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Best Buy Betting Big on Apple

By Daniel B. Kline - Sep 1, 2015 at 1:00PM

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The retailer is going to sell more watches and revamp its stores-within-a-store.

Best Buy (BBY -1.31%) has undergone a retail revival in part by turning over large portions of its stores to some of its top vendors.

The company has made offering stores-within-a-store a key part of its strategy, and it expects to expand upon that in the coming year. Built around top-tier brands including Apple (AAPL 0.17%)Microsoft (MSFT -0.23%), and Samsung (NASDAQOTH: SSNLF), these mini-stores offer a branded experience with a wide-range of products from the partners. It gives those vendors an expanded retail presence without the expense of increasing their own retail footprint.

"Not only do we showcase the best of what our vendors offer, we're also benefiting from the material investments that several of the world's leading technology companies are making in our stores," said CEO Hubert Joly on the company's second quarter earnings call. 

With these partnerships, we're able to bring to life interactive technology experiences that again make the Best Buy operating model more relevant for customers.

The relationship with Apple has specifically been an important one for Best Buy, as the presence of its stores-within-a-store in hundreds of locations allow some of its brand cache to rub off on the retailer. It also does not hurt that the iPhone-maker is one of the few companies that can get consumers to line up in front of stores in advance of a new product release.  

For these reasons, and others, Joly said his company plans to deepen its relationship with Apple.

Apple has a significant presence in Best Buy stores. 

A surprising catalyst
While Apple has not released sales numbers for its new watch, Best Buy has had success with it and plans to offer it in more stores. Joly said:

Because demand for Apple Watch has been so strong in these stores and online, we are excited to share that beginning September 4 we will be carrying Apple Watch in more than 900 of our big-box stores. Apple Watch will be available in all 1,050 of our big-box stores and in approximately 30 of our Best Buy Mobile Stores by the end of September.

That's an increase from the company's original plan, which was to carry the watch in only 300 stores. 

The overall Apple presence is growing
In addition to rolling out the watch to more stores, Best Buy is also working with Apple to improve its existing stores-within-a-store.

"We've also been working with Apple to update the 740 stores-within-a-store that were first implemented in 2007," Joly said. "The stores-within-a-store will have new Apple fixtures and are larger with more display tables for phones, computers and tablets."

These changes have already been made in approximately 350 locations, and the company expects to upgrade a total of approximately 520 by the holiday season.

"The additional display tables are great for the merchandising of Apple Watch," the CEO added.

Hitched to a winner
Though the jury is still out on Apple Watch, Joly has smartly hitched his company's star to a brand that drags its partners forward. The company has a diehard fanbase, and upcoming new product releases including an refreshed iPhone and an update Apple TV box.

Apple has, and will, bring people into Best Buy stores. Once they are there, the retailer has the ability to turn them into customers of more than just Apple. Added foot traffic lets Best Buy sell other items, service from its Geek Squad division, and even extended warranties.

Betting on Apple has been a winning play since the introduction of the iPod, and there is no reason to believe that streak will stop anytime soon. Best Buy has partnered with a winner, and strengthening that relationship should be a good thing for the retailer.

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Apple Inc. Stock Quote
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Best Buy Co., Inc.
BBY
$72.36 (-1.31%) $0.96
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