After giving floorspace to Samsung mini-stores Best Buy Co., Inc. (NYSE:BBY) is forging ahead with the strategy by announcing that Microsoft Corporation (NASDAQ:MSFT) will open 500 mini-stores within the big-box retailer over the next few months. The Microsoft stores will be enormous, ranging from 1,500 to 2,200 square feet, and feature specially trained associates which can demonstrate all of Microsoft’s products. While Microsoft has about 70 stand-alone Windows stores already, this move will allow the company to greatly expand its retail presence quickly and without the overhead of running its own stores. This seems like a good move for not only Microsoft but also for Best Buy.
What this means for Microsoft
The big problem with Windows 8 devices is that people’s opinions are being shaped by what they read online about the operating system. And since much of the reviews and commentary are negative, citing a learning curve and a confusing interface, many are writing off the devices immediately. Microsoft Corporation (NASDAQ:MSFT) can combat this by allowing people the chance to try the devices on a larger scale, and the Best Buy deal does exactly that.
With the upcoming release of Windows 8.1, a major update to Windows 8 which promises to fix many of the biggest complaints about the OS, these mini-stores give Microsoft a platform to showcase the updated OS and the devices which run it, as well as all of the Microsoft services. Microsoft could demonstrate how SkyDrive, its cloud storage system, allows users to access files from all of their devices. The company could push its Office 365 subscription, showing how documents can be accessed and edited from all devices seamlessly. The possibilities are endless.
The mini-stores will also showcase the Xbox, and with the release of the new Xbox One this fall the stores could give Microsoft Corporation (NASDAQ:MSFT) an advantage over rival Sony Corporation (ADR) (NYSE:SNE). Xbox One is being positioned as a full home entertainment solution instead of just a gaming device, and showcasing its abilities to consumers could give a boost to sales.
What this means for Best Buy
Best Buy Co., Inc. (NYSE:BBY) has been reducing the space it allocates for low-margin products like CDs and DVDs, and filling that space with these mini-stores should be much more profitable. Best Buy is the only national consumer electronics chain left, and thus provides a unique platform for companies like Samsung and Microsoft Corporation (NASDAQ:MSFT) to demonstrate their products.
One thing to remember is that the average Best Buy shopper likely isn’t well versed in technology. They haven’t made up their mind about what tablet to buy before coming to the store, so the ability to have products demonstrated and explained by specially trained associates makes Best Buy an attractive place to shop. And with Best Buy matching the prices of online competitors the show-rooming effect should be minimized.
People like to try gadgets before buying them, giving Best Buy a distinct advantage over online retailers. The Microsoft Corporation (NASDAQ:MSFT) deal is a big endorsement of Best Buy’s new strategy, and I wouldn’t be surprised to see more mini-stores being added to Best Buy over time. Apple has had a mini-store presence for years, but the huge Microsoft mini-stores along with the Samsung mini-stores may force Apple to expand its presence within Best Buy. This competition is good for both consumers and Best Buy.
What this means for Nokia
Microsoft Corporation (NASDAQ:MSFT) has partnered with Nokia Corporation (ADR) (NYSE:NOK) to manufacture Windows phones, and the company’s Lumia line has become fairly popular. Nokia recently shipped the last phone featuring the old Symbian OS, making the company exclusively Windows based for the time being.