Best Buy Aims to Attract More In-Store Customers as Online Shopping Grows


By Kelsey Sutton

COLLEGE PARK, Md. (Dec. 19, 2014) — Brick-and-mortar electronics stores such as Best Buy are struggling to attract in-store customers, even though consumer confidence is at a seven-year high and the holiday spending season is in full gear.

A recent national survey showed consumers in an upbeat mood. Consumer confidence in 2014 rose 18.2 percent from the same time period in 2013, and it increased 2.2 percent from October, according to the University of Michigan-Thomson Reuters November 2014 Survey of Consumers.

But retail electronics giants like Best Buy — which has 36 stores in Maryland — are struggling to adapt to changing consumer purchasing habits, which involves more people comparing prices and buying electronics online.

“Like other retailers and as reflected in this quarter’s performance, we continued to see a shift in consumer behavior: Consumers are increasingly researching and buying online,” Best Buy said in a September Securities and Exchange Commission filing. “As a result, traffic to our retail stores continued to decline.”

Terry Carman, 62, of Laurel, comes to Best Buy in College Park to compare electronics inside the store before looking for the best deal on the Internet.

“Word on the street from my kids is that you get better deals online than in the store,” he said, while browsing high-definition televisions and other electronics as gifts for his children. “It’s still easier for me to come into the store and compare things in person.”

Best Buy has attempted to attract customers to the store with services like Geek Squad, in-store tech support and home installation assistance, and price matching, which guarantees Best Buy will match the price of identical appliances from the company’s major competitors, including online sellers. The company says it’s working.

“Our in-store conversion and online traffic continued to increase” over the past year, Best Buy’s Sept. 10 filing said.

Price matching is a strategy that brought Andy Yu, from Silver Spring, back through the business’s doors.

“I feel comfortable buying in-store because they price match, and I know that I can get a good deal,” Yu said.

Across the retail sector, online sales are skyrocketing, further threatening brick-and-mortar companies such as Best Buy.

E-commerce sales have steadily risen since 2005, and comprised more than 6 percent of the total retail market in the third quarter of 2014, according to Census Bureau data. E-commerce sales in the third quarter of 2014 were $78.1 billion, a 16.2 percent increase from the same time period in 2013, according to Census data.

This trend was evident on Cyber Monday, the Monday after Thanksgiving, when online sales across the country and in all sectors rose 8.5 percent compared to the same day last year, according to an IBM report.

Smartphone and tablet sales accounted for more than 40 percent of Cyber Monday purchases, according to the report. Year-round, computers and consumer electronic sales is the largest product category in e-commerce, making up more than 21 percent of total online sales, according to a report from eMarketer.

While in-store sales are dwindling, Best Buy’s online sales in the third quarter grew 21.6 percent compared to the same time period last year, the company said in its most recent Security and Exchange Commission filing.

Best Buy said its third-quarter revenue ending Nov. 1 was $9.4 billion, up $53 million from the same quarter last year. Best Buy brought in $27.31 billion in revenue over the first nine months of 2014, $629 million less than the $27.94 billion it earned in the same period last year.

Management blamed internet-based businesses and digital tools that allow for customers to compare prices for its drop in revenue. Best Buy depends heavily on net earnings from the fourth quarter, which includes the majority of the holiday shopping season, according to its SEC filings.

The University of Michigan Survey of Consumers reported that consumers expressed “favorable views” toward the purchase of large household durable goods, which include home appliances and consumer electronics, the type of goods sold at Best Buy. Improved personal finances and favorable views about the job market fuel the sentiment, according to the survey, leading economists to believe total consumer expenditures will increase by 2.9 percent in 2015.

Yu said he is making more money than in prior years at his job as a government subcontractor in information technology. That means he is spending more, even looking to buy a house in the coming year. But he comes to Best Buy only when he’s sure he can get the best deal after checking online.

The weekend after Thanksgiving, Yu bought an iPad for his mother — but he made that purchase at Target, where he received a $140 gift card in exchange for the tablet, he said. That decision came after researching the best iPad deals on his computer, he said.

Best Buy pointed to highly competitive tablet promotions as a cause for this year’s drop in profits.

There are still some Maryland shoppers who prefer to shop in stores.

MacArthur Agatep of Upper Marlboro rarely shops online.

“I’ve had bad experiences purchasing electronics online, where they were identified as new but were sold used,” Agatep said. “I’d rather come into the store, where what you see is what you get.”

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