Monday, December 20, 2010

DUH: Best Buy Sticks Head In The Sand By Thinking Consumers Aren't Aware Of Competitor Pricing; Decimates Sales, Stock

Here's a major news flash: Big box stores win the game by using their monopoly might to price themselves competitively against online retailers. Tell that to Best Buy, which decided that despite a walloped economy, its regal brand name will prevail.

Altogether now: DUH!

The Wall Street Journal reports that as a result of its arrogant pricing strategy, U.S. sales at stores, call centers and websites dropped 5% from a year ago, while the nation's largest electronics dealer's stock tumbled 18%. What's obvious to savvy consumers, as The New York Times quotes an analyst, is that the consumer electronics market is ”dramatically shifting away from stores and toward online."

Analysts note that Best Buy "misfired this holiday season by deciding not to compete more aggressively against competitors Wal-Mart and Amazon in favor of preserving profits." Best Buy estimates its inventory levels swelled 8% over the prior year.

Adding stupidity to naivety, Best Buy's CFO says the chain refuses to discount during the remaining holiday season, because, "The items on hand are of good quality." Uh, as are those at Amazon and everywhere else, sir. Does Best Buy think consumers are that daft?

Apparently, so. The company blames lackluster sales not on non-competitive prices, but instead on lack of demand for staple items like HDTVs, notebook computers and videogames. The company also blames its woes on slow consumer adoption of pricy new technologies such as 3-D and Internet-enabled televisions—gimmicks, in my book, that have little lasting future.

Say so long, Best Buy! If you don't get the big picture—competitive pricing—soon you'll be joining the ranks of Blockbuster as a retail memory.