Are Best Buy’s Showrooming Troubles a Myth? What Do You Think?

Best Buy’s new CEO, Hubert Joly, said in an interview with the Minneapolis Star Tribune this week that the standard theory about Best Buy’s struggles- that “showrooming” has caused it to fall behind the competition- is “a myth.”

“I believe showrooming is one of the greatest falsehoods about our company,” Joly told the newspaper. “If there was a lot of showrooming, I don’t think we would have $50 billion in revenue. We must have at least a few people buying in our stores.”

Do you agree? Is showrooming a real problem for retailers, or a myth? Join the discussion in the comments of this post.

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Comments
  • Cap

    RE: Whether the concept of "Showrooming" exists.

    I believe we used to call it "Shopping". That’s what customers do. To think otherwise is ignorant at best. A denial of reality.

    "Showrooming" is simply the latest face on an age-old problem. The solutions are still the same.
    Unless, of course, you view a salesforce as a necessary inconvenience toward diverting household disposable income through your retail modality. Then, "Showrooming" becomes some new unheralded beast of mythic proportion behind which you can hide.

    I "Showroom" often. I still try to give the brick and mortar an opportunity. Hell, I’m standing there, I want it, and if the store is remotely competitive, why wait? Plus, it’s nice to be able to deal with a local person it there is a problem down the road (bean counters, see "added value", subtopic "consumer perspective").

    My "showrooming" first started when I purchased a pair of hiking sticks ($150!) from my local "specialist" chain. I broke one on my first hike and returned to the store to see how they could help me. In any store in which I worked, at the very least we would send them back to the manufacturer, or order parts – no charge if they were purchased from us. The salesman told me to "call the manufacturer" – end of story. Also, end of loyalty.

  • Cap

    In previous comment, I eluded to the fact that "showrooming/shopping/just looking, etc" has a solution.
    That solution is a return to the commission-driven sales force.

    Commission is the positive engery that counterbalances apathy and lethargy. It provides the motivation to actually understand and solve customer problems. To learn product and selling skills; to show up on time; hell, to make sure the demos work and the floor is clean!

    Senior management typically do not understand this basic phenomenon because their background is typically not "lowly" sales, but more likely marketing/accounting/statistics.

    Let’s face it, everyone who is good at what they do desires recognition and respect. And why not? A good salesperson can overcome nearly any obstacle. The trouble is that no good salesperson remains in an environment where he is treated no differently from the "slug" on the floor. Lack of commission is an environment "self-selecting" toward the lowest common denominator.

    I believe that recognizing and correcting this, is fundamental to Joly’s challenge.

  • disruptive

    Comparison shopping has always exsisted and "showrooming" is just a new varition of this. The question should not be "what’s your opionion of showrooming" it should be "What unique value does Best Buy offer potential customers and how can they leverage that value." People know there is cheaper coffee but they buy Starbucks anyway. Value, not price alone attracts customers. Best Buy still can’t state it’s value proposition clearly and quickly implying they still haven’t figured it out.

  • See Ya BBY!

    Out of touch. Has he been in store? I am in the business and showrooming is 100% in play. Smart phone in hand, camera scan bar code, software to shop . HMM! BBY $1000 Amazon $700 delivered in a day. What would you do??

  • Robert Heiblim

    What is becoming increasingly clear is that the retail environment has changed and continues to change. There is also no real question that physical connection to products are required for many people to consider or complete purchases, so rather than consider "showrooming" the effect is clearly on pricing transparency. Best Buy is much larger than their online competitors but they do put price pressure out there. M.Joly will have many things to consider and these effects are just one among them, but anyone in the market would be well advised not to "run away" from the changing habits of consumers and rather "run toward" them. Meanwhile, we all wish Best Buy success and it is good to hear confidence from the new CEO as this attitude will be key moving forward.

  • jeffoheir

    Showrooming is far from a myth. But, to put it within Joly’s context, Best Buy has a helluva lot more problems than showrooming. Joly’s probably sick of the executives whining about show rooming when they should be doing more to use it to their advantage and to fix other lingering problems. Sorry, but if a company like Best Buy, which still has tremendous resources despite its sales slumps, can’t figure out how to turn showrooming consumers into paying customers, it doesn’t deserve to be in business.

  • Kent

    They have store close to customers. That is invincible value to Brick and Mortal stores. But at the site, they are not communicating well to consumers. I don’t think they have clear direction. As "See Ya BBY’ below mentioned, CEO has been to store but did he go to worse performing store? If not, that’s could be very different experience for him.
    Wasting space, so be more creative. Then make more value added sales. Showing product on shelves are basics. Wholefoods, for example, are doing business with very high price for same product. Customer feels better shopping experience there and pay for the experience w/ quality. Amazon is just focusing low cost operation and profit level is very very thin. BestBuy should not be in the low cost game. They need hiring better marketing executive team for reforming store concept. Even at the same priced product, I would go there and spend my money at the store for the value added experience.

  • EJS

    Pioneer Receiver, Best Buy $599.00 Amazon $459.00. Just A sample.

    Thanks
    EJS

  • IND Veteran

    I suppose much liike Washington politicians are clueless to the real world that "We Commoners" live in, Joly may be following suit; or it’s simply a facade to protect BB’s shareholders from bailing… If it looks like a duck…. Good Luck Qbert.

  • Cap

    DISRUPTIVE: is correct, of course. It’s value, not price. I’ve never, in 30+ years of selling, ever met a customer who’s only goal was the lowest price.

    The trick is having a clear value proposition and successfully relating that message to the consumer. And, as Tweeter used to say, making sure that the "story is not better than the store".
    "Corporate" believes 90% this messaging is done in media. I suggest that bulk of this impression is made (in the store) right on the sales floor. Now, how are you going to entrust your "slugs" with that?

    Answer: Commission!
    Please name ANY sales floor related problem/solution in which commission cannot play a key role.
    So then, the problem lies not on the floor, but in management’s failure to comprehend selling/sales floor dynamics.

    Who here ever worked in a great store in which the salespeople were commissioned based on profit margin?
    "You’re here for our weekly loss leader, sir?" Hell NO. "Have you every heard of this brand, sir? It is a bit more, but from what you’ve told me…"

    Mr. Joly, BB will always be in trouble (until BK) unless you can make the dramatization, above, the norm in your stores.

  • don bendell

    The manufactures have not been controlling their distribution! Some are starting to do a better job but is it too late? Only in the last year or so some companies started to take aggressive stances in online pricing and distribution. Amazon is the wholesale giant now, the problem is they are not in it to grow the business like Best Buy. The old days shopping was get in the car and drive from store to store. Now it is just a flip of the phone.

    Best Buy needs a smaller footprint and needs to supported by manufactures that are going to control their distribution and online advertised pricing. EJS comment is well stated! Many manufactures are still high in the clouds like Jay Vandenbree of LG. He and the rest think that a saleman on the salesfloor should be able to up-sell or close the sale when the customer is in the store. These are the attitudes of top executives that have never seen the real world and because their numbers look good are too weak to see the long term effects of showrooming. That salesman has very low odds closing a $800 TV sale when you can get it online for $630.00. The higher the sale the bigger the savings to the customer online.

    Best Buy;
    1) drop the manufactures that don’t support you and the rest of this industry
    2) reduce square footage
    3) train your staff and better pay on bigger categories
    4) get out the private label stuff its crap!

  • had it with the rich

    the reason they are a 50 billion dollar company has nothing to do with customers buying things. it has to do with Samsung, LG, Sony, Panasonic and other big companies paying Best Buy that money to put up big displays of their product in their stores! The employees, the people who actualy do the work, are told time and time again that there is "no margin" in electronics. they are constantly getting their hours cut and their benifits reduced. Mr. Joly has just proved he cannot lead Best Buy anywhere. What a ridiculous thing to say!!!!

  • Disruptive

    Thanks for the shout-out Cap. Though I agree that the profit motive (commission) motivates salespeople as well as companies alike, the issue here is, "What is the BestBuy value proposition?" – We are blue? We may no longer offer the best buy but have a lot of stuff on display? We like you and we are learning to act that way? Starbucks value proposition goes something like "Great product, clean stores and bathrooms, friendly knowlegeable staff, and professional grade brewing all combune to offer a great product in a great atmosphere." The Starbucks CEO states he wanted his stores to become the "third place" for people to hang out after – Home -place #1 and Work place #2. I think he’s won that battle with a clearly defined vision and value. If BestBuy won’t pay me to advise them, perhaps they should contact Howard Mark Schultz of Starbucks…or read his book.

  • Cap

    DISRUPTIVE: All true. I’m sure we are just coming at BB’s problem from opposite sides of the same coin.
    True, any business should start with a good grasp of some general concepts: who are we and what are we (can we) be good at; who are our customers (what do they want); where is sufficient overlap to make a successful business relationship.

    I’m a proponent of commission as an indispensable tool in directing the business, once the retailer has developed a set a strategies to drive their value proposition . Perhaps I’m taking too much for granted (!)

    By the way, KNOWLEDGE has always been the "value" in the CE retailers’ value proposition. I scoffed at the BB name when they first rolled out. Imagine, basing a business model on the impossibility of the lowest price!

    If you are savvy enough to have made the analyses above (and it does seem BB is struggling with his), then how do you implement strategies so derived? The rubber hits the road on the sales floor. You can have the best value proposition in the world, but it must be successfully related to the customer right on through to money; "pull your car around front, sir…" A video game playing Burger King reject is presently entrusted with this crucial role. If one appreciates the fact that it all ultimately "happens on the floor", then I’d say the salesperson’s position is more important to BB’s survival than Mr. Jolly’s.

    So, a retailer must attract and retain the best salespeople; who show up clean and on time, know product better than the consumer, care, and CLOSE.
    ANYONE: Explain how this can be achieved without commission. I’d love to hear it!

    To summarize: A good value proposition is absolutely essential, but ineffective/squandered in the present, salaried-only, sales floor environment.

  • Disruptive

    The question is – Are Best Buy’s Showrooming Troubles a Myth? What Do You Think?
    This article in the current issue of dealerscope say Showrooming is no myth. http://www.dealerscope.com/article/adjust-way-consumers-want-buy/1
    Despite the protests of the BestBuy CEO, smartphone use is now in play with over 50 percent of USA celphone users – and they aren’t using em just for talk…

  • Cap

    OK. I’ve changed my mind.
    BB’s problem is bigger than requiring mere refinements to their current methodology. And so, BB needs a complete transformation.

    I still contend that "Showrooming" is simply the latest iteration of comparison shopping dating back to before trading bazaars. BUT BB’s PROBLEM IS BIGGER THAN THAT…
    What is killing BB is not a new method of shopping. Rather it is a new method of BUYING.

    Consumers don’t want to traipse all over town, dealing with drones, only to come home half a day later tired and unsatisfied (thank you BB!). So, they have become increasingly comfortable in doing online research, pushing a few buttons, and having products magically appear on their doorsteps. And, there’s the future.

    So, if consumers "showroom", GIVE THEM A SHOW ROOM!
    Scrap the "mega-store" approach. Replace them with small boutique, life style oriented, displays. Have few, but genuinely talented salespeople. Stock only the most popular items and promise rapid delivery of the rest.

    Then, the only real price difference will be SALES TAX. And frankly, the current system is truly a disservice to everyone. It’s not good for the brick-and-mortar, it’s not fair to society as it pushes the displaced tax burden onto those who aren’t buying. The current tax codes, then, may be their biggest challenge.

  • don bendell

    Cap: I agree so what to boutique. BUT! The real problem is online price "whoring" with Amazon and guys like AUDIO & VIDEO. If shoppers are becomming more "smart" using their phones to price check then how can any "brick n mortar" match price. These guys I mentioned above are selling at mere wholesale! The manufactures have to do something about their products being sold out to the lowest bidder online. From mounts to TV’s I could just about fill my showroom wtih Amazon product. So the real question is "why is someone going to buy from you, when they can save $hundreds going online? Oh, 2 day free freight and no sales tax! Please don’t try with the Jay Vandenbree of "A good salesperson can upsell them at the time". Salesman are just being used to shop online.

    In the old days it was the mail order catalog, but you had to reach that customer through mail. Now its just a search engine. Best Buy has no chance until the manufactures decide to support them and us (other retailers).

    Retailers! Start droping those manufactures that do not support your business. Align yourself with manufactures that allow you to make a profit. Do it now or you too will end up like Best Buy.

  • Disruptive

    I agree Don. In other words, "What possible value does a brick and mortar showroom offer to a customer today especially if it is disadvantaged price-wise?" and "Why would a person want./need a brick and mortar store at all?" The answer lies with Apple. Why would Apple invest so heavily in Brick and Mortar stores when their entire line is for sale online? Because people need knowlegable and friendly service and help – questions faciliate the sales. People also like to "try before they buy" – One solution to leverage the physical store is to "sell the physical showroom experience" Charge $1.00 for entry to the store (which screens out of the non-buying losers) Make the store cool enough to pay $1.00 to enter. The $1.00 can be credited back to the best buy card and doubled if it is used toward a BestBuy purchase of any kind. This way, if a customer comes wants to use BestBuy just for it’s physical showroom and buy elsewhere, BB could monetize the need and hopefully convert the buyer while in the store…

  • Brian Mitchell

    Well the major difference I see between Apple and Best Buy is that Apple is the manufacturer of a brand that has created innovative products that have changed our lives. Their customers LOVE their products and cant imagine life without them. I’m pretty sure NO ONE feels that way about BB. Some people may call Best Buy a "brand" but I don’t think of them that way. I have been in the Consumer Electronics business for almost 30 years and there is NOTHING innovative or unique about Best Buy that would draw me into one of their stores. Did I use to go? Yes. If you wanted the latest selection of new and previously released music on CD, Best Buy had everyone beat. Then came the Ipod and Itunes, and the ability to sample and download only the songs you samples and liked! How Innovative! Then along came Amazon. Imagine my delight in purchasing a 50" LCD and paying no tax or shipping and have the delivery guy help me carry the unit into my house! Awesome! Why do I need a BB? Really, the only thing I see that will help Brick and Mortar retailers like Best Buy is the Internet Sales Tax bill and the Manufacturers really policing MAP pricing for ALL retailers, either online or brick and mortar. If the Manufacturers really want to protect value and margins for their retailers they need to be proactive with this. And Best Buy, give me a REASON to come to your store. Right now, there is not. Maybe now BB will see it is worth it to invest in PEOPLE that have the KNOWLEDGE and SALES/PEOPLE/COMMUNICATION skills to connect with customers and prove that there is a long term value to gaining customer trust and loyalty.

  • Cap

    Correct, both of you. Apple came to mind when I suggested boutique showrooms for BB.
    However, Apple does something special necessary to pull this off, and Don touched on it – unique product.

    In response to an article here about a year ago regarding buying groups, I suggested that, to be effective, they should really be "Sourcing Groups".

    Certainly, there are enough members to bankroll the design and manufacture of sufficiently proprietary brands. Start with a mission statement and list of objectives. Meet with retailers, get input, and assign a "buy in". Refine goals, parameters… then specifics. Hire a designer for a unique style a feature set, etc. Also a brand/sales manager. Franchise agreements, etc. Transhipping, again, becomes a hanging offense. Of course, I didn’t have BB in mind when I made this suggestion…

    So, the committed retailers pony up seed money according to their footprint. With a modest objective, say a line of AV receivers, $150-200k should be enough to get the ball rolling well into prototyping…

  • Disruptive

    I agree that perhaps Apple is a bad comparison since they are the manufacturer and the retailer. However, If you look at this string, early on I said that BestBuy has no value proposition – unfortunatley that may be true for many brick and mortars. I’m not sure they have any competitive advantage. I’m also not certain "friendly and knowlegable salespeople" are going to help if the price point is wrong. Radioshack tried that and is down 80% in value this year alone and yesterday fired their CEO. The sales tax bill may help but don’t hold your breath for manufactures to be able to "hold" the big online retailers to anything, they are not in a position to demand much from the bigs…

  • Disruptive
  • disruptive

    Here is an interesting take: http://venturebeat.com/2012/11/08/retailers-embrace-showrooming/ Also, the best, friendliest, and most knowledgeable sale team anywhere is at the Mac store and they don’t pay commissions…