third-party applications like Shop kick – to win back the mobile-savvy customers.
  • In 2013, the price-matching policy was made permanent and embraced the image of the brand as an Internet Showroom followed by a low-price guarantee.

Weakness

  • The sales in the physical stores had been declining in the electronics industry from 2007 to 2012 despite the increase in online electronic sales.
  • Internet retail share of Best Buy followed by total retail share slipped in the United States in comparison to a 10 to 16 percent increase in the share of Amazon.
  • Due to a significant decline in same-store sales i.e. by around 5 percent; there had been a decline in the stock price by a quarter.
  • Best Buy was hit hard by Showrooming, which was to offer better online prices; see the product in-person before making an online purchasing decision, and out-of-stock products in the retail stores.

Opportunities

  • A significant reduction in the operating cost would allow the organization to offer the products at low-prices in comparison to online retailers, like: Amazon.
  • The provision of training and development to in-stores salespersons would positively influence the shopping experience of customers, leading towards an increased conversion of visitors into shoppers.
  • Increased investment in improving the use of technological approaches to drive the consumer experience resulting in ease and satisfied shopping, would lead towards an increased frequency of repeated customers, and helps the company in staying competitive in the highly competitive industry.

Threats

  • The inability to offer the products at relatively low prices than competitors such as Amazon would lead to an increased threat of continuous decline in sales.
  • Despite the growth of customer electronics, the rapid product diversification by different retailers was increasing leading towards an increased competition.
  • Lack of return on investment would lead to increased concern over the financial stability of the organization making it difficult to invest in a new technological approach.
  • Loss of potential customer base would also negatively influence the morale and motivation of the employees, hindering the improvement in their performances……

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