Best Buy Co., Inc. (BBY) Is Becoming a Tech Mall

What do manufacturers get out of it?

Microsoft already operates a chain of standalone retail stores called Microsoft Stores. It operates 65 locations, all designed around a concept similar to Apple Stores – tables of computers and gadgets with helpful sales associates. Unlike Apple, however, Microsoft has struggled to make an impact with its retail locations.

In light of Microsoft’s struggles with standalone stores, the deal with Best Buy is a sensible way to expand its footprint through an established retailer. Microsoft increases its retail presence 1000% without having to spend a ton of money on building and promoting new stores.

Samsung, which didn’t have any retail presence until its partnership with Best Buy, saw the big-box retailers strategy as an opportunity to catch up to Apple as well. Apple operates over 400 stores around the world, and has long operated stores-within-a-store.

Apple saw its computers being sold next to other computers, and customers couldn’t differentiate between a Mac and a PC. Setting up its own retail operation allowed Apple to better differentiate its products from the rest of the PC market.

Now, in a space getting flooded by new products, Microsoft and Samsung are trying to do what Apple did a decade ago. Samsung is mostly pushing its smartphones and tablets where it faces more competition every day. Microsoft plans to showcase its Windows ecosystem across smartphones, tablets, and PCs, as well as its upcoming Xbox One entertainment system.

If the strategy is even half as successful as Apple’s, both companies will see major benefits. The biggest beneficiary, however, may be Best Buy, as Microsoft’s and Samsung’s success would further encourage other manufacturers to pursue similar mini-store strategies. As the only big-box tech retailer left, Best Buy is poised to become a tech mall.

Brick-and-mortar isn’t dead

If anything, the partnerships with Microsoft and Samsung indicate that brick-and-mortar retail is still important. But Best Buy still has a lot of work to do to get back to the levels it saw in the early 2000’s. Branded stores are just the start, and a smart strategic move in my opinion. It still needs to fight to mitigate the costs of operating a brick-and-mortar store while keeping prices competitive, and its digital presence could use a facelift as well.

Still, the store-within-a-store concept seems like a win-win.

Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Adam is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Best Buy Is Becoming a Tech Mall originally appeared on Fool.com is written by Adam Levy.

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