Amazon.com Inc. (NASDAQ:AMZN) has had a lot of success turning the retail universe on its head with offering goods and services online at very affordable prices. And since the company introduced the Kindle e-reader and the Kindle Fire tablet, it has started a major competition with other electronics stores, not the least of which being Best Buy Co. Inc. (NYSE:BBY), perhaps the top retail rival for Amazon.com Inc. (NASDAQ:AMZN).
Amazon.com Inc. (NASDAQ:AMZN) has been putting Best Buy Co. Inc. (NYSE:BBY) in a position to develop very little margin on the products that they sell in competition with Amazon.com Inc. (NASDAQ:AMZN). But then, in a recent interview with the BBC, Amazon.com Inc. (AMZN) CEO Jeff Bezos admitted what many people suspected – the company is about its digital products, not about the hardware. Bezos told the BBC in the interview that the Kindle and the Paperwhite devices are sold at company cost, with the expectation that the company would make the money on the digital goods that are purchased for those products – namely, e-books, videos and music.
As Bezos has said before, “We want to make money when people use our devices, not when people buy our devices.”
If that’s the case with Amazon.com Inc. (NASDAQ:AMZN), then does Best Buy Co. Inc. (NYSE:BBY) have a plan to counter, or is it falling into a trap with is latest move? Best Buy Co. Inc. (BBY) announced recently that it was going to combat “showrooming” – where customers view and test products in stores but by them online at cheaper prices – by authorizing its in-store staff (at their discretion) to match any online competitor’s price on appliances and many consumer electronics (except smartphones). This is meant not only to combat Amazon.com Inc. (NASDAQ:AMZN) but also meant to combat the online presence of Wal-Mart Stores Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT).
Best Buy Co. Inc. (NYSE:BBY) will be conducting this offer to match online retailers like Amazon.com Inc. (NASDAQ:AMZN) from now through Nov. 17 and November 27 until Christmas Eve. But if amazon.com Inc. (NASDAQ:AMZN) is not making money on the devices, what is the plan for Best Buy Co. Inc. (NYSE:BBY) to get itself margins? If you’re an investor in Amazon.com Inc. (NASDAQ:AMZN) or Best Buy Co. Inc. (BBY) stock – like billionaire fund managers Ken Fisher of Fisher Asset Management or David Einhorn of Greenlight Capital – which do you think will win this battle of “showrooming”? Which will have the advantage at the end of the holiday shopping season?