Bloomberg News

Best Buy May Reduce Online Prices to Compete With Amazon

October 03, 2012

Best Buy May Reduce Online Prices to Compete With Amazon

Best Buy Co., which generates about 6 percent of sales online, is increasing its efforts to remain competitive. Photographer: David Paul Morris/Bloomberg

Best Buy Co. (BBY:US), the world’s largest consumer-electronics retailer, may cut online prices as it heads into the holiday shopping season to compete with rivals such as Amazon.com Inc. (AMZN:US)

Best Buy sets prices for televisions, tablet computers and smartphones based upon “what is selling online, what is selling in the store, what is selling with the competition,” Stephen Gillett, president of digital, global marketing and strategy, said today in an interview. The retailer may reduce prices “to make sure that we are competitive across those categories.”

Best Buy, which generates about 6 percent of sales (BBY:US) online, is beefing up efforts under new Chief Executive Officer Hubert Joly. The retailer today hired a new e-commerce chief, former Expedia Inc. (EXPE:US) President Scott Durchslag, as total revenue heads for its first annual decline, according to data (BBY:US) compiled by Bloomberg.

Durchslag, 46, starts Oct. 8 as president of online and global e-commerce, the Richfield, Minnesota-based retailer said. A former consulting colleague of Joly, he reports to Gillett, 36, after the two worked together on software startup ventures in Silicon Valley around 2001.

Offering competitive prices is “just the price to play” as consumers increasingly compare prices using smartphones and the Web, Durchslag said in an interview today from Chicago.

Promotional Environment

Consumers “are trying to reach a general conclusion that they are not having to pay more than they need to,” Durchslag said. “In consumer electronics, they’re looking at the prices of major items, maybe it’s an iPhone 5, maybe it’s a MacBook Pro, maybe it’s the new Toshiba Windows 8 computer, maybe it’s the new the Samsung smart LED TV.”

Best Buy rose (BBY:US) 4.7 percent to $17.76 at the close in New York. The shares have dropped 24 percent this year.

The promotional environment for consumer electronics will probably remain “intense” this year, according to Alan Rifkin, an analyst at Barclays Plc in New York. He rates Best Buy as equal weight, equivalent of a hold recommendation.

“The intense competition that drove margin contraction in 2011 is likely to continue for the foreseeable future,” Rifkin wrote in an Oct. 2 note.

Best Buy’s revenue (BBY:US) may decline 2.9 percent to $49.2 billion in its current fiscal year, according to the average of 19 analysts’ estimates (BBY:US) compiled by Bloomberg. The company had increased annual revenue every year since it started trading on the Nasdaq Stock Market in 1985, according to Sue Busch, a company spokeswoman.

The company generates about $3 billion of revenue from online sales, Joly said in an interview Sept. 6.

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • BBY
    (Best Buy Co Inc)
    • $24.18 USD
    • -0.09
    • -0.35%
  • AMZN
    (Amazon.com Inc)
    • $325.73 USD
    • 1.15
    • 0.35%
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