The rumor that electronics superstore Best Buy (BBY 2.17%) might host Google (GOOG 2.01%) in a store-in-store concept to sell its coming Google Glass sent shares soaring 4% last week.
While there was a lot of conjecture as to whether it was true (it's not, as Best Buy debunked it) or even feasible -- tech guru Robert Scoble, who posted the rumor, said Google wanted to rent some 6,000 square feet of space, almost a quarter of Best Buy's average store size -- it still gave a hint as to where the electronics retailer sees its future.
Best Buy already houses mini-Apple stores; is launching some 1,400 Samsung Experience Shops for Samsung to peddle its Galaxy S4 (at around 500 s.f. each); and earlier this month Microsoft said it would be opening 500 stores-within-stores ranging in size from 1,500 to 2,200 s.f.
So even though it's not coming to pass, it's instructive to see whether housing Google would have made sense financially to Best Buy's future.
Sure, there's the opportunity to draw in more traffic that could end up generating sales for the retailer, but it wouldn't be so cut-and-dried that it would have actually paid off. Plenty of store-in-store concepts fail -- Target just parted ways with RadioShack earlier this year because of dismal sales (and ended a tech service partnership with Best Buy, to boot) -- and there's no guarantee that someone coming in to buy an iPhone, Galaxy, or PC will stay around to buy a big-screen TV, too.
Shares of the electronics retailer have tripled so far this year, in no small part because they've been carried aloft on each successive partnership announcement. But I remain unconvinced this "big tent" concept will work out well for CEO Hubert Joly, who seems to have gone all-in on this idea.
Best Buy's staff are supposedly the resident experts when it comes to all things tech, and improving the customer experience to minimize the impact of showrooming and loss of sales to Amazon was what was going to drive the retailer forward. However, with each of these store-within-store concepts maintaining strict control over product and pricing, it's not exactly an unbiased atmosphere the consumer is walking into. By becoming a tech shopping mall of sorts, Best Buy runs the very real risk of diluting its own brand.
There was also the codependent nature of the relationship Best Buy would have had with Google that spoke against its success. Where Google Glass would obviously have enjoyed the low-cost means of using Best Buy's retail footprint to put its technology into the hands of as many customers as possible, Best Buy would need the search king even more in hopes of keeping foot traffic high.
There was no guarantee Best Buy would be relevant once again after selling itself out for a few pieces of silver, but the fragile and precarious nature of its position remains intact, regardless of how its turnaround plans seem to be gaining traction. Best Buy has allowed for wiggle room that an agreement may yet happen one day (Google says don't bank on it), but I foresee the dilutive impact of these types of agreements ultimately hurting more than helping.
