I am not going to pretend to know what BBY makes on games they sell for $60 but they also put their games on sale for $39.99 so that lost $20 from the price match at Target is a moot point. So what we are talking about here is the $20 cert which is money that goes right back to BBY. So from a cash perspective I give them $40 cash and they give me a coupon for $20 off something else in store. They are not selling me that game for $20. What I do with the $20 cert will determine part of the profitability of the sale.
Stop. You're looking at this completely wrong because you're looking at it from YOUR perspective.
(Removing tax from the equation.)
Best Buy understands already what a $20 certificate is worth. It's obviously not $20 cash. Say it's $15 cash or $10 cash or whatever.
Best Buy asks EA to subsidize a preorder. EA agrees to "pay" $15 (or $10 or whatever) for the promotion. Best Buy gives you the $20 GC. Best Buy is net 0 on the preorder deal.
Now, Target does a deal with EA too but it's just a straight $10 off promo two weeks following release.
When BB PMs that Target price, without a subsidy from EA, they are in effect losing that $10. (I wonder if they call it a marketing expense.)
Or if they put the game on sale for $40 a month later, that's because of a different subsidy from EA for $20. EA is not going to stack two subsidies for them.
That's why the PM policy loses money, especially when it's stretched over a long period of time and increases the chances of a promotion elsewhere.
This is completely different from your straight 50% retail markup items where if you PM, you're just making less margin. e.g. Amazon sells a $10 widget for $18 and Best Buy sells it for $20. By PMing amazon on the widget, BB only makes $8 instead of $10. Now, BB has higher overhead but at least they're not losing money straight off the top.
I suspect that price matching Amazon on already low margin products is killing them because they have so much overhead. Mentally looking through a best buy store, I gotta think most of their merchandise is really low margin stuff.
short version: price matching is killing BB. It's not like they want to get rid of it just for shits and giggles.
Edited by confoosious, 15 February 2013 - 01:25 AM.