Less than a year ago, Best Buy Co., Inc. (NYSE:BBY) looked to be facing a glum future. More and more, consumers were opting to buy their electronics either online or in specialty stores, while a good chunk of Best Buy’s products (CDs, DVDs, video games) were increasingly going digital.
But Best Buy seems to have completely turned it around, and could have a bright future ahead of it.
Samsung and Microsoft Corporation (NASDAQ:MSFT)
In April (borrowing a page from Ron Johnson’s J.C. Penney Company, Inc. (NYSE:JCP) playbook) Best Buy inked a deal with Samsung to build specialty, dedicated shops within larger Best Buy stores.
It was truly a win-win for both companies. Samsung was able to build out a dedicated retail presence across the US in just a few months (and thereby up the ante in its war with Apple Inc. (NASDAQ:AAPL), while Best Buy was able to reduce its labor costs and offer a unique retail experience.
After the deal had been announced, I speculated that additional partnerships would likely be coming. In fact, I wrote that Microsoft Corporation (NASDAQ:MSFT) should be Best Buy Co., Inc. (NYSE:BBY)’s next partner.
That wound up to be the case. Microsoft now plans to launch its own specialty stores in 500 Best Buys across the country. That number is fewer than the number of Best Buys with Samsung shops, but still represents a big chunk of Best Buy’s locations.
But Microsoft’s decision is actually far more important than Samsung’s.
Best Buy is a better bet than independent stores
The key difference between Samsung and Microsoft is that, unlike Samsung, Microsoft had begun a campaign to establish its own independent retail presence. Since last year, the Windows-maker has been slowly building out a full retail operation across the US.
Of course, Microsoft’s retail strategy has taken a relatively long time to implement, and the stores are few and far between — many major metropolitan areas don’t have them at all.
One might expect Microsoft to slow or cease its own retail rollout in favor of partnering with Best Buy Co., Inc. (NYSE:BBY) — a store that has spent years acquiring and developing retail assets.
It also suggests that, going forward, other tech companies that may have had an interest in an independent retail operation might instead look to partner with Best Buy rather than develop their own locations.
I would expect both Sony Corporation (ADR) (NYSE:SNE) and Google Inc (NASDAQ:GOOG) to consider partnering with Best Buy next. Sony already has a few dedicated retail stores in the US, but the company has never strongly pushed its retail presence.
But now, Sony is in the middle of a turnaround, and is preparing to launch (or has recently launched) a number of key products. These include the PlayStation 4, its 4K TVs, and the Xperia lineup of tablets and phones.
Sony’s products directly compete with Microsoft’s and Samsung’s, so getting its own dedicated shop within Best Buy Co., Inc. (NYSE:BBY) would prevent it from losing a competitive edge.