Why Does Best Buy Sell a $3,900 Refrigerator?
Best Buy Co. Inc. (NYSE: BBY) is a consumer electrics giant that just happens to sell appliances. The reason for strategy of diversification is hard to say. A move against Home Depot Inc. (NYSE: HD) or Amazon.com Inc. (NASDAQ: AMZN) or both?
Best Buy, for example sells a “KitchenAid – 23.8 Cu. Ft. French Door Counter-Depth Refrigerator – Black” for $3,869.99. But does Best Buy really sell it? The merchandise is fruit of a deal started with the Best Buy buyout of Pacific Home in 2006. Since the deal has hit its 10th anniversary, and Best Buy continues to use the brand, it appears the retailer made a wise decision.
Best Buy apparently has elected to keep an appliance brand separate with its consumer electronics brand. Best Buy does not conjure up visions of coffee makers. Better to leave that association to what management has decided is a brand that at least has a direct association: “Pacific Kitchen and Home, within Best Buy.”
The gambit extends itself to the way the Best Buy website works. The visitor who wants an appliance goes to Pacificsales.com and leaves the Best Buy website completely.
The PacificSales site looks nearly identical to the appliance site at HomeDepot.com.
Under the Pacific Sales plan, Best Buy loses one point to Home Depot and gains one against Amazon. A typical Home Depot has enough floor space for a huge appliance showroom. Amazon has none. Best Buy has to compromise. A list of its stores shows only a fraction have a Pacific Sales location. For Best Buy, a store within a store — unless the store is not there.