Brick-and-Mortar Retailers Fight the Amazon Effect The increase in electronic commerce sales has been remarkable, and it accelerated in 2020 as a result of the coronavirus pandemic. In 2019, e-commerce sales accounted for only 16 percent of overall retail sales. However, those sales were growing roughly five times faster than sales at traditional stores. In 2019, more than 9,000 brick-and-mortar stores closed, a 60 percent increase from the previous year. The Amazon Effect refers to the disruption of traditional brick-and-mortar retailers by electronic commerce. Despite the seriousness of Amazon's impact, references to the death of physical, brick-and-mortar commerce seem to have been premature. As we see in this case, Costco (www.costco.com) and Best Buy (www.bestbuy.com) are thriving in the face of intense competition from electronic commerce. Let's take a closer look at what each company is doing to achieve outstanding results.

Best Buy In 2012, Forbes announced that Best Buy was "going out of business." Since that time, the retailer has defied expectations by focusing on what it could offer that online commerce could not: engaging physical stores, knowledgeable staff, and a Geek Squad who will install and synchronize electronics in your home. Best Buy stores and staff. The success of Best Buy suggests that customers still value the physical experience of stores. However, these stores must offer a vibrant experience combined with integrated services that customers need and value and cannot be easily duplicated online. Best Buy stores are welcoming, and they allow customers to touch, use, and experiment with electronic devices. They also have knowledgeable staff members who are passionate about what they explain and demonstrate. Best Buy also implemented an In-Home Advisor program. Through this initiative, Best Buy sends consultants to customers' homes to offer advice and assist with purchasing decisions. Best Buy encourages advisors to establish long-term relationships with customers, rather than simply trying to close a one-time sale. In-home advisors do not need to track weekly metricsfor example, number of customers visited and sales closedand they are paid an annual salary rather than an hourly wage. House calls are free and can last up to 90 minutes. Best Buy instructs its advisors to "be comfortable not closing a deal by day's end." The Geek Squad. Best Buy has identified the customer pain point in shopping for electronics; namely, installing, synchronizing, and integrating devices without having to waste time dealing with technical customer service. To accomplish this mission, Best Buy can send its Geek Squad to help set up those systems in customers' homes or offices and recommend other products and services. Human resources. In 2012, Best Buy CEO Hubert Joly visited many Best Buy stores and even worked at one store for a week. After speaking directly to employees he:

Fixed broken systems, such as an internal search engine that provided poor data about which products were in stock Restored the employee discount program for purchasing products Invested heavily in regular employee training

His initiatives worked. In August 2020, workplace review website Glassdoor stated that 80 percent of employees would recommend working at Best Buy to a friend. Strategy. Best Buy turned showrooming into a competitive advantage. Showrooming refers to the practice in which customers enter a store to test products and then purchase them online from competitors. Joly used that practice to Best Buy's advantage by instituting a price-matching system. The strategy took advantage of the fact that customers want to see expensive items such as big-screen televisions and smartphones before they make a purchase. If the store was willing to price-match, then why not buy then and there? Best Buy also partnered with large electronics companies such as Apple and Samsung to feature their products. These companies rent square footage within a Best Buy location to highlight all of their products together in a branded space. This arrangement gave Best Buy a new revenue stream. Joly and his team also made changes that allowed stores to serve as mini-warehouses for online customers. This process enabled customers to order a product online and then choose whether to pick it up at a store (click-and-collect) or have it shipped to them. Results. For the second quarter of 2020, which ended August 1, 2020, Best Buy reported domestic e-commerce revenue of $4.85 billion, an increase of 242 percent over the same quarter of 2019. Best Buy's net income for the quarter was $432 million, an increase of 81 percent over 2019. A final note: other traditional brick-and-mortar retailers are also having success competing with the Amazon Effect. Notable examples are Target (www.target.com) and Tractor Supply (www.tractorsupply.com). Sources: Compiled from J. Bowman, "Walmart Just Did Something that Amazon, Home Depot, and Target Couldn't," The Motley Fool, May 20, 2020; "Costco Earnings Hurt by Purchase Limits; eCommerce Sales Spike," PYMNTS.com, April 10, 2020; F. Ali, "A Decade in Review: Ecommerce Sales Vs. Retail Sales 2007-2019," Digital Commerce 360, March 3, 2020; Z. Karabell, "Best Buy Bucks the Trend That's Crushing Other Retailers," Wired, December 11, 2019; Z. Crockett, "How Costco Gained a Cult Followingby Breaking Every Rule of Retail," The Hustle, June 30, 2019; A. Hensel, "'There Are Some Real Sales to Be Had There': Costco Is Finally Figuring out Its E-commerce Strategy," Digiday, June 3, 2019; D. Kalogeropoulos, "How Costco Crushed It in 2018," The Motley Fool, April 19, 2019; J. Bariso, "Amazon Almost Killed Best Buy. Then, Best Buy Did Something Completely Brilliant," Inc.com, March 4, 2019; J. Grill-Goodman, "Costco's Plans for Its E-Commerce Operations in 2019," Retail Information Systems, March 11, 2019; S. Berfield and M. Boyle, "Best Buy Should Be Dead, but It's Thriving in the Age of Amazon," Bloomberg BusinessWeek, July 19, 2018; M. Segarra, "Were Retail Jobs Always Low Wage, with Few Benefits?" Marketplace, February 9, 2018; J. Fox, "How Shareholders Are Ruining American Business," The Atlantic, July/August 2013, L. Downes, "Why Best Buy Is Going Out of Business...Gradually," Forbes, January 2, 2012; www.costco.com, www.bestbuy.com, accessed August 4, 2020.

Questions

Describe the nontechnological initiatives that Best Buy is employing to compete against Amazon and other electronic retailers.

Answer rating: 100% (QA)

Answer Best Buy has implemented several nontechnological initiatives to compete against Amazon and other electronic retailers These initiatives focus on enhancing the physical shopping experience prov... View the full answer