Sony's Ditching PCs, Going Back to TVs

Sony is showing signs of trouble so it's doing what Samsung did last year -- opening mini-stores within Best Buy to grow market share.

May 5, 2014 at 3:45PM

"Retail is not something you jump into lightly, especially given consumers have been expecting this as a next step for Samsung," Ketrina Dunagan, vice president of retail marketing for Samsung Telecommunications America, told CNET last year. In March of 2013, Samsung (NASDAQOTH:SSNLF) began rolling out mini-stores in all 1,400+ Best Buy (NYSE:BBY) retail store locations across the country. The partnership gave Samsung a way to obtain dedicated retail space without investing in retail stores like its rival Apple (NASDAQ:AAPL).

PhotosSony Experience. Source: Sony.

Now Sony (NYSE:SNE) is following suit by rolling out the "Sony Experience." The Japanese electronics giant wants to open 350 stores within Best Buy locations by the end of the year. 

"With user-friendly, interactive demonstration experiences and a dedicated team of product experts trained to deliver a world-class experience, the Sony Experience at Best Buy will be an ideal place to inspire, engage and educate consumers about Sony's home theater products," said Mike Fasulo, president and chief operating officer of Sony Electronics. 

By all accounts, Samsung's launch was a success. Return on assets went up to 15.4% from 14.2%, net cash almost doubled, debt levels declined, and as you can see from the chart below, market share in the U.S. went up from 29% to 30% in 2013.

Sony

Source: samsung.com.

Still, there are several differences between Samsung's roll-out and Sony's that could affect the success of the program. Samsung employed both Samsung and Best Buy employees to manage in-store shops -- Sony will only use Best Buy employees. Additionally, Sony is only rolling-out 350 mini-stores, whereas Samsung opened stores in all 1400+ Best Buy locations.

Competing with Apple by focusing on TVs
Apple is the poster child for retail success, but what most don't know is that it started out with similar mini-stores in Best Buy's. The stores weren't enough to increase Apple sales over Windows-based PCs so Apple decided to open its own line of retail stores and the rest is history. 

Apple still has around 740 mini stores in Best Buy and about 400 stand-alone stores of its own. Without this level of customer engagement, it's doubtful that Sony's $4,000 TVs will stand out among competitors, especially when the competition is priced significantly lower. Mini-stores provide a way for Sony to distinguish itself on quality.

Sony Electronics president Mike Fasulo had this to say about the deal:

For our consumers this will be an interactive environment that allows them to shop and compare products and features intuitively. The dedicated Sony Experience Experts will be certified and on-hand to assist and explain the benefits Sony products have to offer.

The main goal of the program is to focus on what Sony is known for -- TVs. "The Sony Experience will give consumers a shopping experience unlike anything before," said Mike Mohan, Best Buy's Chief Merchandising Officer. "Sony's 4K Ultra HD televisions have to be seen to be believed. Our newly transformed home theater areas will, for the first time, allow customers to test, try and experience how all of the Sony products work together."

Takeaway
On the same day that Sony announced the opening of 350 stores within Best Buy it also released a downward revision to its operating income forecast primarily related to the company's decision to exit the PC business in February. So, Sony needs this partnership to be successful in order to make up for lost PC sales this year. Without it, 2014 may be one of its worst years yet.

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C Bryant has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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