Rafi Mohammed

A Juicy Pricing Scandal at Best Buy

Posted on May 29th, 2007 (3 Comments)

After a fun holiday weekend, I thought it’d be nice to ease into the week by discussing a juicy pricing scandal currently in the news.

Remember my blog where I described my experience of ordering products online at BestBuy.com and finding in-store prices to be higher? This story gets more intriguing courtesy of George Gombossy, a reporter for the Hartford Courant who broke the story that Best Buy maintains a “secret” in-store web site. The story began innocently enough when Eric Hammer, a Hartford teacher, visited his local Best Buy to purchase a laptop computer advertised as being on sale. Arriving at the store, he was told the sale was over – and to prove it, the salesperson went to a web site (that looked exactly like BestBuy.com) showing the laptop at a higher price. Surprised, Mr. Hammer visited another Best Buy store and ditto…the exact same thing happened. After a salesman showed him a higher price on the web, Mr. Hammer took control of the computer and navigated directly to BestBuy.com. And guess what…according to BestBuy.com, the sale was still on. The site showed the laptop priced $150 lower than what the store was selling it for (also $150 lower than the price on the mysterious web site the salesman had shown him). What’s going on here?

Best Buy initially denied there were different web sites (and prices), but later admitted that its stores do have intranet sites (that look exactly like the BestBuy.com site). The company maintains it never meant to mislead customers. Last week, the Attorney General of Connecticut filed suit against Best Buy alleging the company violated its unfair practices law by baiting customers (with low Internet prices) and switching (by using deception to not honor these Internet prices at retail outlets). The Attorney General maintains that to check prices, customers would press a button labeled “BestBuy.com” on in-store kiosks. But instead of being sent to BestBuy.com, customers were led to the store’s intranet that simply listed the in-store prices – that we higher than those on BestBuy.com.

Do you really think Best Buy is crazy enough to intentionally deceive customers in this manner? Doing so would involve a massive conspiracy amongst its employees. Additionally, George Gombossy (the Hartford Courant reporter) did find one instance where the intranet price for a computer was less than the Internet price. That said, it’s unclear why Best Buy maintains an intranet site that looks exactly like its Internet site or why some stores allegedly have kiosks that mislead customers. And while Best Buy’s sales force is not paid on commission, according to emails from former employees sent to Mr. Gombossy, the number of hours part time sales people are assigned depends on the sales and profits they make for the chain. Thus, sales people have an incentive to deceive customers to increase their profitability, which will lead to more hours.

This will be an interesting story to follow. What should be clear is that when purchasing from a retail store that honors prices from its Internet site like Best Buy, come armed with a print out of the web prices.

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Readers' Comments on This Blog Entry

From Steve from the West Coast on May 29th, 2007
I absolutely do believe they would maintain a parallel site. Why do I think that Best Buy will end up getting in trouble for trying to cover up the use of this site? Just like in political scandals, it's never the act that gets you. It's the cover up.
From Bill Taylor on May 29th, 2007
Rafi- The son of one of my clients works at Best Buy. According to him, the employees also get "spiffs" which are payments from the manufacturer to encourage sales of their products. It's a way of paying commissions and saying you're not at the same time.
From Deborah the Lawyer on May 30th, 2007
This is completely believable. Many national chains price the same goods higher in affluent neighborhoods than in blue collar areas. What mystifies me is why the Best Buy website didn't stress that the sale prices were applicable to online purchases only. The websites of most national chains have language indicating that in-store prices may vary from the website price. The absence of such language is what makes this a bait-and-switch situation (yes, I've made up my mind---in the immortal words of Zonker from Doonesbury, many years ago, "Guilty! Guilty! Guilty!"). I doubt that the lower-level store employees knew that the intranet Best Buy was different from the BestBuy website, although probably most of the managers were advised of it and told how to handle sticky customer inquiries. My lawyer's instincts say, the discovery process in this lawsuit will not make Best Buy look very good