Retail Rivals Amazon and Best Buy Team Up to Sell Smart TVs
April 18 2018 - 6:29AM
Dow Jones News
By David Pierce
Rivals Amazon.com Inc. and Best Buy Co. are joining forces to
sell television sets powered by Amazon's Fire TV operating
system.
Amazon CEO Jeff Bezos and Best Buy CEO Hubert Joly revealed the
partnership on Tuesday at a Best Buy store in Bellevue, Wash. The
companies will sell 11 models, starting this summer with TVs by
Toshiba and Best Buy house brand Insignia. Best Buy will feature
the Amazon-powered TVs in its stores and on its website, and also
become a merchant on Amazon's website, where it will sell these TV
sets exclusively.
"What we're doing is so deeply integrated," Mr. Bezos said,
acknowledging the fact that his company and Best Buy are often
considered rivals. "It's only possible because we trust each
other."
The two companies say they have been partners for years, and
Amazon products such as Kindle e-readers have long been sold in
Best Buy stores. But the new partnership brings potential benefits
for both companies as sales of so-called smart TVs continue to
climb.
It provides Best Buy with access to Amazon's online customers
for the first time, while broadening Amazon's potential audience
for products that feature its Alexa voice assistant. Amazon, which
has been expanding its physical footprint through its own stores,
has deepened its reach into consumers' homes in recent years,
starting with Kindles and more recently with its line of Echo home
speakers, which star Alexa.
"What's new in this partnership is the depths of the physical
integration between the software and the hardware," Mr. Joly said.
"The two companies are retailers but they're also product
companies."
The companies declined to comment on whether Best Buy would pay
a standard commission as an Amazon merchant, or whether they
negotiated a different deal. They didn't disclose prices for the TV
sets, which will be branded as Fire TV Edition.
The partnership means that Best Buy's house brand Insignia will
no longer produce sets powered by Roku Inc.'s operating system. The
retailer, however, will continue to sell Roku-powered TVs from
other brands.
Best Buy, which was left for dead six years ago, has bucked the
retail shakeout by ramping up its e-commerce efforts, promising to
price-match Amazon and taking market share from competitors. It
continues to operate about 1,000 big-box stores in the U.S., where
it leases out floor space to brands like Samsung, and uses store
inventory to fulfill online orders.
"In the electronics and appliance space, our combined market
share is about 25%. They're gaining, we're gaining, too," Mr. Joly
said in an interview last month. "It's not a zero-sum game."
By selling the Fire TV models on Amazon's site, Best Buy risks
pulling sales away from its own website and its physical stores.
Most traditional retailers such as Walmart compete to attract
shoppers to their own e-commerce sites, although Amazon did strike
a deal with Sears Holdings Corp. last year to start selling Kenmore
appliances through its marketplace.
Best Buy said it plans to sell only the Fire TV models on
Amazon's site and no other products.
The setup appears to embrace so-called showrooming, a
smartphone-era trend where customers browse items in a store and
then buy them online. Best Buy's sales and service staff can help
explain how Alexa and Fire TV products work in store--and
potentially sell shoppers other devices in the same ecosystem. If
the shopper decides to buy the set online, Best Buy still makes a
sale.
With the Fire TV Edition sets, users can ask Alexa to turn the
TV on and find shows to watch, among other commands. Each TV will
come with a voice-capable remote and can also be controlled through
an Echo device in the home. Mr. Bezos said that not all people
would want to control their TV with their voice, but argued that it
made TVs simpler to use.
Like other smart-TV platforms, Fire TV integrates apps, even
those from Amazon's competitors such as HBO and Netflix. But Amazon
relies on outside developers to integrate these apps with the Fire
TV's search and discovery tools. Without it, someone commanding,
"Alexa, watch 'Westworld'" might not get the desired result. Mr.
Bezos said some 190 providers are already integrated with the Fire
TV's universal search, including Netflix, Hulu and Showtime.
In 2017, Amazon began selling a Fire TV Edition line from the
lesser-known brand Element at deeply discounted prices. The new TVs
from Insignia, Toshiba and possibly other brands to be named later,
are likely to cost more, and will vary in size and price. Amazon
said the Element TVs are sold out and won't be restocked.
Amazon may be hoping to follow the lead of Roku, which began
licensing its own smart-TV software to manufacturers in 2014. By
the end of 2017, Roku said one in five smart TVs sold in the U.S.
ran its software. Roku plans to release its own voice
assistant.
Khadeeja Safdar contributed to this article.
(END) Dow Jones Newswires
April 18, 2018 06:14 ET (10:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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