Despite growing pressures from low-cost e-commerce titans, Best Buy Co. is betting on its physical store.
The electronics retailer is borrowing from the department-store model of devoting separate space to high-profile brands (in this case, Microsoft, Samsung and Apple), counting on them to lure customers to Best Buy and its Future Shop outlets.
Even amid the trend known as “showrooming,” in which consumers go to stores such as Best Buy to check out products but then buy them from lower-priced websites, the Minnesota-based retailer is investing in its bricks-and-mortar stores to keep shoppers coming back – and opening their wallets.
On Wednesday, the Canadian division launched a Microsoft Windows shop inside a midtown Toronto Best Buy, set on a hardwood floor rather than the carpeting and sporting shiny white display tables to help differentiate the space. It’s one of 105 such shop-in-shops to be introduced this year at Best Buy Canada, along with 500 in the United States.
“To me, it’s a reverse showroom,” Ron Wilson, president of Best Buy Canada, said after touring the new installation. “The Web is the showroom, and the store is where people are going to buy.”
Retailers, ranging from electronics to toy and book specialists are fighting low-cost behemoths such as Amazon.com Inc. by finding new ways to draw customers with well-appointed in-store shops, interactive displays and beefed-up service.
Under a new leader, Best Buy has been focusing on closing underperforming stores, slashing costs and improving its remaining stores, as well as its own e-commerce sites in a bid to bolster its results.
So far the initiatives are bearing fruit. In Best Buy’s international division, which includes Canada, sales at outlets open a year or more, a key retail measure, fell 1.8 per cent in its second quarter, compared with a “double-digit” decline in last year’s fourth quarter.
“The Best Buy recovery still has substantial legs,” Brian Nagel, an analyst at Oppenheimer, said in a recent note.
Mr. Wilson, a company veteran who took the top job in Canada in March, is racing to step up the look of its new in-store shops and prepare for the crucial holiday shopping season amid intensifying competition.
“We have a lot of positive momentum and that momentum will continue,” he said, predicting that same-store sales will return to positive territory, without elaborating.
Best Buy Canada, which closed 15 big-box stores earlier this year, has launched some smaller outlets of 5,000 square feet. And it has rolled out more Best Buy Mobile outlets, also smaller shops, to meet mounting demand for mobile devices.
At the same time, it has focused on its e-commerce, providing a “reserve and pickup” service by which customers can order on the Web and pick up items at stores. The company’s research found that 85 per cent of its customers do research on its website before coming into the store, Mr. Wilson noted. “Customers want to come into the store to experience the product, especially as product is changing as quickly as it is.”
The company also has expanded its online site to include a wide array of merchandise beyond electronics, including furniture, toys and baby gear. Year to date, Canadian online sales have more than doubled from a year ago, he said.
Jason Anderson, vice-president of retail sales at Microsoft Canada Inc., said Best Buy is an important retailer for the company because it is the single largest seller of Windows products.