Microsoft’s Mini-Stores: Same Old Same Old

by Alyssa Oursler | June 14, 2013 1:59 pm

Last time I was in a Best Buy (BBY[1]), its new “Samsung Experience” — you know, the mini-store within its store[2] — still were under construction.

I didn’t care. I was there to buy an Apple (AAPL[3]) laptop.

Of course, if Samsung‘s (SSNLF[4]) corner had been up and running, maybe its resident expert would have changed my mind.

Microsoft (MSFT[5]) seems to think that’s a strong possibility, so now its own branded stores will sell exclusively Windows-based tablets and computers, as well as other Microsoft products.

The desired outcome, of course, is for the products to have a more prominent place in the big-box retailer, as opposed to being overshadowed by Apple and Google‘s (GOOG[6]) gadgets.

Those stores also will be home to more than 1,200 Microsoft-trained sales associates, who will show shoppers how to use Windows 8 — and eventually, the relaunched version[7] — as well as MSFT’s various products.

My grandfather, for one, tried the new Windows 8 on his own and hated it, finding it confusing and impossible to use (as many others have). It’s at least possible that if he had someone to demonstrate its features — or had regular tutorial classes like Apple does at Best Buy — he wouldn’t have jumped ship.

Apple pitched such classes on my visit, and there was a dedicated Apple expert/salesman roaming around, wearing a clean, black shirt that set him apart from Best Buy’s glaring blue ones. I didn’t find him particularly helpful, but then again, maybe that was just because 1.) I already know how to use most Apple products, 2.) I came in knowing exactly what I wanted, and 3.) he didn’t have any competition … yet.

I’m much less familiar with the ins and outs of Samsung and Microsoft’s competing gadgets — and I think its safe to say lots of other folks are, too. That’s what makes these stores so valuable to those companies.

Also, these Best Buy mini-stores seem better than standalone Microsoft stores — of which the company has around 50[8] — because people can easily wander through them, sometimes even unintentionally. Sure, they can do that in a mall, too … but an entire store is far more expensive and time-intensive to get up and running than small kiosks in an already-existing store. And if consumers are in Best Buy to begin with, chances are they’re seeking out tech, anyway.

The only hitch in the “wandering in and falling in love with Microsoft products” idea: People actually have to wander into Best Buy for it to work.

A colleague of mine recently went to Best Buy, and his reaction was passionate. To paraphrase him:

“I don’t see a reason why I will ever set foot in that store again. The service was sub-par, the selection was shockingly sparse and the prices were laughably high.”

So he left, then ordered what he wanted off of Amazon (AMZN[9]) later that day.

Granted, I do think having Microsoft, Samsung and Apple stores in at least some locations will help, as it could make the retailer a one-stop shop to try out and learn about all the different options for tablets, laptops and the like. Plus, it helps Best Buy showcase higher-end products, which can be more profitable for the retailer, according to [10]Reuters[11].

Even then, these mini-stores could be just as susceptible to showrooming[12] as all of Best Buy is already, and that won’t remedy BBY’s slipping sales. Sure, the price match guarantee is meant to address this[13], while a federal bill forcing online businesses to collect taxes[14] could also help … in theory[15].

But any glimmers of hope have been baked into the stock’s amazing 135% year-to-date climb[16], and then some.

Meanwhile, BBY’s performance isn’t at all justifying that share resurgence. In the most recent quarter, the company posted another loss — of $81 million, or 24 cents a share, compared with a profit of $158 million, or 46 cents a share, a year ago. That loss was driven by weaker sales in its European business, which it recently sold, yet even excluding the discontinued European operations and other one-time items, its core profit reached 32 cents a share — a pretty significant drop from 72 cents a year ago, and one that came on a nearly 10% slide in revenues.

In other words, mini-stores would have to do something special to counteract what are some awfully ugly numbers.

Bottom line: The partnership does have potential, but far more so for Microsoft than for Best Buy.

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

  1. BBY:
  2. the mini-store within its store:
  3. AAPL:
  4. SSNLF:
  5. MSFT:
  6. GOOG:
  7. the relaunched version:
  8. of which the company has around 50:
  9. AMZN:
  10. according to :
  11. Reuters:
  12. susceptible to showrooming:
  13. price match guarantee is meant to address this:
  14. federal bill forcing online businesses to collect taxes:
  15. in theory:
  16. year-to-date climb:

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