Best Buy Makes Its Advance on Amazon
NEW YORK (TheStreet) -- While Amazon
What Best Buy is doing to transform its physical stores should interest Amazon, which derives approximately 68% of its annual sales from electronics and general merchandise, according to its 10-K, and boasts a dedicated Samsung shop on its Web site along with the latest premium offerings from Sony.
Best Buy is opening its new Samsung Experience and Sony
"By the end of the summer, when it is done, there will be 500 Samsung experiences and 350 Sony experiences. Some stores will have Samsung, some will have Sony only, many will have both," noted Shelman. Those totals work out to 47% of Best Buy stores in the U.S. (excluding Best Buy Mobile) with a Samsung home theater shop, and 33% with a Sony store.
Shelman was unable to provide details on financial arrangements between Best Buy and Samsung and Sony, but pointed to this statement from the third-quarter analyst call by CEO Hubert Joly:
So each vendor store, of course, is going to be different. But generally speaking, Best Buy is not -- Best Buy's main activity is not philanthropy, so we are doing this because it makes sense from a financial standpoint. Generally speaking, there is more help provided from the vendor, as related to the cost of operating the stores-within-the-stores in terms of the either it could be the labor, the fixtures, and the space, all of these things. There is a financial contribution, retail contributions. There are improved margins. It can be improved margins on the products. And then of course, importantly as well as sometimes or typically marketing support because these vendors can see their stores within Best Buy as their store, which it is, and therefore, directing traffic to Best Buy makes sense.
The speed in which these new shops are opening -- the program was completed in roughly three months -- suggests Best Buy could announce at least one more vendor partnership before the Christmas holidays. That announcement could be made around the time of the next earnings release in August.
Best Buy shares have risen about 19% in the past three months. The stock was up 0.7% on Monday to $31.25.