Shopping at Best Buy (BBY 8.97%) has become a more engaging experience. Walking into one of the retailer's big-box stores, you'd be subjected to strategically placed sights, sounds, and products meant to capture your interest and trigger your explorative side. You'd probably take strolls down aisles you hadn't planned to visit because the action on the other end of the store seems so intriguing. Try Samsung's new tablet on display. Feel the weight of the Apple Watch. Hear the three-dimensional atmosphere that Dolby Atmos can produce. At all times, a nearby associate is available, armed with technological expertise, ready to help.
That experience and interaction is, at least, Best Buy's intention. As part of its Renew Blue strategy launched in 2012, the company wants to improve shoppers' perception of the store by building eye-catching merchandise displays, increasing the customer-facing workforce, and expanding its sales team's product knowledge. In a bid to neutralize the threat of online-only retailers, Best Buy hopes to draw crowds and increase sales by providing an experience that is unique to brick-and-mortar channels.
"You cannot use your senses online to see the difference in picture quality of the TV or the sound quality of a headphone. You really have to go to the store," Chief Executive Hubert Joly said in a conference call. As evidenced by the company's most recent quarter, customers are going to the store.
Shares of Best Buy soared 12% on Aug. 25, as investors reacted to the retailer's better-than-expected second-quarter results. Domestic comparable-store sales were up markedly, achieving the fourth consecutive quarter of growth and serving to support the notion that declining comps are things of the past. The company believes its turnaround is attributable to the rising demand for expert advice. Products are becoming increasingly complex and interoperable, Best Buy says, and customers want assistance with technology selection, installation, and integration. Being well-placed to accommodate such demand, the retailer says its investments in service and convenience are paying off.
If Best Buy's strength is anything but fleeting, one of the retailer's fast-growing partners could be positioned to make long-term gains: GoPro (GPRO 2.39%).
GoPro's products are lumped into the Consumer Electronics category at Best Buy, which now accounts for 32% of the retailer's sales and which grew more than 7% this past quarter. Through significant investments in point-of-purchase merchandising displays, GoPro is aiming to extract maximum benefit from the symbiotic partnership that the two companies share. Both companies' strategies focus on differentiation through unique and dramatic customer engagement, and GoPro's merchandising displays exceed this standard.
At some locations, these displays are 12 feet wide and 7 feet tall, with 40-inch monitors showcasing the capture devices in action. These displays typify the most effective attributes of attention-grabbing marketing: They're physically immense and they feature compelling content with attractive visuals. Intrigued customers are drawn to these areas and purposefully learn more about what they're watching. In this case, they learn about action camcorders, which had, only just before, proved themselves to be durable, versatile, and undoubtedly manufactured by a high-quality brand, GoPro.
GoPro believes this is a winning strategy, and the company continues to ship similar merchandising displays to many of the 25,000 outlets that sell its products. But this is most notable at Best Buy, where management believes that this kind of interaction is important to its own success. With the high customer praise that GoPro's products receive, the strategic benefits that Best Buy claims to reap from such eye candy, and the vendor-merchant partnership already solidified, GoPro's footprint is secured in this very important channel. It will be challenging for competing vendors to elbow their way into that space in any meaningful way.
This partnership is critical to GoPro. In addition to the significant product visibility, the leading maker of action camcorders is heavily reliant on Best Buy to sell these devices -- around one-fifth of GoPro's sales are derived from the retailer, and that share has been steadily rising for the past few years. If Best Buy's recent performance represents a true resurgence and revitalization of its business, then GoPro stands to benefit as brand awareness expands and sales climb in the burgeoning market for action cameras.