Why Google Inc (GOOG) Needs a Retail Operation: Apple Inc. (AAPL), Best Buy Co., Inc. (BBY)

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But then Samsung signed a deal with Best Buy Co., Inc. (NYSE:BBY), and everything changed.

Microsoft, which had been rolling out its own retail stores (a la Apple), switched course and signed a deal with Best Buy. Microsoft still has several dozen retail stores spread out across the country, but by partnering with Best Buy, it will increase its retail presence rapidly, at lesser cost.

Building a retail operation takes time. Best Buy already has plenty of stores in some of the best spots of the country, stores that consumers are trained to go to for their electronics needs.

When Best Buy was left for dead last year, investors came to the conclusion that the big-box stores were simply too big. Lots of Best Buy’s merchandise (like video games, CDs, and DVDs) was going digital, and all that real estate was unnecessary.

Turns out that’s not the case — that real estate is still an asset after all. It’s just a matter of repurposing it.

Building on the model that Apple’s popularized, consumers want brand-focused stores with dedicated employees. Both Samsung and Microsoft provide their own employees to run their stores within Best Buy; it seems likely that Google would do the same.

Sony Corporation (ADR) (NYSE:SNE) should be next
I wouldn’t be surprised if other companies also form partnerships with Best Buy. If they don’t, they risk having their products marginalized, as dedicated sections and employees gives competing brands a leg up over the competition.

One company that immediately comes to mind is Sony Corporation (ADR) (NYSE:SNE). The Japanese electronics giant actually has a chain of retail shops, but not many — less than 50 in the U.S.

Since naming a new CEO last year, Kazuo Hirai, the company has made a concentrated effort at turning itself around. This turnaround effort has taken the form of several major new products, including a 4K TV, the Xperia line of tablets and smartphones, a smart watch, and the upcoming PlayStation 4.

As these products compete directly with some of Microsoft’s (PlayStation 4 vs. Xbox One), and Samsung’s (Xperia vs. Galaxy mobile devices, smart watch, TVs) wares, Sony would benefit from its own partnership with Best Buy.

Investing in Best Buy
Contrary to what has been popular belief, Best Buy’s retail space is an asset — not a liability. As Apple has shown, electronics makers see a major boost from dedicated retail operations. Sure, they can go it alone — building their own retail arm — or they can partner with Best Buy.

Samsung and Microsoft clearly believe that strategy makes more sense. And if the rumor is true, Google, too, sees the advantage in a Best Buy partnership. It wouldn’t surprise me if other companies, particularly Sony, also make deals to work with Best Buy down the road.

I’ve been pounding the table for Best Buy for a while now, and it’s been a great stock to own. I still believe it has further upside.

The article Google Said to Want in on the Best Buy Action originally appeared on Fool.com and is written by Sam Mattera.

Sam Mattera owns shares of Best Buy. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

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