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Showrooming at Best Buy

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Jessica Hohne

on 23 February 2016

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Transcript of Showrooming at Best Buy

Showrooming at Best Buy
Non-pricing Strategies
People based service (Best Buy) and Equipment based service (Amazon)
Cost-efficient operating leverage is difficult to achieve
Value based pricing strategy that defined by customer’s perceptions and competitions
Economy of scales are achieved through its size and mass marketing campaign
Developing new services:create Best Buy Android store app
Barrier to entry
Marketing Concepts
Store-Owned & Third Party Apps
Assortment Changes
Pricing Policy Changes
Rewarding Loyalty
"Just looking" fee
Case Overview
-What is Showrooming?
-Demographics/Psychographics
-Marketing Concepts
-Other non-pricing strategies
-Can Best Buy Compete?
-How does Best Buy stack up against the competition?
-Potential benefits?
What are the demographic and psychographic characteristics of the consumers who engage in showrooming?
What is showrooming?
5 Dimensions of Service Quality
Strategy Difference in Service Business
Should Best Buy have invested more time/resources in any of them?
Best Buy's Counter-Attacks
Block in-store Barcodes
Exclusive Products
Own Shopping App
Partnered with Shopkick
Reward Zone Loyalty Program
What is Showrooming?
Customers shopping at the store, but buying online
Background
2012 store traffic increased, but sales decreasing?
After 2008 online shopping skyrocketed (Amazon Price - Comparison App?)
Fighting Showrooming/Alternative strategies
Successful/unsuccessful strategies
Hit Harder than most (driven by electronics)
Sales declined every year since 2007, stock fell, competition increased
Defensive strategies: Price Matching
Embracing the new Image
Embracing Showrooming
Adapting to the customers needs
Opportunity to showcase products
Improve customer experience
Provides market research
Form of advertising
Reliability: Reliability of quality good purchased, return policy and after service care
Assurance: knowledge and confidence projected by competent employees
Responsiveness: keep customer informed and provide prompt attention and service to customers on need basis
Empathy: understanding and accommodating customer’s needs with patience and caring, convenient store hours
Tangibles: modern and visually appealing facility, products and displays; professionalism, welcoming atmosphere along with promotional deals and coupons entice impulsive buying behaviors
Retail showrooming and ROPO
Showrooming Study Conducted
by
Columbia Business School
Over 3,000 consumers in the US, UK, and Canada
(currently using their mobile computing devices as part of their shopping experience in retail stores.)
Who are these shoppers?
What are they doing with their mobile devices in-store and why?
Implications for retailers to a changing consumer landscape
Sample Findings
Demographics
21% of all consumers are "M-Shoppers" - using mobile devices while in retail stores to assist in their shopping decision
74% of "M-Shoppers" are over 29 years old - they are not just Millennial Generation
It's Not Always About Showrooming
Only 6% of "M-Shoppers" are "Exploiters" - already planning to buy online and always opting for the lowest price
30% are "Traditionalists" - committed to purchasing in-store and only using their smartphones to find more information
Convenience, urgency, and immediacy - top three reasons that "M-Shoppers" buy in-store even after they find the same product cheaper online
48% of "M-Shoppers" are more likely to purchase products in-store despite equal or cheaper prices online when they are a loyalty member
Top Reasons for "M-Shopping"
Does Best Buy Want to
Eliminate Showrooming?
Ultimately, can a traditional brick-and-mortar retailer like Best Buy afford to permanently match its online competition?
What are your recommendations for Best Buy?
Team Consensus
Yes, Best Buy can compete on price even with higher operating costs.
How?
Finance's
Reduce Operating Costs:
Use economies of scale to obtain price advantages

Optimize supply chain and inventory management
Internet of things

Consolidate stores where needed
Boost Sales per Sq. Ft.
Optimize Floor Layout
Store within a store concepts
Spaces paid for by brands

Adjust product mix
Concentrate on products that benefit from in-store shopping
Make Pricing a Priority
Best Buy & Costco

Offer in store specials and discounts (Internet of Things)

Continuity between online and in-store
Differentiate BB with Services
Demonstrations, repairs, warranties, and tutorials

Obtain rights for special BB only releases

Work with vendors to gain exclusive early release rights
Make Customer Service/Experience the #1 Priority
Develop highly trained staff with a customer first focus

Make help easily accessible

Streamline the in-store experience
Only 'customer value added' experiences (mobile ch. outs)
Questions?
A downloadable copy of this research report and a complete list of the survey questions can be obtained at:
http://www.gsb.columbia.edu/globalbrands/research/m-sjopper-study
No way - here's why:
Embrace reality or become the next Circuit City and CompUSA
Consumers have changed what they want, Best Buy needs to evolve
Invest in a new strategy
"Internet Showroom"
“Best Buy is one of the most impressive turnarounds in retail over the last decade. Three years ago the conventional wisdom was they were a carcass that had just been run over by Amazon.”
- Scott Galloway, Professor at NYU Stern and L2 Founder
Core Competitive Advantage
Strong brand recognition
Established distribution networks
Competitive pricing
Better service experience
Full transcript