As if competing against Amazon and Wal-Mart wasn’t hard enough, Best Buy apparently faces another upstart rival that doesn’t even sell smartphones and televisions.
That would be Spirit Airlines, the ultra cheap airline that notoriously charges passengers for overhead baggage and water.
In a recent interview with the Los Angeles Times, Spirit CEO Ben Baldanza said his company’s business model is so unique that he doesn’t even consider Delta or even JetBlue to be real competition.
“Our competition is Amazon.com and Best Buy and other places you will spend your discretionary funds,” Baldanza said.
On the surface, Baldanza’s argument seems odd. Retail and airlines are completely different businesses.
But are they? In today’s weak economy, consumers have a limited amount of money to spend. So companies as varied as Spirit and Best Buy must offer consumers a compelling reason to buy their goods or services. The way Spirit sees it, the company wants buyers to choose a cheap flight to Vegas over that 20-inch flat screen.
Spirit has clearly established its niche in price. The company offers really cheap fares because they charge customers for everything else. They also pack more people into their plans by offering less leg room than other airlines.
Not surprisingly, some flyers are peeved about Spirit's perceived lack of quality customer service. That's akin to complaining that the $20 bus fare you paid for Megabus didn’t include a facial and massage. You get what you pay for and Spirit has prospered handsomely from that philosophy.
Best Buy, on the other hand, is betting on customer service. Consumer electronics aren’t simple products and what will separate Best Buy from the rest of the pack knowledge and expertise.
But that’s hardly a neat marketing slogan. Customers respond more easily to price than the relatively abstract idea of expertise. Compounding the challenge is that Best Buy carries everything from $10 DVDs and $15,000 televisions. Such an eclectic range of products makes it hard to tell customers what you’re really good at.
Can Best Buy develop a similarly simple yet compelling identity like Spirit? That remains to be seen.