Best Buy Didn't Beat Amazon. It Made Amazon Pay the Rent.

In 2012, Best Buy ran the most expensive advertisement Amazon never had to pay for. A shopper walked into a bright store, picked up a TV, asked an employee in a blue shirt how it compared to the model next to it, weighed the answer, pulled out a phone, scanned the barcode, found the same set cheaper online, and walked out. Seventy-one percent of the people who did this at Best Buy bought from Amazon instead. Only eight percent came back to BestBuy.com.⁷ The store was doing the selling. Someone else was ringing up the sale.

The story everyone tells is that Best Buy fought Amazon and won — that it out-priced, out-clicked, and out-hustled the internet's biggest store. Almost none of that is what happened. Best Buy never beat Amazon on price, and it never tried to for long. What it did was stop pretending price was the fight, and start charging Amazon's own suppliers for the floor space their browsers were standing on.

The company was a showroom that forgot to charge admission

When Hubert Joly was named CEO in August 2012,¹ the numbers told a brutal story underneath a calm surface. Revenue had flatlined for years — about $49.2 billion, $49.7 billion, then $50.7 billion across fiscal 2010, 2011, and 2012³ — the kind of plateau that looks like stability until you notice the floor is rotting beneath it. The company lost roughly $1.2 billion in fiscal 2012, ran more than 1,400 stores, and had a website its own e-commerce president admitted was stuck 'in a 10-year time warp,' pulling in only about 6% of revenue at a time when a quarter of all consumer-electronics sales had already moved online.⁸ By the time the turnaround plan was unveiled that November, the stock had sunk below $15.²

The trap was structural, not strategic. Best Buy carried the full cost of a physical network — rent, staff, lighting, inventory — to do the one job Amazon needed done and couldn't do itself: let people see and touch the thing before they bought it. Electronics were the worst possible category for this. Of all shoppers who showroomed across every retailer, more named Best Buy as their favorite showroom than any other chain.⁷ It had become America's most popular place to decide what to buy from someone else.

Joly's move: stop fighting the price, sell the floor

On November 13, 2012, at the Best Buy Theater in Times Square, Joly laid out a plan called Renew Blue, built on five plain pillars: improve the customer experience, energize employees, deepen vendor relationships, cut costs to lift returns, and grow sales.² Read carelessly, it sounds like every turnaround deck ever written. Read carefully, it is a confession: Best Buy could not win a price war with a company that ran on thinner margins by design, so it would stop fighting one. The thesis of the whole turnaround sits in a single reframe — Best Buy is not a price-match battleground, it is the only national showroom for electronics, and a showroom's tenants should pay rent.

The first step was defensive and almost humiliating: match Amazon's prices, take the margin hit, and stop the customer from leaving with a barcode in their phone. That bought time, nothing more. The real move was the store-within-a-store. Instead of Best Buy stocking and merchandising every brand on its own dime, vendors built and paid for their own branded mini-stores inside the floor. By fiscal 2014 Best Buy had opened 1,400 Samsung and 600 Windows stores-within-a-store.⁴ The suppliers got a premium stage for their products against rivals; Best Buy got someone else funding the showroom that had been bleeding it dry. The genius is the inversion: the very feature Amazon was exploiting for free — physical display — became the thing Best Buy could sell to the brands Amazon also depended on.

While the vendors rebuilt the floor, Joly attacked the cost base with a discipline the headline numbers understate. The original Renew Blue target was $725 million in annualized cost reductions. After a single fiscal year, Best Buy beat it, reporting $765 million; by the third quarter of fiscal 2015 the figure reached $965 million.⁴ That cash bought the only thing a dying retailer actually needs: time. And the early signs of life showed up in the right places — domestic online sales rose 20% in fiscal 2014,⁴ dragging the website out of its time warp, while total revenue troughed near $39.8 billion in fiscal 2013 and recovered toward $42.4 billion in fiscal 2014.⁵

Wasn't it just luck, a friendly founder, and a kind market?

The honest objection is that Joly arrived with a safety net and good timing, not a strategy. Founder Richard Schulze was circling that same summer with an informal bid of roughly $8 to $10 billion, around $24 to $26 a share — a meaningful premium that looked, in the press, like a floor under the stock.⁶ If a buyout was coming, why credit the operator? The answer is that the net was never real. By late February 2013 Schulze's bid collapsed because he couldn't line up the financing, and Best Buy's board noted it had received no formal offer at all.⁶ The takeout everyone assumed would save the company evaporated; the operational triage had to actually work.

The fairer version of the objection is that Best Buy didn't beat Amazon so much as survive it — and that's correct, but it's the point, not the rebuttal. Renew Blue was never a plan to defeat the internet's lowest prices; it was a plan to stop being the cheapest way for Amazon to acquire a customer. The vendor-funded floor, the cost cuts, the price-matching, the patched-up website all did one job: keep Best Buy alive and intact long enough to build something Amazon genuinely struggles to replicate at scale — the physical, human, in-store service business that ships, installs, and supports the things people buy. You can't easily out-warehouse Amazon. You can stand in the one place it can't: the room where the customer is holding the product, deciding.

Best Buy's survival is usually filed under 'how a retailer beat Amazon,' and that label gets the moral exactly backwards. Joly never tried to be Amazon, and he never beat Amazon at being Amazon. He looked at the one thing his company had that the internet's biggest store wanted — a floor where people make up their minds — and instead of giving it away for free, he started charging the people who needed it most. The showroom didn't kill Best Buy. Once someone else paid the rent, it saved it.