Retail

Why Best Buy Offers Sharp Discounts on Some Items

Douglas A. McIntyre

Published: April 10, 2016 8:56 am

Last Updated: January 13, 2020 10:58 am

Best Buy Co. Inc. (NYSE: BBY) offers sharp discounts on some of the items sold at BestBuy.com. There are several reasons the consumer electronics retailer may do this. Among them are clearance of inventory which would not sell quickly without discounts, a method to bring in customers who might buy other items on which Best Buy makes large margins, or a means to keep pace with online sales by Amazon.com Inc. (NASDAQ: AMZN).

The sales have three components beyond discounts. Best Buy “Hottest Deals” come with “free store pick-up,” which would appear to have no benefit to customers, “free shipping” for items which cost $35 or more, and a deal whereby Best Buy will match deals from its competitors. It is not entirely clear how long this “free shipping” takes. Best Buy lists standard shipping at three to seven business days.

Since few people outside Best Buy and its vendors know what the retailer spends on each item, it is hard to say whether discounted items are sold at a profit.

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• In the “Home Theater” department, it has cut the price of a Samsung 40 inch diagonal, 1080 LED Smart HDTV to $349.99 from $499.99.
• Best Buy sells the Samsung Galaxy S7 for $1, “With activation and 2-year contract for Verizon Wireless or Sprint. In store only.” This is a product on which Best Buy may actually make money because of deal with carriers.
• Best Buy offers more modest discounts on computers. The “Lenovo – Yoga 700 14″ 2-in-1 Touch-Screen Laptop – Intel Core i5 – 8GB Memory – 256GB” posts a price reduction from $799.99 to $749.99.

It would be a mistake to entirely criticize Best Buy for the sale practice. However, it is fair to compare the results to other retailers. If Best Buy believed it could get the “retail price” for the items, it would.

No retailer drops a price if it does not have to.