Best Buy Marketplace Comes Late to the Online Retail Party

There was a time when simple commerce on the Internet was something to be
excited about. When eBay (NASDAQ: EBAY ) went from a keen idea with a cult
following to one of the most successful public offerings of the first dot-com
boom back in 1998, it was one of those rare moments that new technology was not
a fad but a clear herald of the future. Some attempted (poorly) to mimic its
private auction format like Yahoo (NASDAQ: YHOO ), but other online businesses
found success in eBays legacy simply by enabling small businesses and private
sellers to sit alongside large-scale retail partners in a single online shopping
destination. It is the model that helped cement Amazon (NASDAQ: AMZN ) as the
premier retail presence online and paved the way for its nearly $100 billion
valuation today. Of course, the online market trend has aged a decade. It is old
hat, an established business with entrenched players. So why is electronics
retailer Best Buy (NYSE: BBY ) just now showing up to the game? The Richfield,
Minn.-based company announced the opening of the Best Buy Marketplace on
Wednesday, an expansion of its online business to include products from a
variety of retail partners. Reuters reported that those partners include a
plethora of small to large online electronics retailers, from laptop battery
distributors like Mambate.us to Internet stalwarts like Buy.com. All products
purchased through the Best Buy Marketplace are eligible for Best Buys Reward
Zone loyalty program that lets customers earn points toward promotional items
and discounts on future purchases. In the short term, the Marketplace initiative
is a strategic move in Best Buys broader holiday sales plans. In 2010, Best Buy
made an expanded retail operation its holiday priority , opening a fleet of
small Best Buy Mobile locations to spur sales. Online sales, however, are
proving to be much more potent for retailers of every stripe, giving companies
in the electronics space with no retail presence, like Amazon, a leg up. For
Best Buy, though, this need to find new customers online goes beyond the holiday
season. Poor sales of major products like televisions , one of the companys
primary sources of revenue over the years, have forced Best Buy to reconsider
its retail operations worldwide. In the past 12 months, it has announced the
closure of its entire operation in China as well as plans to decrease its total
retail space in the U.S. by 10%, closing large stores in favor of the
aforementioned Best Buy Mobile locations. As Best Buy moves to emulate its
fiercest competitors, though, the question remains: Why will customers buy a
product at BestBuy.com when they can get it at Amazon, eBay or even independent
discount electronics retailers like NewEgg? As a business strategy, the Best Buy
Marketplace is sound: More selection at competitive pricing will, under ideal
conditions, lead to more sales. Ideal conditions, however, would require the
Best Buy Marketplace to have opened in 2005 or earlier. At this point, there is
simply no evidence that Best Buys offering can differentiate itself in a crowded
market. And considering that Best Buy shares have shrunk from above $40 in
December 2010 to below $25 on Wednesday, differentiation is precisely what the
company needs. As of this writing, Anthony John Agnello did not own a position
in any of the stocks named here. Follow him on Twitter at