Market Overview

Is Microsoft's Windows Store Concept Good for Best Buy?

Best Buy (NYSE: BBY) is going through a bit of a transformation. After failing to draw customers with its traditional business model of selling electronics at fair prices, the retailer has decided to share some of its store space with Samsung.

This week Best Buy hosted a massive event with Nintendo (OTC Pink: NTDOY) that gave attendees the chance to play demos of unreleased Wii U games.

Now the retail giant has announced that it will welcome a Windows-centric store-within-a-store later this summer.

A whopping 500 U.S. stores and 100 Canadian outlets will receive a Windows Store, which will sell everything from Office products and Windows Phone handsets to PC accessories, Xbox game consoles and tablets.

Windows PCs will also be sold and promoted, and Best Buy plans to hire 1,200 Microsoft-trained (NASDAQ: MSFT) sales associates that will create an "engaging customer experience at scale."

This is the third company that is attempting to open up shop in Best Buy. The first, Apple (NASDAQ: AAPL), has been very happy with its partnership. Apple has been able to use Best Buy to discount older iPods and MacBook computers with monthly sales. Even EarPods -- the snazzy earbuds replacement that Apple created and released last year -- have received a discount from time to time, allowing shoppers to save as much as 20 percent.

It is not yet known if Samsung will follow in Apple's footsteps and make Best Buy a bigger part of the company's marketing initiative.

Microsoft is looking to take up the largest amount of store space, however, with as much as 2,200 square feet going to Windows Stores. The smallest store-within-a-store will be 1,500 square feet, which is still fairly impressive.

Right now, Best Buy already devotes that much space (if not more space) to its various Windows-related products. By treating this section as its own retailer, however, Microsoft is attempting to direct attention away from Apple and Samsung.

In the short-term, this is a big win for Microsoft, but it could be detrimental to Best Buy. Benzinga's own Matthew Kanterman recently pointed out that this business model is similar to the one that Ron Johnson came up with for J.C. Penney (NYSE: JCP). Investors are well aware of how that turned out.

Even in the best-case scenario, this strategy could pose problems for Best Buy. If the store is seen by consumers as a mini-mall, consumers may expect every major brand to be represented accordingly. For example, Sony (NYSE: SNE) operates several Sony Style stores in malls across the country, but it does not currently have one inside of Best Buy. The same can be said for Bose. Will Best Buy eventually approach these companies about building a store-within-a-store?

And if they do, will that really prevent shoppers from choosing Amazon (NASDAQ: AMZN) instead?

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

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