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amazon v best buy

The Amazon dominance - a 'David and Goliath' story

Posted: 8 March 2019

How Best Buy is fighting back against Amazon

The Giant

We all know Amazon is big. But do you realise just how big? In 2018 sales were around $258.22 billion, and they achieved a 5% share of the total US retail market (online and offline). Amazon isn’t just big, it’s epic proportions gigantically big. It’s a giant. Welcome to the Amazon dominance of retail.

Over the next two years, Amazon is projected to achieve a 50% share of the entire e-commerce retail market's GMV. There are already five e-commerce categories where Amazon has a more than 90 percent market share for online purchases. And during 2018’s Prime Day, a whopping $4.2 billion worth of goods were sold during the 36-hour event.

David and Goliath

Goliath is laughing at David - could this be the truth of today?

Amazon’s strongest performing category is computer and consumer electronics with sales of $65.82 billion in the US during 2018. This category alone accounts for more than a quarter of Amazon’s retail ecommerce business. Amazon’s dominance in the electronics sector has been compounded by their private label initiative ‘AmazonBasics’ where products like batteries and cables perform particularly well.

Amazon is the ‘Goliath’ of our story.

Introducing David

Our ‘David’ is Best Buy. A retailer that was originally established in 1966, and has operated under the name of Best Buy since 1983. We can’t pretend that our David is tiny – Best Buy ranks at number 72 in the 2018 Fortune 500 list of the largest United States corporations by total revenue, and, is the largest speciality retailer in the US consumer electronics retail industry. But, with a 2018 net income of $735 million, when we compare that to the sort of figures we touched upon for Amazon, we can see Best Buy is certainly shadowed.

However, Best Buy is fighting back.

The slingshot against the Amazon dominance of retail

 That $735 million net income during 2018 we mentioned above, was actually more than double the previous year. For 2019 Best Buy is forecasting sales growth of up to 2.5%, and based on the previous year’s performance this growth shouldn’t be unrealistic.

The growth is coming from Best Buy’s new approach to engage with shoppers and improve the customer experience. This includes the launch of its Total Tech Support program and also an expanded In-home Advisor program.

The Total Tech Support program is a membership scheme where customers receive support for all the technology and appliances in their home, no matter where they bought them. Support is available online 24/7, and also in store and over the phone.

The In-home Advisor program is a free service where a Best Buy advisor will visit customers in their home and make recommendations based on the specific needs to the customer. They will also coordinate any deliveries and installations.

These initiatives have been about building customer relations and bringing a customer focus to the fore of Best Buy’s operation.

The moral of the story

It’s all about the customer experience. Online retail offers convenience and low prices, but the one big disadvantage is a shopper cannot see the product before they buy. They can read online reviews, but they can’t discuss their individual situation and the needs specific to them. For these things, they need to go along to a store. This is where bricks and mortar stores need to focus, and this is where Best Buy has found their success against the Amazon dominance of retail.

Customers at Best Buy want to interact. They are looking for support and advice, and with Best Buy’s new customer focus they are getting that.

Shoppers still like to visit physical stores to see products for themselves.  Retailers have an opportunity to convert these visits to actual sales with each shopper that enters the store. How a retailer presents its products within the store will impact the sales conversion rate.

An example of how a POP display can help customers understand products while in-store

Point of purchase (POP) displays and good signage are vital. Research by Brigham Young University found that displays with signs outperform displays without signs by 20%.  And what is really interesting is that when displayed with a sign, regular priced merchandise (not on sale) outperform sale or clearance priced merchandise with no sign, by 18 percent. Signs are powerful!

Bricks and mortar retailers need to play to their strengths. The shopper is in the store. Create an environment where you present the products to make it easy for shoppers to browse. Good signage is a must. Displays can help draw attention to key products. Staff should be knowledgeable and friendly. Consider where you can add value to the customer’s shopping experience. It is these things that will set you apart from your online rivals.

Further reading to help you fight the Amazon dominance of retail

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