Best Buy is confident that its latest policy change will kill "showrooming" in its stores for good.
Starting on March 3, the retailer will price match all local retail competitors, along with 19 "major online competitors" in all product categories, whenever a customer asks for it,
This statement assumes: “Amazon Is Dead”. Far From It.
For some time now, we’ve been highlighting our EVERGREEN Pricing Strategy. (Chart 1) It’s similar to what Amazon and others use successfully.
In a nutshell: “Use higher profits from one product group, or service, to offset competitive pressure on a key product.”
Amazon uses their long time “EVERGREEN” pricing strategy most effectively, applying their “Evergreen Profits” from Sales Commissions from their 4 million Online Third Party Sellers to maintain overall growth and margins while lowering key product prices, long or short term, as need be.
Our EVERGREEN Pricing Strategy is similar, except you use “Evergreen Profits” from Sales Commissions from your 600,000 participating Physical Third Party Sellers (Local stores and restaurants) to lower your in-store and/or online product prices, as need be.
Amazon’s Siege Is On:
It’s not just Best Buy that hopes to keep Showrooming under control with price matching. So are Target and RadioShack, amongst others.
However, price matching, declared or otherwise, without a long-term offsetting “EVERGREEN” profit source has always been a very risky and uncertain long term DEFENSIVE strategy,
AND it further encourages consumers to use their ever-increasing number of Smartphones in your stores against your ongoing best interests.
Particularly, it invites price wars by web-only retailers like Amazon who measures profits in free cash flow, not margins:
For example, see these excerpts from this Bloomberg article:
· Amazon scares everyone. There are multiple reasons, but a big one was summarized by Amazon Chief Executive Officer Jeff Bezos in a Harvard Business Review interview posted lasted week, which ranked Bezos as one of the top executives in the world.
“Percentage margins are not one of the things we are seeking to optimize,” Bezos said, to make the counter-intuitive point that he does not particularly care about making money.
“It’s the absolute dollar free cash flow per share that you want to maximize. If you can do that by lowering margins, we would do that.
Free cash flow, that’s something investors can spend.”
· Bezos has been reliably saying this sort of thing for years. To him, it’s still a land grab. So he’s prepared to cut prices to the bone and add all those freebies to cultivate customer loyalty and drive sales growth.
Then he reinvests it all in more low prices and further expansion, driving additional customer loyalty.
· If you’re a competitor, it’s the Bermuda triangle of business.
· And by the way, low margins to Bezos are a competitive advantage.
Jeff Bezos is a Past Master at using his “Evergreen Pricing” as a Sales & Marketing tool effectively.
You Need The Same OFFENSIVE Tool to survive and win. Only your SuperCyberCenter© with 600,000 Third Party Seller local merchants is that tool. (see BEST BUY example in Chart 1 below)
Without such an aggressive long term OFFENSIVE tool to generate a ‘War Chest”, you will not be able to withstand Amazon’s siege against your margins using their “Evergreen Price-Tweaking” to the “Ouch No-Go” level.
And Amazon can do this for years until they win, as they did against Circuit City, Borders, Blockbuster and so many others.
The Worst Part For You Is:
Your “price-matching” strategy backs you into a corner – it simply tells Jeff Bezos how weak and therefore vulnerable you really are,
You need a permanent Offensive pricing / marketing strategy instead of a Defensive position, expecting the consumer to do your pricing job for you.
AND Amazon will further encourage their Prime members with the convenience and cost savings of FREE Delivery against you.
All Bezos has to do is concentrate on the obvious and weakest competitor(s) first to simply and inexpensively lessen his siege time and costs against you.
His first target is ALL the top 25 Bricks and Mortar retailers in America, including Walmart – Why Not ?
After all – time is on Bezos’ side - he has all the time in the world – he has nothing to lose, only you do !
The Only Long Term Permanent Solution In Sight: Your SuperCyberCenter with 1-Hour Instant Gratification with Lower Prices and Wider Choices than Amazon.
Over the last several years, since E-commerce clearly emerged, (Chart 1) you’ve tried everything else, including price matching, and nothing has stopped Amazon’s phenomenal growth against you. In fact it continues to increase.
You’ve also resisted the only Game-Changing solution in sight (Your SuperCyberCenter – see Chart 1 for Best Buy example) for all the standard reasons such powerful new innovative solutions have always had to overcome. Trying to do something like this alone looks easy, but it is deceptively difficult – see the first line in Chart 6.
But when you finally see the riches of the promised land, as in all our other Industry-Changing successes, (Chart 5) you’ll never want to leave. (Charts 1, 2 & 3). We Promise.
To truly turn Showrooming in your favor, only a SuperCyberCenter can do it quickly, efficiently & profitably by meeting all three major consumer demands that collectively Amazon can never match:
(1) Better LONG TERM Pricing than Amazon (supported by Evergreen profits to you);
(2) Much Wider Product Choice (including time-sensitive groceries, restaurants & fast food – with profit from sales commissions to you (Chart 1) as Amazon does so successfully);
(3) Super Convenience – 1-HOUR Fulfillment with Delivery (usually in 30 to 45 minutes); The Retail Holy Grail (Chart 4)
And, it’s not just Amazon & Showrooming to Fear. Google, Microsoft and eBay arealso Gearing Up.
Having the ability to lower prices LONG TERM (while increasing your sales & profits – as Walmart did) has always been “The Retail Holy Grail”.
Your ONLY choices are: Be “slowly eaten alive” by Amazon or do something powerful to “Change-The-Game” to the consumer’s obvious #1 choice: “One-Hour Instant Gratification with Lower Prices & much Wider Choices”.
In today’s retail world, Amazon is Goliath, but we are David – Chart 1 says it all.
All you need to do is: Make That Call to us to schedule your initial trials. Prepare to assuredly win this decisive battle.
We’ll answer ANY remaining questions you may have that are blocking you from achieving the Sales & Profits in Charts 1, 2 & 3.
As well as stopping Amazon’s “Showrooming Siege” against you, Dead In Its Tracks.
Gail Nichols, Vice Chair