Walmart, founded in 1945 in Bentonville, Arkansas, has more than 2.2 million full-time employees and operates retail stores, restaurants, supermarkets, supercenters, warehouse clubs, apparel stores, and much more. If there is any product someone wants, Walmart likely offers the product at an attractive price point. The company emphasizes low prices and provides flat screen TVs, phones, mp3 players, cameras, notebook computers, and many other electronics at prices typically lower than Best Buy. In addition to electronics, Walmart is so diversified, especially with its grocery business, that it is able to withstand downturns in the economy better than most retailers. Currently, Walmart operates more than 10,000 retail stores under 69 different brand names in 27 different countries.
With tax-free benefits still present for online sales, coupled with convenience, lower prices, and more variety, online sales are increasing at a much rate faster than traditional retail sales. Online sales could reach 15 percent of total retail sales by 2015. These numbers still leave the majority of retail sales to brick-and-mortar establishments.
Currently there is no state sales tax on many Internet purchases in the USA. This savings can provide consumers who buy and sell products online from a central location up to a 10-percent price advantage over rival firms who have brick-and-mortar locations in the respective state of the transaction. However, there is growing sentiment among U.S. politicians to even this playing field, and it is expected that states could receive a $23 billion windfall from taxed sales on the Internet. Many states financially need the money badly. Taxing Internet sales would make it more likely consumers would patronize local stores rather than buying off the Internet. This would be especially true for firms such as Best Buy who sell many higher ticket priced items. For example, a $500 notebook computer purchased in state and local township with 8 percent combined sales taxes would cost a consumer an extra $40 in tax, so removing this potential $40 savings from online sales should benefit stores such as Best Buy.
Even if the tax-free environment on most Internet transactions is removed, firms such Best Buy still face an uphill battle with online merchants. Amazon.com for example offers free shipping on many orders more than $25 and in addition offers the same product from many different merchants allowing customers to price check easily and conveniently. In addition, customers can view product reviews and comments from users of the products as part of their research. Furthering the online threat for brick-and-mortar establishments such as Best Buy is the increased use of smartphones for price checking while shopping in brick-and-mortar stores. Forrester Research reports there were 82 million smartphones in the USA in 2010 and this number is expected to increase to 159 million by 2015. Ironically, the mobile phone that Best Buy is betting so heavily on in the future is also the device that allows customers to price shop competing firms for other products while shopping in Best Buy.
Customers often will visit a store such as Best Buy to talk to experienced sales people and to view the products before purchasing elsewhere. This was one of the contributing reasons why Best Buy did not work in China. Chinese customers simply used Best Buy as an information agent and purchased elsewhere.