Electronics retailer Best Buy is doing okay, according to its new earnings report. It made a convincing profit. Revenue was up about 5 percent, same-store sales up about 2 percent from last year. This is not so encouraging when you consider that a year ago, Best Buy had a major national competitor in Circuit City, which has since closed. Indeed, Best Buy told people not to get too excited about its results, offering a warning about profit margins. More shoppers, it said, are focusing on low-markup items, particularly low-end televisions and notebook computers.
I expect the trend toward lower markups to increase in the next three years as consumers try harder to get a good price. I’m not talking about consumers shopping around, going from store to store before they make a purchase. Some consumers do that, of course, but most are too busy, busier than ever, and that trend shows no sign of going away in the next few years. But consumers no longer have to shop around. They are getting better information on where the bargains are.
I have heard, for example, of a mobile phone application that can scan a product barcode and show other places where the product or similar products can be found, often with prices. Sometimes, it produces a map showing nearby places, marked with product prices. When consumers have access to this kind of information, it is harder for a retailer to slip an extra $20 into the price of an item. And this is the kind of information that will become commonplace about two years from now.
Retailers benefit when consumers are more active, but only up to a point. The most active consumers have relatively little need for retailers — these consumers always have other options. No matter what a retailer is offering, highly active consumers can take it or leave it. And consumers seem to be getting more actively involved in the shopping they do. That’s an emerging trend that will favor some retailers while forcing others to adapt.
