Photo: Best Buy
Best Buy is ready for Christmas with free next-day deliveries for almost everyone
Best Buy is looking to make some news ahead of the holiday selling season. Yesterday, the chain announced the launch of free next-day delivery on thousands of items that it sells online, with no minimum purchase or membership required.
The new service covers a wide range of products, although not some of the bigger ones such as wide screen televisions and refrigerators. Best Buy estimates that around 99 percent of its customers are eligible for the service. Those who are not still qualify for free standard ground delivery on their orders.
The retailer’s announcement follows similar moves made by rivals Amazon.com and Walmart earlier this year.
On Amazon’s first quarter earnings call in April, CFO Brian Olsavsky told analysts that the e-tail giant was well into the process of standardizing delivery times for Prime members from two days to one. Consumer Intelligence Research Partners estimates that Amazon has over 103 million Prime members in the U.S.
In May, Walmart announced it was rolling out its free NextDay service and expected to have it available to about 75 percent of American consumers by the end of the year.
Best Buy emphasized that it has other convenient options to connect its customers with the products they purchase. The chain’s store pickup service has proven a hit with customers. Forty percent of online sales are picked up at one of its physical locations. In select markets with curbside service, customers do not even have to get out of their cars. For those who prefer to have orders delivered, Best Buy makes same-day deliveries in 42 metro markets around the U.S.
Discussion Questions
DISCUSSION QUESTIONS: How important is speed of delivery to online sales performance? What will the availability of free next-day delivery mean for Best Buy’s business during the Christmas selling season?
Poll
BrainTrust
Anne Howe
Principal, Anne Howe Associates
Steve Dennis
President, Sageberry Consulting/Senior Forbes Contributor
There definitely seems to be a delivery race with online purchases, but I don’t see that being the game-changer unless the consumer has waited until the absolute last minute and needs the merchandise now. My more significant concern is that stores are doing everything they can to keep the customer out of the store. BOPIS makes perfect sense, especially when there is a shipping charge for delivery, and the customer can pick the item up for free. It gets the customer in-store, and there’s a chance they make another purchase while in the store. Now we’re doing away with that as well. The best way for brick-and-mortar to compete with online-only businesses is with their stores when appropriately used. Yes, they need a robust online presence as well and need to compete with prices and services with the online competitors. But doesn’t it make more sense to offer a discount off the price when picking it up in-store or some other way to connect the stores with the purchase? And we wonder why more and more retailers are going out of business because we have kowtowed to the online merchants without looking at better ways to compete. So get next-day delivery, offer same-day delivery and do it all for free and watch how your store traffic, already down, continues to decline.
Offering next-day delivery certainly isn’t going to hurt Best Buy’s business. Offering another option for their customers continues to show that Best Buy is determined to challenge and pressure their competition. And by offering it to all customers, it gives them yet another chance to offer their loyalty program to new people. Smart move by Best Buy.
Speed of delivery is sometimes important. If the TV goes, it’s really important. If it’s for a new camera, likely not so much.
Speaking of new cameras, fun fact! I went to Best Buy last weekend to look for a new camera. I knew what I wanted and luckily they had a sample in stock. So, I asked about price matching and then I mentioned B&H Photo (in NY). The response? “Oh, we don’t price match New York stores.” WHAT? Now that was a shocker. Makes zero sense, and they just lost the sale. As it turns out, B&H was the same price for this particular model (Park Avenue Photo was not) but what kind of weird fine print is that? Guaranteed, that will hurt them more than next-day delivery or not.
Speed is essential for e-commerce success, as online shoppers now expect fast (and free) delivery. Speed and ease are evolving into table stakes for retailers to stay competitive and responsive to consumer demand. By reducing friction in the online customer experience, Best Buy becomes a more desirable, convenient destination for holiday shoppers, which will boost its top line.
Best Buy is going to give us an interesting case study when we can compare 2019 sales and profits to 2018 sales and profits. Will this decision give Best Buy a bump in sales or is it just a recognition that next-day delivery is now table stakes? Since 40 percent of online sales are currently picked up in-store, what happens if those customers shift from that lower cost avenue to the higher cost next-day option? Best Buy is already a headquarters/go-to store for tech and electronics based on product and service. They are smart not to cede any operational advantage to the competition. Will this move be an expensive way to maintain market share, or will it buy market share?
There are three mains kinds of value possible from an announcement like this. First, it’s a statement to investors. Maybe that’s important. Second, it’s a PR play. Unfortunately for Best Buy, Walmart and Amazon have reaped most of the PR value.
Finally, there’s the value to customers. I struggle to see this making a substantive difference in holiday gift buying sales for Best Buy — except during the final week before the holiday. Gift season is the one time when customers can best afford slower delivery.
Paraphrasing Sergio Zyman, in the absence of meaning customers will always choose fast delivery. Fast delivery has become a variation on the “dash to the bottom” of price competition.
We did a study on the most important issues to consumers right now and speed came in fourth (4,000 people, match of U.S. demographics). So I think next-day is important, but not a game-changer. I honestly think the difference between one-day and two-day is insignificant to consumers, as long as it’s free. In the U.S., every retailer knows that the word FREE is always a game-changer.
And the shipping wars continue. Next-day service with no membership or minimum order is a step above Amazon which requires a paid Prime membership. Customers have come to expect both free and fast shipping options and the online retailers that can deliver will win loyalty. Why wait a week for ground shipping when you can have it tomorrow?
BOPIS makes so much sense for shoppers, but why does any retailer think it’s okay to not invite the customer back in the store? A parking lot pick up experience pretty much guarantees the next visit will be online, and then the subsequent customer experience opportunity becomes skewed to digital. The human-to-human interface is lost to the chatbot. It’s sadly a contributing factor to the rising tide of store closings and Best Buy is clearly at risk of operating a boatload of irrelevant stores.
Couldn’t agree more
Best Buy, just like any other retailer, cannot afford to lose out on holiday sales. That performance will determine viability and any strategic maneuvering necessary to grow or pivot.
Next-day deliveries add to the convenience menu for a crucial sales season, when convenience as speed stands tall for time-starved consumers desiring “instant” gratification — be it for a 4K TV or the newest Sony camera.
Speed of delivery is a key component of the online shopping experience with studies indicating that up to 87 percent of purchases are influenced by delivery time. Best Buy’s ability to deliver to the over 150,000,000 people in the top 42 metropolitan areas in the country will be their key to a successful holiday season. The challenge here is execution. They are up against a premier logistics company in Amazon and it is critical that they execute and deliver on the promise for to do less would damage the brand.
Customers’ expectations regarding delivery for online purchases keeps increasing. First it was free and then two-day and now next-day. As the baseline expectations grow it forces companies to keep up to avoid losing sales. Best Buy didn’t create the delivery race, but has now matched Amazon’s offer for its Prime members and Walmart’s. Will it help them gain customers? That is uncertain, but it should help prevent them from losing some.
We continue to condition consumers to expect faster and faster delivery times. And people respond to conditioning. Let’s use communication as an example. Once upon a time, and a very, very long time ago it was, important documents were sent from Point A to Point B via a service known as Air Mail. Then came FedEx, et.al. with next-day delivery. Then came faxing. and now we have email which is increasingly too slow for most of us. We expect to receive an email shortly before it’s sent, counting the delays between sending and receiving in horrific seconds. So we have gone from thinking three days, in the case of Air Mail, was “fast” to being unable to wait for an email — that may take 30 seconds to reach us — without suffering agita. Aren’t retailers doing the same thing? Next-day delivery isn’t a service anymore, it’s increasingly table stakes. What will this do for Best Buy? Ensure they continue to have a seat at the table. No consumer is going to see their new policy as heroic in an era when next-day delivery is rapidly becoming business as usual.
Best Buy is sure in a better position than they were several years ago when survival was in question for them. By adding next-day delivery to their already popular BOPIS they are putting themselves in a good position to have a successful end of year and holiday season. Service in the store has also improved greatly. Geek Squad service has been a hit, at least for customers like me who need service and are not sure where to turn. I purchased a new laptop last month. They were terrific getting me set up and operational.
Speed of delivery, mitigating the last mile, next-day delivery guarantees have become a great public relations strategy for retailers, yet also could be a race to the bottom. Best Buy is one of our favorite retail renaissance stories as, in the middle of all the doom and gloom of the so-called retail apocalypse, the company returned to prominence with a combination of outstanding customer service, value pricing, price match guaranteed, and a much more curated assortment offering.
Next-day shipping, as well as flexible same day BOPIS capabilities certainly matter. However, it’s the other differentiators such as the in-store customer experience, the ability to experience the products, and matching competitor prices that represent where Best Buy could shine.
Speed of delivery is key to winning each category in the online delivery race. Since Amazon and Walmart are all standardizing on the next-day free delivery, Best Buy has no choice but to match it or better.The real question is, how does Best Buy stand out from their competition once they have the delivery time matched with Amazon and Walmart?
If I’m shopping for consumer electronics I know that I’m likely to check both Amazon and Best Buy before making a purchase online or in a store. Price and delivery times being equal, I’m probably ordering from Best Buy even though I have a Prime membership. That’s because Best Buy has a technical support system in place that Amazon currently can’t match.
This is all about convenience. I love that there is a “convenience war” surrounding deliveries. As for the Christmas selling season, Best Buy (and any other retailers offering shipping during the holidays) will need to set strict standards to ensure on-time delivery. That means deadlines for shoppers and holding the shippers accountable for their end (on-time delivery).
And just as there is “no free lunch,” as the saying goes, there really isn’t truly free shipping. The shipping is baked into the retail price. Still, free shipping is a good perception. And it all benefits the consumer.
I am just glad that I may now not ever have to step foot in an actual Walmart again. But in all reality, the speed of delivery is critical now more than ever to e-commerce sales performance, as is the price. The availability of free next-day delivery will surely mean an uptick in top-line revenue for Best Buy during the Christmas season. On a more lighthearted note — our tech focused society has quickly become a “right now society.” We must have it right now! Pretty soon we will want drones to pick items off the production line at the manufacturer and supersonic jet them to us from Taiwan to our doorstep in eight hours or less, or we will unfollow them on Instagram. Just sayin’.
The race to the bottom continues. Given that Amazon and Walmart had already announced free next-day delivery, Best Buy had little option but to follow suit. However, does nobody plan for Christmas anymore? Is it a surprise that it is happening on the 25th of December so you need an urgent drop of your holiday shopping?
The only good news is that Best Buy is utilizing their store base by encouraging customers to buy online and pick up at store, a much more ecologically friendly way of handling online shopping. It is also the best way to compete with Amazon because they cannot offer the same service. So why follow them down their route and play to their strength? Better to compete with something they do not have. If retailers continue to allow Amazon to dictate the game they will find it very difficult to survive. Be more creative, look at your strengths and capabilities and fight on your own ground — not theirs.
Delivery speed appears to be important for online sales. I must admit that when I have to wait longer than a week for something I find it frustrating. Since I have been conditioned to wait, the difference between one-day and two-day delivery is not a big issue for me. However, it appears to be important to many other consumers. Balancing the needs to say competitive and profitable continues to be the puzzle retailers need to solve.
Really think it is all becoming table stakes. Everything here is a gamble, but if you want in, you pay. There isn’t a choice.
Speed of delivery can definitely help convert sales for retailers, though it’s highly dependent on the particular customer’s desires and situation.
Given how crowded stores can be during the holiday season, I definitely see some upside. The real issue, more broadly, is how the ever escalating delivery wars only serve to raise retailer’s costs. It’s great for consumers. Not so much for investors.