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Best Buy Sees Early Upside To Samsung Shops

5/05/2013 08:00:00 PM Eastern

NEW YORK – Best Buy said early indicators from the first wave of 200 Samsung in-store boutiques have been promising.

“Customer feedback has been extremely positive,” Best Buy CEO Hubert Joly noted at the recent launch event for the Samsung Experience Shops here.

“The concept makes sense,” he said. “The next question is, ‘How big is big?’ We don’t know yet.”

Joly was joined by Samsung IT and mobile president/ CEO J.K. Shin and other senior executives at the retailer’s flagship Union Square store in Manhattan to formally kick off the much-ballyhooed boutique program. The shops, which average 450 square feet in size, feature an edited assortment of live tablets, laptops, cameras, accessories and cellphones — including the new Galaxy S4 — and are typically anchored by a service desk and TV display.

Tim Baxter, president of Samsung’s consumer electronics division, said the manufacturer had previously experimented with pop-up shops both here and abroad and “learned that customers like that engagement.”

He added that Samsung plans to place smaller versions of the Samsung shops with other retailers.

The Best Buy rollout, which was timed to the release of the S4, begins in earnest this month, merchandising VP Scott Anderson told TWICE, reaching all 400 Best Buy Mobile stores this week, 500 more big-box stores by mid-May, and blanketing virtually all 1,400- plus Best Buy locations by early June.

Samsung products will continue to be merchandised across the store by product category, Anderson said, and a dedicated micro site is also planned for BestBuy.com.

Joly wouldn’t discuss the financial terms of the instore program, but described it to TWICE as a typical vendor agreement with no lease or revenue-sharing elements.

The program is scheduled to run for three years, he said.

Joly declined to comment on whether other vendors will follow Samsung, and before it Apple, with dedicated Best Buy real estate, but acknowledged that his focus is on floor-space optimization.

To that end, he has “hit the pause button” on the chain’s connected-store prototypes, a remodeling initiative begun under predecessor Brian Dunn that sought to provide an interactive, multichannel experience.

“Do customers care about the color of the paint? No, but shareholders care about profits per square foot,” which can be better realized by emphasizing higher-margin categories like tablets, major appliances and accessories, he told TWICE.

Joly said the Samsung departments will be carved out of less-productive floor space, most typically physical media, which presently comprises 20 percent of the sales floor. “That’s too much, and we’re working to shrink it,” he said.

The shops, with their live displays and sales assistance from Best Buy Blue Shirts and Samsung consultants, will allow customers to “feel, touch and experience great products and see how they all work together,” Joly said. Samsung’s Baxter noted that the advent of digitally converged hybrid products, and the changing ways consumers are using them, are compelling vendors and retailers to market and merchandise advanced devices with new and different approaches.

The Experience Shops, he said, “display the entire Samsung ecosystem in one place where shoppers can see, try and buy.”

Joly described the effort as “a great partnership” based on Samsung’s need to showcase the fruits of billions of R&D dollars before the largest possible audience, and Best Buy’s ability to draw 600 million store visits and 1 billion website hits annually.

He added that the effort came together very quickly, with discussions starting in early December and preparations beginning by January.

The launch event included a preview of the shop and a private concert by singer Bruno Mars at Manhattan’s Cunard Hall for the first 300 customers to line up outside the store.