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business newsGoliath vs. Goliath: Best Buy Takes On Wal-Mart
By
Scott Reeves Mar 16, 2009 11:20 am
Big-box giants in consumer-electronics battle royale.
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Wal-Mart says consumer electronics drove much of February’s 5.1% increase in same-store sales, or sales at stores open at least a year, as the retailing giant increased its selection of cell phones, video games and major brand TV sets.
Few can compete head-on with Wal-Mart on price, and Best Buy plans to stress customer service as it slugs it out in the aisles with the retailing giant, the Wall Street Journal reports.
Best Buy hopes to counter Wal-Mart’s ruthless price-cutting by stressing customer service. Best Buy will allow customers to see their image captured by a high-definition video camera, or get hands-on experience with a new video game. The bet: Allowing customers to interact with the merchandise before making a purchase at Best Buy beats strolling down aisles stacked high with merchandise -- but devoid of staff -- at Wal-Mart.
It’s a reasonable bet - but customers are increasingly shopping on price, and a no-frills approach would appear to give Wal-Mart the advantage.
Best Buy now leads Wal-Mart in the sales of consumer electronics, but Wal-Mart is closing the gap in key sectors such as flat-panel TVs. Best Buy has struggled in this area, and has reduced its inventory.
Best Buy said same-store sales fell 6.5% in December. and analysts expect fourth-quarter earnings to drop as much as 20%. That might create an opening for Wal-Mart.
Brian Dunn, Best Buy’s new chief operating officer, rose through the sales ranks and believes customers will respond favorably to tips that help them make informed buying decisions. Best Buy plans to build on its well-informed sales force while matching Wal-Mart on price.
That’s a winning combination - if Best Buy can pull it off. The danger is that smart customers will pump Best Buy’s knowledgeable sales staff for information and then make the purchase at Wal-Mart, where prices may be perceived to be lower.
Circuit City couldn’t compete and closed the last of its stores this year, putting its customers up for grabs. RadioShack (RSH) must respond quickly to stay in the game.
Fierce competition is good news for shoppers - assuming significant numbers start buying again.
No postion in stocks mentioned.
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