Is Best Buy's Super Bowl Commercial a Lie?
Despite its financial struggles, Best Buy (NYS: BBY) was back with another Super Bowl commercial yesterday.
No Ozzy Osbourne. No Justin Bieber. No laughable obsolescence insurance to promote.
It was an effective 30-second spot, highlighting mobile and mobile app visionaries.
It doesn't even seem like a Best Buy ad until the final few seconds.
"And we created a better way to buy a smartphone," says someone decked out in Best Buy garb with a few blue and yellow associates behind her. "Any phone. Any carrier. And all of their plans with lots of unbiased advice."
The right connection
There's no denying that mobile retailing is the future of consumer electronics. RadioShack (NYS: RSH) stunned investors last week in revealing that traditional, non-mobile consumer electronics fell a sharp 30% during the holiday quarter.
Both RadioShack and Best Buy have been opening smaller stand-alone kiosks devoted entirely to selling wireless handsets and accessories.
The ability of traditional retailers to offer various platforms across different carriers is a worthy selling point, and Best Buy sweetening the pot with promotional offers makes this even better. As part of yesterday's Super Bowl spot, Best Buy is offering a $50 gift card this week to folks who reserve the right to activate their phones later this year through the retailer. The deal is only good for AT&T (NYS: T) , Verizon Wireless, Sprint (NYS: S) , and T-Mobile.
I'm very cynical when it comes to Best Buy, but this is a good deal. Best Buy's pricing is the same as you would find if you walked into your local AT&T, Verizon Wireless, Sprint Nextel, or T-Mobile store. Why not cash in on a $50 gift card if you truly are upgrading your phone this year?
However, the last two words of the ads don't pass my sniff test. "Unbiased advice"?
Truth in advertising
How would you define "unbiased advice" in context of a retail transaction? Make a purchase at Best Buy -- in person -- and you'll be hounded with offers for extended warranties, Geek Squad tech support, and buyback protection programs. They all cost money. They're all high-margin add-ons that employees are encouraged to attach to customer purchases.
What if things get worse?
RadioShack was bellyaching last week about cascading margins, blaming the popularity of select smartphones during the holiday quarter for the shortfall. Without calling Apple (NAS: AAPL) out by name, the implication is that the huge sequential boost in iPhones -- and Apple sold more than 37 million smartphones during the final three months of last year -- hurts retailer margins.
If this is the case at Best Buy as well, are we seriously going to believe that Best Buy will continue to encourage iPhone sales if there are greater profits per sale to be made by pitching Android, Windows Phone, or potentially even BlackBerry devices?
I'm merely speculating on that final point, but the fact that Best Buy employees are encouraged to push its high-margin protection plans really finds me questioning how "unbiased" this "advice" really is.
Just because you offer greater selection doesn't mean that a buyer will have greater choices. If Best Buy continues to face thinning margins on products, is it really going to ignore the opportunity to push add-on services and accessories that may not be necessary? There's a reason that store-level sales have been weak at your neighborhood Best Buy store for a little more than a year.
Do you really trust the advice at Best Buy? A lot of people don't, and comparing the chain to some true innovators in mobile rings as hollow as the "unbiased advice" promise.
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At the time this article was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool owns shares of Apple, RadioShack, and Best Buy.Motley Fool newsletter serviceshave recommended buying shares of Apple.Motley Fool newsletter serviceshave recommended writing covered calls in Best Buy.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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