Originally Posted by mantar
I wonder what percentage of sales in Best Buy are at THEIR SALE PRICE of $3299. How much profit margins are in these sets that they can price match 2599 just like that. Do you think they get these sets for 2300 or something?
They may well be losing money on each sale on a net basis. However they are big...they own Future Shop, Dynex, and a large chain in China. It could be like Hyundai which is selling cars with more content, etc and is able to do so because they are the largest (and most profitable) ship builder in the world. BB can't keep it up and I don't expect them to but they are trying to build brand equity as the low price, touch and feel and get it now store.
"Retail experts agree it will be tough because prices fluctuate frequently on the Internet. "It is easy to say you're going to do this, but with prices varying minute by minute, it is very difficult to execute," said Leon Nicholas, senior vice president at consultants Kantar Retail.
Another risk is that retailers run the risk of encouraging even more shoppers to check the Internet to compare prices, a comparison that doesn't favor the big box stores. A recent survey by brokerage house William Blair & Co. found that on average Target's prices were about 14% higher than Amazon's, Best Buy's were 16% higher and Wal-Mart's prices were 9% higher. The comparison included shipping costs for Amazon, but not sales taxes.
"It is a pretty dramatic move to match prices, but it could backfire long-term," said William Blair retail analyst Mark Miller.
If the price matching programs attract too many shoppers, analysts say, they may dent profits. Last year, Best Buy offered free shipping and discount prices at the start of the holiday season, which led to the first increase in quarterly sales in six quarters. But the tactics took a serious toll on its bottom line. Profit margins fell at its core U.S. business and quarterly earnings plunged 29%.
The retailer's earnings before interest, depreciation and amortization fell to 6.1% of sales during the holidays a year ago, a profit margin that could be easily wiped out by aggressive price matching, said Michael Pachter, a Wedbush Securities analyst.
And shoppers may just move to the Web, he said. "Let's say you find an item cheaper online; it's easier to just click and order it then go back into the store."