get rid of the iPhone, so I swung into my local Best Buy. If you haven't been in a Best Buy in the past couple of months, you may not recognize the place when you return. Sure, there's still a big guy in a yellow shirt by the front door, and there's kids in blue shirts ignoring you in most every department, but a lot has changed. Namely, there is less "Best Buy" floor space and more "store within a store"
Best Buy began this store-within-a-store thing with Apple back in 2007, offering a tidbit of the sleek Apple Store experience and dedicated display areas for Macs and iPhones. This was the norm for the store for much of the new decade -- 100 sq. ft. of Apple within 30,000 sq.ft. of Best Buy -- until earlier this year, when Samsung began rolling out its "Samsung Experience Shops" into select Best Buys.
As of my visit this weekend, there were the following stores within stores:
- Microsoft - the largest of these, taking over what was the computer section
- Dyson - a single aisle in the appliance section is now controlled entirely by Dyson
- Sony or Microsoft - in the video game section, a very large center aisle is completely barren. Depending on which employee I asked, it was either going to be a Sony store centered around the PS4 or a Microsoft store centered around the XBox One. My money's on the PS4.
These smaller, dedicated retail spaces have come about through partnerships, with each side coming out a winner. How are they winning?
- Best Buy - The electronics retailer has seen its dollar/sq.ft. -- the retail metric above all retail metrics for brick & mortar shops -- fall drastically since a 2010 peak. The dollar/sq.ft. has dropped 12% since 2010, but more alarmingly, 10% in the past year. Partnering with these individual manufacturers and generating steady income streams from the branding/floor space arrangements gives Best Buy some guaranteed dollars on the floor.
- Manufacturers - Microsoft, Samsung, Dyson, Apple, and (likely) Sony benefit from these arrangements by expanding their retail outposts. All but Dyson and Samsung operate U.S. retail shops (Samsung is testing retail in Singapore), and operating smaller shops within Best Buy gets them in front of more shoppers and expands their retail footprint without the higher costs involved in operating additional stand-alone stores.
Too often, contracts are judged on a single-sided victory. How well did you make out in the deal. For one-and-done arrangements -- buying a car for instance -- this is fine. Let the dealer hate you, you negotiated to the point of angering them, saved a ton of money, and you'll go do it to someone else next time. This is short-term thinking, though. If you're wanting a sweet Camaro the next time around and the dealer you just ticked off is the only one with it, you might be in for a dose of your own medicine.
In the long-term, the benefit lies in arranging agreements that both parties are comfortable with. Everyone prospers, you work together, and a healthy relationship is formed. This is a critical component of managing your supplier relationships effectively, and its something we've done at Source One since the day we were founded back in 1992, when there were no stores within stores at Best Buy -- just cassette tapes and Trinitrons.
Just as Best Buy and its manufacturing partners -- Microsoft, Apple, Samsung, and Dyson (and probably Sony) -- each benefit from their arrangements, you should work to ensure your business arrangements are structured in a way that benefits all involved.
Photo courtesy of Windows.com