The Solution To Best Buys Showrooming Problem Is Called Commissioning

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BlackFriday.gifReaders of HomeTheaterReview.com likely were not shocked to see big box retailer Best Buy (BBY: NYSE) post more disappointing results right before the all-important Black Friday holiday shopping season. The company's stock, according to Forbes.com, is down 50 percent for the year and at millennium lows overall. Forbes.com is warning of a possible failure of their 401k program, which would only make one messy situation for the nation's biggest consumer electronics retail store even uglier.

To respond to the bad ink, Best Buy's P.R. and investor relations firm caught the attention of the likes of CNN, the Los Angeles Times, CBS News and others with the issue of "showrooming" and how the company plans to address the issue. Showrooming is the term for what happens when a consumer goes to a retail chain and plays with a product, only to use his or her hand-held device (smart phone, tablet, etc.) to cross-shop prices at other local stores and/or on the Internet. Simple barcode scanners make showrooming amazingly easy (and free) for mainstream consumers looking to eke out the most value for their holiday tech-shopping budgets. The problem for Best Buy is that a check of the prices on the Internet or local warehouse stores like Wal-Mart, Target, Costco and/or Sears - not to mention Amazon.com or other online stores with low overhead - shows that Best Buy is often the worst buy. Yes, you can sometimes have the component that you want right then and there, but up until now, Best Buy had refused to price match with the likes of Amazon. Now, after failing again in the third quarter, the company is changing its tune. 

Additional Resources:
Who will fill the void if Best Buy Fails?
Five reasons why Best Buy might end up like Circuit City?

Although there have been impassioned pleas from as high up as Best Buy's CEO for the company to "embrace showrooming," showrooming respectfully isn't Best Buy's real problem. The issue is what I call affectionately call "commissioning." Best Buy stores are filled with Blue Shirt employees who are trained to be clerks, not salespeople. They move from department to department with little to no training. More importantly, they are not incentivized to close deals with the vast volumes of consumers that are in a Best Buy location at any given hour at any given location. The lesson of the failure of Best Buy's former competitor Circuit City is being lost, as it was Circuit's bean counters who decided it was better to take a quarterly stock bump by firing their small number of top-producing commissioned salespeople, which resulted in a long-term death spiral that cost the company everything and the U.S. economy 33,000 jobs. Best Buy employs over 100,000 people, and they look to have one foot on a banana peel and the other one in the grave.

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The classic car dealer clich� of "They don't walk on the lot if they are not here to buy" is still relevant today in the world of consumer electronics, especially for Best Buy. The company is successfully doing the hard part of the sales process, which is creating the consumer demand as the stores sell the must-have items that consumers want and are even willing to freak out over, as proven by this 2011 Black Friday melee in a Porter Ranch, California Wal-Mart. But without closers who can share in the good fortunes (meaning profits) of the store when it's packed, Best Buy is literally walking people out the front door. The company can match Amazon's prices all it wants, but for years, Best Buy has trained consumers that it wouldn't match prices from online stores. Moreover, retailers like Apple stores don't have to match prices with online stores because their highly-trained and even cult-like employees believe in their product like a religion. They are trained well and motivated even better. They are backed up by tech geniuses, educational classes and so much more. Even without commissions for its salespeople, Apple has found a way to be the highest-grossing retail store per square foot, beating uber-jeweler Tiffany's, according to a report in USA Today

I am not suggesting that Best Buy could somehow build the zealous following that Apple has, or the high-end appeal that Tiffany's has. What I am saying is that, if the company wants to survive long-term, it needs to understand that its success on Wall Street comes from showing the people who work for it on Main Street that there is a way to make some real money working at a Best Buy. Years ago, when in college, I made close to $100,000 per year working 20 hours per week in an audiophile boutique, purely on commission. I didn't have floor traffic like Best Buy does, but for 25 cents of every profit dollar, I found a way to put up big numbers to fund what was at the time a pretty nice lifestyle for a college kid. Show the clerks at Best Buy how to become salespeople with real upside and showrooming will not be a problem. Counting up all of the money at the end of the day will be the issue, and that's a good problem to have.

More about Best Buy:
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Best Buy to Cut Geek Squad Jobs
Five fresh ideas for Brick and Mortar retailers

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