After closing its Future Shop chain in late March, Best Buy Canada is now betting on an unlikely source to help shore up its business: rival retailers.
The country’s largest electronics retailer, which has struggled with declining sales at existing stores, is preparing to invite other merchants to sell their products on its e-commerce site.
Best Buy will reveal on Wednesday that it is launching in the fall an online “marketplace” in a move that can expand its product offerings into more categories and help it take on digital powerhouses eBay.ca and Amazon.ca.
“The market is underserved in Canada,” Thierry Hay-Sabourin, vice-president of e-commerce at Best Buy Canada, said in an interview. “There is massive opportunity for Canadian retailers to leap frog the development effort of total-retail by partnering with us. We’re willing to extend this opportunity even to our competitors.”
Teaming with rivals is an unconventional route to take in the highly competitive retail market, reflecting the urgency among merchants to find new ways to re-imagine their businesses in a digital age. Under the new strategy, Best Buy will receive a commission on sales of other retailers’ goods, while giving those merchants broader exposure than they can achieve on their own.
As Best Buy shrinks its store network, having closed 66 of its 258 stores just over a month ago, it’s now staking more of its growth plans on its well-established e-commerce site, facing off against even larger players such as U.S.-based Amazon.com Inc.
“They’re all trying to compete with Amazon,” said Peter Sheldon, vice-president and principal analyst at technology specialist Forrester Research Inc. of Cambridge, Mass.
“A ‘marketplace’ is a very low-risk way of retailers like Best Buy to massively increase their assortment into new merchandise categories, which usually we would not associate with Best Buy.”
South of the border, an array of players, including parent Best Buy Co., already are selling the wares of other retailers on their websites, taking a cut of their sales.
And eBay Inc.’s strategy has long entailed selling products of other retailers including, in Canada, home improvement specialist Lowe’s, office supplies purveyor Staples, Toys “R” Us and camera retailer Henry’s.
“It’s a great business model,” said Andrea Stairs, managing director of eBay Canada. “People are looking to be able to go to a single site and buy a variety of brands and a variety of different categories. … We know what works. It’s not something that you just turn on and is an easy thing to accomplish.”
While retailers don’t usually work in lockstep, the teamwork at eBay shows signs of paying off. In March, it attracted more than 13.8 million unique visitors to its sites, a 4-per-cent lift from a year earlier, making eBay the top e-commerce destination in Canada, according to researcher comScore.
For its part, Best Buy (and its FutureShop.ca that also operated at the time) ranked No. 4 among online shopping sites, showing that its brand is also a recognized cyber-commerce name: Best Buy attracted 4.2 million unique visitors in March, which was a 10-per-cent gain from the previous year, comScore found.
Eric Ziegele, retail practice director at Toronto-based T4G, which helps retailers such as Macy’s and J. Crew with their e-commerce and merchandising planning, said Best Buy Canada’s marketplace initiative shows how retailers are redefining how they operate. He predicted more retailers will team up to share distribution and merchandise operations to bolster their businesses.
For merchants partnering with Best Buy, they “gain a visibility that they may not have been able to achieve on their own,” Mr. Ziegele said.
“There’s a new realization of what it means to be competitive,” he said. “You’re seeing disruptions of standard practices in the industry from years ago, broken down into new ways of doing businessthat are trying to extract every bit of value that they can out of their operations.”
Best Buy Canada began expanding into non-electronics categories a few years ago, when it added items such as luggage, toys and baby goods to its e-commerce site.
Now it wants to cash in on the millions of dollars of investments it has made over the past 17 years in its e-commerce technology, Mr. Hay-Sabourin said. Best Buy has an edge over eBay and Amazon by having physical stores for product returns and pickups, he said.
Best Buy will charge participating retailers a commission, he said, without elaborating. Amazon.ca, for instance, charges a percentage of a retailer’s sales, ranging from 6 per cent for personal computers to 25 per cent for Kindle accessories.
Best Buy is moving on other fronts to improve its online shopping. It recently started to post items’ expected delivery arrival dates. This spring, it will start shipping e-commerce orders directly from its stores in addition to its distribution centres, Mr. Hay-Sabourin said.
Ship-from-store allows retailers to “drastically” reduce the number of online sales that are lost to out-of-stock inventory situations, a Forrester report last year said. And it found that ship-from-store resulted in Best Buy cutting its average online delivery times by two days.Report Typo/Error