Best Buy Is One Step Closer to J.C. Penney

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Ron Johnson's flawed experiment to turn J.C. Penney (NYSE: JCP  ) around by opening branded mini-stores in the department-store chain is alive and well at Best Buy (NYSE: BBY  ) .

Shares of Best Buy moved higher on Thursday on news that Microsoft (NASDAQ: MSFT  ) will open hundreds of stores inside Best Buy's cavernous superstores this summer. Best Buy stock also moved nicely higher when Samsung announced an even larger mini-store initiative two months ago.

The market eventually soured on Johnson's vision when it failed to generate sales growth at J.C. Penney. A similar fate may also await Best Buy.

On paper, the move is brilliant. Best Buy has extra room. As consumers migrate to digital music, games, and movies, there's less reason for Best Buy to continue stocking CDs, software, and DVDs. Best Buy's recent fadeout of musical instruments also creates more space. The company is an empty-nester. Why shouldn't it rent out the extra rooms after its children move out?

The "store in a store" concept should also help attract shoppers, and that's been sorely lacking at Best Buy, with physical-store sales declining for most of the past two years.

Microsoft also has plenty to gain here by opening 500 stores -- some as big as 2,200 square feet -- inside Best Buy locations, where shoppers continue to choose non-Microsoft smartphones and tablets. It will be staffing the stores with 1,200 employees, and while that breaks out to two to three Microsoft ambassadors per location, that's two to three more people at Best Buy who can talk an undecided shopper into choosing its PC, mobile, and gaming solutions.

The ultimate question is whether two brands that aren't as cool as they were a decade ago can regain some of that swagger by teaming up. At least J.C. Penney has the luxury of fleshing out its makeover by picking out brands that are on the rise. Best Buy did that with Samsung earlier this year, but it may be a different story with Microsoft if shoppers avoid Lumia smartphones and Surface RT tablets the way they are outside of Best Buy. 

In what may prove to be a cruel case of foreshadowing, Microsoft's video promoting the new Best Buy stores features a single person checking it out.

Microsoft and Best Buy had better hope that isn't the case, just as Samsung may be wondering if it just got hosed by having to set up shop alongside Mr. Softy.

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Read/Post Comments (21) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On June 16, 2013, at 9:13 AM, JJSVA wrote:

    Difference is Best Buy is about the only big electronic store in town. Where as JC Penney was one of many who offered the same product. Best Buy will be a win if it will drop costs to be closer to internet sellers as the convience of a return will offset the small cost difference. Plus, with an effort to taxe all internet sales, more will shop local as the price difference shrinks with the added tax.

  • Report this Comment On June 16, 2013, at 9:31 AM, ironmeteor wrote:

    I'm no longer going to best buy much as the selection is shrinking and the information required to make a good purchase is all on the web. Even once I know what I want, Best Buy has reduced their inventory to the point where they probably won't have it. So if I'm ordering it anyway, then I'll use my prime account on Amazon and get the best price. I also disagree with the reduction of DVD space as that is a good category to use as a pull in. There are no more rental/video places and if you want to purchase a movie, it's usually to watch it right away. So this is one spot they should keep as a loss leader to get bodies into the store. But sadly my last visit to my local Best Buy was pathetic as they had the movies laid out like a Walmart. Just 2 short rows of new movies and a few circular bins of old movies. Best Buy doesn't even know who they are if they think their customers want to shop for movies like a Wal Mart. I thought Best Buy was a Audio/Visual/Phone store and you would think content still has a place in that mix and is not something to toss in a bin for me treasure hunt for. I went there for something specific, but now I'm dumpster diving. Maybe there's no need for a Best Buy in this world, but they better understand their customer base and why we go there and why we won't or else they're doomed. I don't want the Wal Mart experience or else I would go there and get it cheaper.

  • Report this Comment On June 16, 2013, at 9:39 AM, PapaG32 wrote:

    I just wish the writer would write a straight story.

    He knows what he is writing about and expect all readers to know also. A journalist he is not.

  • Report this Comment On June 16, 2013, at 9:47 AM, danielsantacruz wrote:

    If you look back to Microsoft's history. Any company it partners with, buys, or touches basically goes to shhhhh. They are all about profits . They ruin everything they touch. Goodbye best but your done. Stupid move to partner with Microsoft. Nobody was ts you anymore. Trust me my daughter 14, nephew 16, niece 13 and all there friends say mi frost is junk, too confusing, outdated, freezes to much, too slow, uses to much memory, kills battery life with heavy software and plain stinks like greed. Shasta LA vista Microsoft.

  • Report this Comment On June 16, 2013, at 10:00 AM, Charlie45764 wrote:

    The issue with JCP isn't, and never was, the store within a store concept. What's at issue is the dramatic price changes and lack of coupons. The store within a store concept will work at both places. It's definitely the best way to shop if shopping by brand, which a lot of people do. I don't want to rifle through St. John's Bay to get to Levi's just as some people are looking specifically for a Samsung or a Sony. But, at the end of the day they want a coupon that is good for all brands.

  • Report this Comment On June 16, 2013, at 10:05 AM, vle045 wrote:

    we shop best buy a lot! I prefer to shop in a store, not online if given a choice. I like seeing', touching, hearing, and playing with electronics before I buy. and I want it now... not when it arrives on my porch a week later and risking it being damaged or stolen along the way....

  • Report this Comment On June 16, 2013, at 10:41 AM, fwe43 wrote:

    What a bunch of stupid two bit analysis.

  • Report this Comment On June 16, 2013, at 11:02 AM, Bluexenon wrote:

    I hope this isn't the case. I go to Best Buy to do research before I purchase online.

  • Report this Comment On June 16, 2013, at 12:05 PM, jhs39 wrote:

    Best Buy has to be the worst run company in America. I used to go every week to see what Blu-rays and DVD box sets were on sale--now I rarely step into the stores because it's so depressing and they never have anything I want anyway. Whatever I'm looking for I end up having to order on Amazon because Best Buy stopped carrying it. They must think Blu-rays are dead based on the shrinking selection but they have lots of windows tablets instead--which nobody wants. Going into a Best Buy store now is like being in a dying ghost town--the ratio of employees to customers is at least 5 to 1. Adding Microsoft stores is another lame-brained move by a company that has done nothing but since the closing of Circuit City. Windows phones and tablets are among the worst selling products on the market--so you're going to attract customers by giving them their own store? Yikes, these guys are idiots.

  • Report this Comment On June 16, 2013, at 1:16 PM, Burstedbladder wrote:

    So os MS fgpoing to produce its own Windos laptips amd cellfones. All They are doing is revampning the laptop area and tossing in their cellfone line with Windows 8 on them all. They'll even have the new Xbox1 there as well.

    Apple did it right imo. They it only make their won products, but they also create their own hardware to go with it. And as usual, MS is not a leader. It only steals ideas and everything else from Apple ad the Apple Store section of Bestbuy, and the only real question here is... "What took MS so long in doing this, and are the people foolish enough to fall for all this MS bs garbage they produce"?

    Stay away from Microsuck. Their products and OS just suck.

  • Report this Comment On June 16, 2013, at 1:27 PM, justmythought wrote:

    I just went into a BB with in the last few days and I usually try to avoid them. I was pleasantly surprised by the nice sales people and how they offered to help me find what I was looking for. Not only that, they offered to show me how to use the tablet I purchased anytime I needed it. Can't get that kind of service from an online store. I am an electronically challenged grandma so that meant a lot to me. The price was the same as Amazon, it was well worth sales tax to help keep people employed in my town.

  • Report this Comment On June 16, 2013, at 1:58 PM, normcf wrote:

    Best buy already has a large space allocated for selling microsoft devices, so getting microsoft to pay for this space is a smart move. I doubt this move will increase BB sales or customer traffic, but at least they get paid for it. It will be interesting to read the articles comparing the microsoft space and traffic to that of Apple, Samsung and Google. I'm sure there'll be plenty of disagreement on success or failure.

  • Report this Comment On June 16, 2013, at 2:33 PM, Wisenotfoolish wrote:

    Best Buy, (or Worst Buy), will never get my business nor any retailer embedded within. May be they have improved since I swore them off, but I would not know. The reasons: 1) The staff is most indifferent to the customer 2) Music from hell is blasted all over the ambiance, and 3) Management is incompetent as reflected in their return policies.

  • Report this Comment On June 16, 2013, at 4:05 PM, BestBuySlayer wrote:

    Your mobile section? lol! Customers usually stroll to a single AT&T ,Verizon,Sprint store or the mall. While the other majority but their mobile from Amazon,EBay or from those very same mobile companies online stores!

    Your best bet is to broker a deal with Apple,and set up your own (independent) Apple reseller contract,where you sell your own Apple mobiles and break off from The stupid AT&t ,Verizon,Sprint set up that you have in your stores.

    Or start putting in Metro Pcs and Tmobile where mobile contracts are more desirable!

    You better start eliminating all that overrated,unused crap,and get with the programme!

    Don't even get me started on pissy clowning penny.

    You are better off purchasing your clothes at the 10dollarmall store online or getting your clothes imported by the bulk from Alibaba lol

    To the commenter above that said. It beats waiting around a week for online Oders to be delivered on what planet?

    Amazon orders are ship two

  • Report this Comment On June 16, 2013, at 4:08 PM, BestBuySlayer wrote:

    Amazon orders are ship two days or with Prime membership pay an extra 3 bucks for one day shipping.

    Dud-mart,crap-buy,Yes-tur-day-years, expensive R Us, bumshack,shame-stop. All their stores and big ideas marketing are very inconsistent, and just like my turds...irregular in habit.

    At least Target wised up,and pull their ish together!

  • Report this Comment On June 16, 2013, at 8:38 PM, BestBuyDefender wrote:

    @BestBuySlayer want Best Buy to only sell the things you want? That's what I'm gathering from this rant. You wouldn't buy these items so they just shouldn't carry them?

    People buy all of those things all the time. Yeah, a lot of people moved to using cell doesn't mean that no one buys home phones.

    Yeah, some people buy their TVs from Walmart...but Best Buy has trained sales people who know everything about these devices and can tell you why one is better than the other for your set up.

    Yeah, some people buy their mobile phones from carrier stores (Att, Verizon, Sprint)...but the associates at those stores are commissioned employees and are typically not very helpful.

    I'm sorry...but your whole argument is made invalid when you say that the women should be dressed like sluts. Best Buy does not cater to your personal fetish.

    Also, Best Buy's services are actually pretty great. If you buy a device and buy a Protection Plan...ANYTHING happens to it and they replace it...sometimes as many times as you break it in a year they'll replace it. That's amazing! Good luck getting that from a Manufacturer or your Beloved Walmart and Target.

    Get a clue, sir or madam. Just because you may have had a bad experience once at your local Best Buy...does not mean the company is as awful as you make it out to be. It's quite possible your local store is poorly managed. They currently have over a thousand stores in America's a foregone conclusion that a couple of them will suck. Still far less of a ratio than say...Walmart...or Target.

  • Report this Comment On June 17, 2013, at 4:04 AM, VintageV12 wrote:

    This is great! Let Microsoft become Wal_Mart, and Apple will dominate the thinking crowd.

  • Report this Comment On June 17, 2013, at 4:43 AM, btc909 wrote:

    Solution to Best Buy's problems.

    A ideal employee candidate for a Best Buy employee would be:

    Worked for the DMV.

    Committed a crime and went to prison.

    Then was a car sales person.

    This would be an IDEAL Bad Buy employee.

  • Report this Comment On June 17, 2013, at 5:13 AM, doawithlife wrote:

    Can your Ipad do this?

    Run the real Mac OSx:

    Play any ps2 game:

    Play any Wii game:

    What makes the Ipad so special?

  • Report this Comment On June 17, 2013, at 5:16 AM, doawithlife wrote:

    Run the real mac osx:

    should have edited my post....

  • Report this Comment On June 17, 2013, at 11:37 AM, vidman81 wrote:

    The store-within-a-store concept is solid, as long as Best Buy can keep consumers thinking of them as a high tech store. Seems to me that getting rid of the low tech DVD space is a great way to make space for Microsoft. As long as Best Buy continues to have a large selection of high tech stuff in stock, they'll have a decent market presence.

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9/26/2016 4:06 PM
BBY $37.51 Down -0.48 -1.26%
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JCP $9.57 Down -0.21 -2.15%
J.C. Penney CAPS Rating: *