Price Check: Best Buy Vs. VARs

Solution providers have some new low-price competition for small-business customers. Computer and electronics retail chain Best Buy has launched Best Buy For Business outlets in more than 100 of its store locations. In addition, the Minneapolis-based retailer said it aims to open another 100-plus Best Buy For Business outlets by early 2007.

How low are the prices? CRN took eight products and asked a solution provider to compare Best Buy’s price with the price he pays in buying the products from distribution and with the price at which he typically sells the products. (See price comparison chart below.)

The results: Best Buy’s price to customers was at least $30 lower than the solution provider’s price for seven of the eight products. They were virtually tied on the eighth, a Toshiba Tecra M5-S433 notebook.

One product, an HP Laser Jet 2600N printer, was selling for less than what the solution provider paid through distribution.

CRN showed the results to two more solution providers, who were not thrilled with Best Buy’s competitive pricing and wondered whether the manufacturers were really supporting all of their channel partners.

“We may have to re-evaluate who we are carrying because of the discounts Best Buy is getting. I’m not going to sit there and bash my head trying to meet Best Buy pricing,” said Jay Tipton, president of Technology Specialists, Fort Wayne, Ind.

Some vendors give too much of a price advantage to large companies, according to John Kunzer, president of MCC Technology, a St. Charles, Ill.-based solution provider.

Kunzer cited Hewlett-Packard as an example. “HP printers have rebates available to the big players that buy huge volumes. That’s been the case for a long time,” he said.

Other IT vendors have tried the retail market to grow their business, but the results are that margins get cut across the board and customers aren’t served properly, Kunzer noted.

“Apple tried going through the Best Buys and Circuit Citys. They aren’t Apple evangelists. If you want it off the shelf, they’ll sell it to you, but that’s all. It ruins all legitimate Apple dealers,” he said.

And once a customer gets used to a lower price, that can’t change, even if the price leader exits the market, Kunzer added.

“It ruins IT pricing. If a customer knows they can buy something for $399 out there, and not buy it at $549, it doesn’t matter if I’m smarter or better,” he said. “It doesn’t scare me in the sense of competing for a customer, but it legitimizes someone that doesn’t have the knowledge to provide services that customers really want.”