Best Buy to Adopt Walmart's 'Every Day Low Price' Strategy?

Shoppers at Best Buy"Every Day Low Price" is the mantra at Walmart, and now it seems Best Buy is considering adopting the concept as it tries to compete with online retailers and get consumers to shop during non-promotional events.

"We have to move rapidly in recognizing the transparency of pricing," Mike Vitelli, executive vice president and co-head of the North America division at Best Buy told Bloomberg News.

According to a Best Buy spokeswoman, any shift in pricing strategy is in the very early stages of discussion, and there are no more details to share at this time. Why then, tell a national news agency during interviews conducted at Best Buy's Minnesota headquarters?In December, Best Buy reduced profit estimates for the year, and continues to lose sales to discount stores like Target and Walmart, and online retailers like Amazon.

Shoppers have become accustomed to waiting for sales in many product categories, but the pattern is even more pronounced in the consumer electronics category, where prices actually decline over time. Not only do we wait for sales, but for the prices to come down and then go on sale.

This pattern has been damaging to Best Buy. In December, revenue at its U.S. stores actually fell 3.2% and sales at stores open at least a year dropped 5% compared to an increase of 9.3% the year before, when Best Buy likely picked up sales thanks to the absence of Circuit City.

Since then, discount stores like Target and Walmart have gotten much more aggressive, courting electronics buyers. Brands are less likely to sell exclusively through Best Buy, and online retailers like Amazon consistently beat Best Buy on price. The retailer's response has been to launch a litany of sales: two-day sales, Free Phone Fridays and pre-Super Bowl HDTV sales.

"If the pricing isn't everyday, the consumers just wait," Rick Rommel, a Best Buy senior vice president told Bloomberg. "Our inventory sits and waits for that next promotional moment."

And Best Buy's chief marketing officer, Barry Judge, believes consistent EDLP would make marketing so much easier, including laying out the Sunday circulars, something Walmart hit upon decades ago.

Walmart's switch to EDLP meant shoppers could shop any time and feel secure they would get the price. There was no need for price adjustments or advertising about specific promotions. Not only is it easier to lay out the Sunday circular, but Walmart doesn't even issue one: the prices are always the lowest they can offer and the lack of advertising helps keep it that way.

Best Buy also says it's reducing the number of items, focusing only on the most popular products. Can Best Buy afford to adopt these austerity measures and stop trying to differentiate itself from the discount stores with a bigger selection and the extra service that comes with specialty stores? It doesn't seem likely.

It certainly wouldn't be the first time Best Buy shook up the retail industry. In the early 1990s, it did away with commissioned sales, a staple practice among electronics stores. It was a successful strategy for Best Buy and forced competitors to do the same. But for Best Buy to go to EDLP and reduce selection seems more like following than leading.
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