Samsung Experience: It’s Great … Just Not for Best Buy

by Alyssa Oursler | April 5, 2013 6:05 am

Just last month, news hit that Best Buy (NYSE:BBY[1]) was planning to launch its own stores-within-a-store layout[2] — a strategy previously adopted by flailing retailer JCPenney (NYSE:JCP[3]) and attempted but abandoned by big-box discounter Target (NYSE:TGT[4]).

I think it’s an overrated concept[5], so I initially greeted the announcement that Samsung (PINK:SSNLF[6]) is planning to open “Samsung Experience” mini-stores inside 1,400 Best Buy locations[7] with an eye-roll.

I don’t think these mini-stores will offer much upside for the retailer that’s hosting them … but it’s actually a pretty savvy move on the Samsung side of the coin.

A Showroom-Within-a-Store

Let’s start with Best Buy, though. The company — despite the fact that it’s rearranging its offering and opening mini-shops — still has one huge problem: showrooming.

Consumers believe that e-commerce companies like Amazon (NASDAQ:AMZN[8]) — and even discounters like Walmart (NYSE:WMT[9]) and Target — sell electronics at a lower price, according to [10]Bloomberg[11]. Thus, many consumers who wander into a Best Buy store often end up deciding which product they like, but snatching it up elsewhere.

It’s almost no wonder the company lost $1.7 billion in 2012, or that same-store sales slid around 2% … on top of a 2% fall the year before.

And Samsung’s mini-stores don’t seem to be a game-changer in that regard at all. InvestorPlace tech expert Brad Moon believes that[12]:

“When asking someone to drop hundreds of dollars on a tablet or phone, the odds of sealing the deal go up if they have the opportunity to play with it first … and if they can walk out the door with their new toy instead of waiting for it to be delivered.”

While the first half seems to hold, that doesn’t necessarily fix the showrooming issue: The odds of sealing the deal go up with a physical presence, sure … but that deal won’t necessarily go down in Best Buy.

As for the last part, I don’t buy it. I don’t think of smartphones as I do shoes, which I loved to wear out of the store as a kid. Instead, I’d be fine to save a few bucks by going elsewhere … even if it means waiting a few days for my new toy to arrive. (In fact, I get excited when packages are delivered to my house.)

A Smart Baby Step

Samsung, on the other hand, couldn’t care less where you pick up its devices. Buy at Best Buy. Buy at the Verizon (NYSE:VZ[13]) store. Buy through an online retailer. It just wants you to buy its product.

Actually, Samsung wants you to buy several of its products.

Physical retail presence for big tech names has already become increasingly common. Apple (NASDAQ:AAPL[14]) — Samsung’s biggest competitor, especially in the wake of recent mobile patent wars — has around 400 dedicated retail spaces around the world, on top of its own sections in stores like Best Buy. Also, Microsoft (NASDAQ:MSFT[15]) opened around 50 stores last year, while Google (NASDAQ:GOOG[16]) recently announced plans to do the same.

Samsung isn’t opening full-blown dedicated retail spaces like the first three, but as Moon also mentioned, it’s the next logical progression. The process usually involves retail partnerships first (check), then stores-within-a-store (soon-to-be check), then a dedicated retail space.

It’s a smart, logical baby step … especially considering that all retail locations regardless of size aim to serve the same purpose: display not just individual devices, but connectivity — hence the goal of selling several products.

As Moon described for Google: ”Google’s Android and Chrome operating systems are developing into ecosystems, and being able to showcase the connectivity between devices is critical. Consumers need to experience it firsthand in order to feel they need to buy it.”

That seems to be what Samsung has in mind, which is reflected in the moniker “experience shops.” Ketrina Dunagan, vice president of retail marketing for Samsung Mobile’s U.S. unit, explained the goal of the stores (emphasis mine):

“This is our first opportunity to demonstrate connected mobile products in a location with educated Samsung employees able to walk a consumer through the experience.”

Yes, the company plans to hire its own staff — much like “Geniuses” at Apple Stores — to demonstrate features on the upcoming Galaxy S4 phone, and to show how content can be transferred to other products including smart TVs, laptops and tablets.

One could even argue that Samsung needs such a demonstration even more than a company like Apple, for example. Samsung has an absurdly wide range of products — not just tablets, phones and laptops, but cameras, TVs, phones and microwaves that aren’t all as inherently connectable as an iPhone and an iPad.

The Bottom Line

Samsung’s strategy isn’t just about picking up a sale here and a sale there. It’s about the ecosystem — and the physical presence is a great way to demonstrate that to consumers, whether shoppers decide to join that ecosystem by purchasing a gadget at Best Buy, or elsewhere.

I still can’t get all that excited about what the Samsung Experience can do for Best Buy, but it has plenty of potential for Samsung.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. BBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBY
  2. planning to launch its own stores-within-a-store layout: http://investorplace.com/2013/03/best-buy-plans-stores-within-a-store/
  3. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  4. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  5. I think it’s an overrated concept: http://investorplace.com/2013/03/stores-within-a-store-an-overrated-strategy/
  6. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  7. to open “Samsung Experience” mini-stores inside 1,400 Best Buy locations: http://buzz.money.cnn.com/2013/04/04/best-buy-samsung/?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29
  8. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  9. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  10. according to : http://www.bloomberg.com/news/2013-04-04/samsung-presses-apple-fight-with-mini-stores-in-best-buy.html
  11. Bloomberg: http://www.bloomberg.com/news/2013-04-04/samsung-presses-apple-fight-with-mini-stores-in-best-buy.html
  12. believes that: http://investorplace.com/2013/02/why-google-needs-to-open-retail-stores/
  13. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  14. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  15. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  16. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG

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