Best Buy May Switch to Everyday Pricing Model
Best Buy Company, Inc., is considering switching to a more consistent pricing model-but a local retail consultant is skeptical about whether it will work.
Mike Vitelli, executive vice president and co-head of Best Buy's North America division, recently told Bloomberg News that consumers won't wait for sales if they find better deals elsewhere-particularly in an age when smartphones are increasingly being used to comparison shop.
Vitelli acknowledged that discussions about possible change are in the early stages but added that, “We have to move rapidly in recognizing the transparency of pricing.”
Best Buy spokeswoman Lisa Hawks told Twin Cities Business on Thursday morning that “there isn't really any additional information . . . that we can provide” beyond what Vitelli told Bloomberg, adding that “a lot of this is preliminary.”
Retailers that offer everyday pricing essentially pledge to offer the best prices they can get from suppliers while still making money on each product.
Jim McComb, a retail consultant and president of Minneapolis-based McComb Group, Ltd., isn't convinced that such a pledge will ultimately resonate with customers and help Best Buy's bottom line.
“Retailers have turned the American consumer into a pack of trophy hunters” who are “trained to believe that the regular price is not the real price,” he said Thursday. “The sale price is the real price.”
McComb said that consumers don't respond to everyday pricing initiatives in a consistent fashion-mostly, he thinks, because so many have embraced the “high-low” model that most retailers employ, under which the “high” shelf price is occasionally discounted to the “low” sale price.
McComb acknowledges that he's not an expert when it comes to the electronics business. But he wonders what would happen when one of Best Buy's manufacturers has overstock items that it unloads to the company at a lower cost. Should Best Buy pass along that discount to shoppers, the move may water down the “everyday pricing” pledge in the eyes of consumers.
Vitelli told Bloomberg that Best Buy hasn't made a determination about how the new pricing model would work. But the company has reportedly entered into discussions with Sony Corporation, Samsung Electronics Company, and other manufacturers about the possibility of offering greater pricing flexibility on their products.
If and when Best Buy really will employ a new pricing model is unknown-and whether it will be successful is even harder to say. But McComb isn't holding his breath.
“The history says it probably won't be,” he said. “People have tried this. If it was really going to work, you'd probably see more of it.”
Richfield-based Best Buy is Minnesota's third-largest public company based on revenue, which totaled $49.7 billion in its most recently completed fiscal year.