Best Buy and Good Guys Jump Into E-Commerce

Lost in the shadow of Wal-Mart’s decision to move their online operations to Silicon Valley were major e-commerce announcements by two other brick-and-mortar mainstays.

$10 billion (US$) retailer Best Buy (NYSE: BBY) announced a major expansion of its Web site to include all of the electronics products that the company now sells and also unveiled a partnership with a new online site to sell telecommunications services, while $1 billion U.S. West Coast specialty audio/video retailer Good Guys, Inc. (Nasdaq: GGUY) announced that it is setting up initial online sales operations.

Brick-and-Mortar Floodgates Are Opening

When all three moves are combined together, it is strong evidence that the floodgates are opening for the online operations of major brick-and-mortar retailers. If you are anybody in the retailing world — especially if you also sell your stock publicly — there is enormous pressure to jump into the online fray.

It also shows that when the brick-and-mortars jump into cyberspace, it may well be accompanied by a third party deal. Wal-Mart has partnered with venture capital firm Accel Partners. Best Buy’s moves include a partnership with newcomer Simplexity.com. The Good Guys will only own 49.9 percent of its online venture, selling the rest to San Francisco Bay Area “venture capitalists, ‘angel investors,’ and Good Guys management and board members.”

BestBuy.com Adds Electronics and Telecom Services

Best Buy is a discount retailer with warehouse-like stores that carry consumer appliances, electronics, audio/video products and music CDs, tapes and DVDs. Best Buy already sells its CDs, tapes and DVDs on its online store.

Its next online moves are to add its entire existing line of name brand electronics products for sale online, including televisions, stereos and cameras, and to also sell a new line of telecommunications services online. The company said that all products purchased online can be returned at any one of the 354 brick-and-mortar stores that it operates nationwide.

Telecom Services Sold Via Deal With Simplexity.com

While the move to sell electronics products is expected and represents a logical online expansion, the move to sell telecommunications services has a unique flavor to it. Sales will be made via a strategic alliance with Simplexity.com, a new company that will soon be selling telecommunications services via what it says is a “new architecture to match consumers and small businesses with the best telecommunications services to meet their needs.”

As part of the announcement, Best Buy said it is making a $4 million equity investment in Simplexity.com. Best Buy president John C. Walden said that its market research indicates that consumers are “overwhelmed with the number of products and services available.” As a result, he said that Best Buy is trying to develop a service that will make it easy to choose the best service. Time, of course, will tell if he is right.

Good Guys’ Partner Route Hedges Bet

Good Guys operates 79 stores on the U.S. West Coast, including California, Oregon, Washington and Nevada. Its move online has come after the company decided that it is viable to sell its comparatively high-end audio and video products online. The company said that it expects its site to be online in the second quarter of 2000.

Company president Ronald A. Unkefer said that it was moving online via a partnership so that “Good Guys can reap all of the benefits of a branded electronic commerce site, without assuming the associated financial risks and obligations.” The Good Guys recently announced that its operations lost $34 million in its fiscal year ended September 30, 1999.

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