Best Buy has agreed to install Samsung shops in more than 1,400 of its stores this year. Best Buy already has a similar arrangement with Apple (AAPL) in 740 of its big-box stores.
Best Buy (BBY) investors cheered the news, driving shares up 16% to 25.13, a 12-month high, in the stock market today.
Financial terms of the deal between Samsung and Best Buy were not disclosed.
For Best Buy, the deal is a way to get more use out of its existing real estate and potentially drive more traffic into stores. For Samsung, it means getting dedicated retail space to show off its products without having to open its own stores like rivals Apple and Microsoft (MSFT).
Samsung will use the space to sell laptops, tablets, mobile phones, cameras and accessories at in-store boutiques called Samsung Experience Shops. It will staff the boutiques with its own employees at the majority of shops. The in-store shops will be as large as 460 square feet and will have their own checkout lines. The companies estimate that 900 Samsung Experience Shops will be open by early May, with the rest by early summer.
Samsung and Apple are the only vendors that make a lot of sense to have special in-store shops at Best Buy, says Bernstein analyst Colin McGranahan. Still, Sony (SNE), Hewlett-Packard (HPQ) and others could experiment with the concept, he says.
"My issue is: They (Best Buy) sell all this stuff today ... . They're just putting it together and they've got a Samsung ambassador hawking his products," he said. "How that is worth $1.2 billion of value (to Best Buy's market cap) has got me scratching my head. It's the same stuff they were selling before. They just moved it to a different spot in the store. That's it."
On the other hand, Best Buy stores are too big and they've got a lot of underutilized space, McGranahan says. It could help with sales conversion rates and basket size, though likely not with foot traffic, he says.
Best Buy is likely to get the same profit margin it was getting selling Samsung products before, but Samsung probably pays for the fixtures and its own employee in the store.
"Essentially they're just taking dead space, which was dedicated to stuff that didn't work, and putting in a nice showroom," McGranahan said.
source: news.investors.com
