Earlier in October, brick-and-mortar electronics retailer Best Buy (NYSE:BBY) announced that it would match the prices of some products offered online by competitors. By most estimates, it’s a bold maneuver. The company’s stock has been bleeding value for years, coming down over 13 percent in the last month alone.
Mounting competition from destination shopping centers such as Wal-Mart (NYSE:WMT) and online retailers like Amazon.com (NASDAQ:AMZN) is largely to blame. Holiday price matching is designed to keep shoppers from treating their trip to Best Buy as a glorified window shopping experience, browsing the goods and then returning home to shop online for a better price.
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So-called “showrooming” is a legitimate concern that requires a serious solution. According to The Wall Street Journal, a study by William Blair & Co. points out that on average, Best Buy’s prices are 16 percent higher than Amazon’s.
But even with perfect price matching— which is not guaranteed given a number of caveats — Best Buy still pays a “convenience” tax. That is, at the same price point, why drive to a store? The added value becomes delivery fees and instant gratification, and that’s still a tough sell. FedEx (NYSE:FDX) is expecting to have its busiest season ever, indicating that this holiday season more and more shoppers will be turning to the Internet as their point of purchase.
That being said, PayPal (NASDAQ:EBAY) is joining the price-matching party, adding another benefit of using the service on top of other incentives like free return shipping and the Bill Me Later service. If you purchase an eligible product through PayPal that is under $250 and then find it for a lower price somewhere else within 30 days, the company will refund you the difference. The restrictions make this a pretty reasonable, but still pretty enticing deal.
The big battle is not between the brick-and-mortar stores and the online retailers, but among the online retailers themselves. It will be interesting to see how the sales environment evolves during the holiday season, and whose incentive programs work best.
For its part, Amazon is getting busy with Black Friday deals.