Best Buy Partners With Microsoft To Open In-House Stores

After its partnership with Samsung, electronics retailing giant Best Buy (NYSE:BBY) has now teamed up with Microsoft to open the latter’s stores within the company’s brick-and-mortar outlets. Microsoft will be the third tech giant after Apple and Samsung to have a dedicated selling space within Best Buy stores. Also, its stores will be much larger than those of Apple and Samsung. ^[1]

Best Buy seems intent on leveraging the value of its real estate to turn it into an asset. High real estate costs have been the primary reason for the company’s eroding competitiveness in the market with the advent of giant e-commerce players like Amazon. While Amazon can afford to offer products at lower prices to customers, brick and mortar retailers like Best Buy find it difficult to do so in face of high operating costs. The company hopes to increase footfalls in its stores as more people visit to experience gadgets firsthand. ^[2]

See our full analysis for Best Buy

The plan is to roll out Microsoft mini-stores in 600 Best Buy locations by early September, around the time when the new version of Windows 8 is expected to be released. Of these, 500 stores are located in the U.S. and the rest in Canada. The stores will feature Windows products, including tablets, PCs, Windows phones, and Xbox.

Win-Win For Microsoft And Best Buy

Personal computer sales have plateaued over the last few years with tablets being the rage these days. Microsoft is working hard to tweak its software and sales strategy to boost sales. It realizes that a lot of people turn to Best Buy for their computers and electronics purchases, so it makes sense for it to be present in its stores in a big way. Given that Microsoft has only 68 retail stores of its own in North America, its footprint will extend widely and quickly and at a lower cost. It is making special efforts to access customers because it believes that the hands-on experience and guidance will better convince shoppers of the advantages of the Windows 8 operating system. More than 1,200 Best Buy employees will staff Microsoft’s stores and receive training to sell its products. Also, tech rival Apple already has dedicated selling spaces within 740 Best Buy stores, even though its 200 square feet stores would be nothing compared to Microsoft’s planned 1,500-2,200 square feet stores. ^[3]

For its part, Best Buy would like nothing more than to see shoppers flocking to its stores for their electronics purchases, no matter which tech giant eventually wins their business. Nothing could be better than the vendor partners making special efforts to boost their product sales within its stores. The financial terms of the arrangement have not been disclosed though.

Best Buy could be looking at teaming up with more companies such as Google and Sony to set up dedicated selling spaces offering enhanced customer experience.

We have a price estimate of $20 for Best Buy.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Best Buy to Carve Out Microsoft Mini-Stores, WSJ [↩]
2. Best Buy deal with Microsoft seeks to turn big-box liability to an advantage, MarketWatch [↩]
3. Best Buy will feature Microsoft’s Windows products in dedicated store-within-store space, Washington Post [↩]