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In Best Buy deal, Amazon acknowledges you sometimes need to touch things to buy

Posted by On April 18, 2018

In Best Buy deal, Amazon acknowledges you sometimes need to touch things to buy

In Best Buy deal, Amazon acknowledges you sometimes need to touch things to buy

BELLEVUE, Wash. â€" Amazon has built its brand as a digital marketplace, but it’s increasingly clear that it also needs a big physical presence to sell the devices that will further knit customers into the Amazon ecosystem.

A deal announced Wednesday that Best Buy will exclusively sell Amazon Fire-edition smart televisions suggests that it can no longer achieve the scale it wants without access to more brick and mortar.

In a rare sit-down meeting with a small group of reporters on Tuesday, Amazon CEO Jeff Bezos made the announcement together with Best Buy CEO Hubert Joly.

This summer, Best Buy will begin selling more than ten 4K and HD Fire TV Edition televisions models from Insignia, Best Buy’s in-house brand, and Toshiba. The TVs will have Amazon Fire TV built in, allowing users to search for and watch broadcast TV, or choose from a catalog of streaming TV episodes and movies from Netflix, Prime Video, HBO, PlayStation Vue, Hulu, and other streaming sites.

The TVs will also include a voice-activated remote with Alexa, Amazon’s voice-enabled assistant, and are set up to pair with any Echo device, allowing users to issue commands to their television via their Echo.

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Bezos and Joly made their announcement in a small room designed for demonstrating television sound systems at the back of a Best Buy in Bellevue, Wash.

The Amazon CEO said he was excited by the possibilities because a Fi re TV-enabled television gives consumers the convenience and simplicity they want in the increasingly important smart TV segment.

“The data is that it’s growing something like 70% year-over-year, so it’s also a natural place for us to partner together because it’s something customers are very interested in,” Bezos said.

The Fire TV Edition smart TVs will be available exclusively in Best Buy stores and on BestBuy.com. In a first, they will also be sold on Amazon, with Best Buy acting as a third-party seller on the site.

Best Buy and Amazon have a long history that goes back to the Kindle reader. Today, about 700 Best Buy stores feature an Alexa showcase table where shoppers can see how Alexa works, especially with smart home products, said Joly.

“What’s new in this partnership is the depths of the physical integration between the software and the hardware, between the two companies working together â€" specifically the two companies are retail ers but they’re also product companies,” he said.

Televisions are increasingly moving away from boxes and add-ons that provide access to content like cable TV or Amazon Prime Video. Instead, that functionality is being built into the television’s operating system and hardware.

To be competitive in this shifting market, Amazon needs to get its Fire TV operating system into customers' living rooms, said Stephen Baker, a vice president of consumer electronics at the NPD Group.

Once the hardware’s in the home, Amazon can use that to get consumers using Alexa, its smart home offerings and whatever comes next.

The deal shows that Amazon understands it’s becoming a hardware company as well as an online company.

“And to be a hardware company you’ve got to play nice. Nobody can be successful at the scale Amazon wants to be at just selling their own stuff, you have to go to other partners. This shows they’re recognizing how important that is ,” said Baker.

A physical store is more important for new or complex technology that requires an explanation for consumers to really "get" it enough to buy.

“Amazon gets all this credit and buzz about how innovative and disruptive it is, but the fact is that until its acquisition of Whole Foods, it was a single channel operator. True scale is no longer achieved in a single channel,” said Carol Spieckerman, a retail analyst with Spieckerman Retail.

That's especially important for Fire TV because it's an Amazon product that hasn’t always found its way.

“If you go on Amazon.com and you look at reviews of Fire-TV, there are often over 1,000 questions that people ask about connectivity, about compatability. The Best Buy staff can help smooth those friction points and generate sales,” said Spieckerman.

Amazon's embrace of brick and mortar is not new. The e-retailer has been increasingly building out its presence in the p hysical world. It’s opened 15 Amazon bookstores and last year it bought Whole Foods, which gave it 479 grocery stores. It also partnered with Kohl’s to sell Amazon smart home products in its stores, which now also to accept Amazon returns.

Even with the TVs, various versions of what will be on offer at Best Buy have existed before. Amazon already sold an Element Fire TV-enabled television, though that deal is now ending. And an Amazon.com search turns up a page of televisions for sale that are compatible with Alexa.

Rather, the deal “is an incremental move, a stitch in the tapestry that’s going to be necessary if Amazon is to realize its ambition of creating this massive, interconnected system for services, content and products,” said Spieckerman.

It’s also a nice coup for Best Buy, which has undergone a reinvention as it repositions itself from a retailer of branded products to a flagship location for many of the brands it carries.

And it doesn ’t hurt in a climate where Amazon is getting a lot of heat for harming retail to show that it’s not just a juggernaut that crushes everything in its path.

“They don’t always have size and scale in every place. Somebody smart, like Best Buy, can leverage that,” said Baker.

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