'Price-Matching': The Worst Phrase Amazon (AMZN) Could Hear (BBY) (WMT)
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Today, big-box retailer Best Buy (NYSE: BBY) issued quarterly results, showing an impressive 20 cent EPS "beat," though total comparable-store sales slipped 0.6 percent. Management also said it sees challenges in fiscal Q3 and Q4 due to mobile warranty costs and a new private-label credit card agreement which will carry a higher rate than the one it currently receives.
Another point made today is that Amazon (Nasdaq: AMZN) is rapidly moving to expand is warehouse network by an additional five units this year, adding to some $13.9 billion in costs on the effort since 2010. Fulfillment is Amazon's top cost and more centers should lead to higher expenses.
Other than Best Buy, Wal-mart (NYSE: WMT) and eBay (Nasdaq: EBAY) are also moving to become quicker at fulfillment and shipping. While eBay is testing same-day shipping in certain markets, Wal-mart is looking to move more of its nearly $500 billion in annual sales to the Internet.
But, there is one point to make: Best Buy is seeing traction with its price-match guarantee. Though the company sees higher near-term expenses for the effort, with Amazon expanding and Best Buy right-sizing, it should only be a matter of time until the two could be on par with expenses versus margins. Like Wal-mart, consumers might also still like to physically see and handle certain items (like expensive consumer electronics, for example) before making a large purchase. That's an advantage that Best Buy has versus Amazon at this point.
Of course, Amazon goes beyond just electronics into different retail segments, such as clothing and consumables.
Should Best Buy swallow some loses in the next few quarters, it might just have a good thing on its hands via the elimination of "showrooming," which is when consumers enter a retail location only to see and price out goods before going home to purchase them online.
Shares of Best Buy are lower early Tuesday.
Another point made today is that Amazon (Nasdaq: AMZN) is rapidly moving to expand is warehouse network by an additional five units this year, adding to some $13.9 billion in costs on the effort since 2010. Fulfillment is Amazon's top cost and more centers should lead to higher expenses.
Other than Best Buy, Wal-mart (NYSE: WMT) and eBay (Nasdaq: EBAY) are also moving to become quicker at fulfillment and shipping. While eBay is testing same-day shipping in certain markets, Wal-mart is looking to move more of its nearly $500 billion in annual sales to the Internet.
But, there is one point to make: Best Buy is seeing traction with its price-match guarantee. Though the company sees higher near-term expenses for the effort, with Amazon expanding and Best Buy right-sizing, it should only be a matter of time until the two could be on par with expenses versus margins. Like Wal-mart, consumers might also still like to physically see and handle certain items (like expensive consumer electronics, for example) before making a large purchase. That's an advantage that Best Buy has versus Amazon at this point.
Of course, Amazon goes beyond just electronics into different retail segments, such as clothing and consumables.
Should Best Buy swallow some loses in the next few quarters, it might just have a good thing on its hands via the elimination of "showrooming," which is when consumers enter a retail location only to see and price out goods before going home to purchase them online.
Shares of Best Buy are lower early Tuesday.
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