USA TODAY International Edition
Best Buy scores a win with Amazon Fire TV deal
TVs will be available exclusively at retailer
BELLEVUE, Wash. – 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 no longer can 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 10 4K and HD Fire TV Edition television 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.
The news sent shares of Internetstreaming device maker Roku down 12%. Its operating system has powered the Insignia house-brand TVs at Best Buy. Best Buy will keep selling Rokupowered TVs from other brands.
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 Fire TVenabled 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, Joly said.
“What’s new in the depths of the physical integration between the software and the hardware, between the two companies working together — specifically, the two companies are retailers, but they’re also product companies,” Joly said.
Televisions are increasingly moving away from boxes and add-ons that provide access to content such as 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,” Baker said.
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,” Spieckerman said.
Amazon’s embrace of brick and mortar is not new. The e-retailer has been increasingly building out its presence in the physical world. It has 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 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.
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,” Spieckerman said.