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Best Buy Bows ‘Connected’ Stores

2 Jul, 2012 By: Erik Gruenwedel

Best Buy Co. has begun operating the first series of “connected” stores that showcase functionality of consumer electronics, home appliances and increased tech support in a 23% smaller retail footprint.

The CE retailer opened the first Connected Store — featuring 45,000 square feet of retail space — near its corporate headquarters in Richfield, Minn., and in select locations around San Antonio. Best Buy is planning to roll out 50 Connected Stores and 100 Best Buy Mobile Stores this year while shuttering 50 big-box stores (larger than 58,000 square feet).

The retailer this year has been beset with internal and market challenges, the former underscored by the abrupt resignations of CEO Brian Dunn and founder and chairman Richard Schulze. Schulze, who owns 20.1% of Best Buy, reportedly is seeking to take the retailer private through a leverage buyout.

Interim CEO Mike Mikan has pledged to right the retailer. In a June 21 shareholders meeting, he acknowledged Best Buy is operating below expectations.

Meanwhile, Best Buy executives hope the new store format will borrow from the successful Apple Store format, which features tables of connected devices ready to touch and handle accompanied by knowledgeable staffers.

“Technology is an amazing place to be right now for Best Buy,” Josh Will, VP of Connected Store development, told StarTribune.com. “But it's still too hard for consumers to use. It’s difficult to get a good understanding of what technology can do for you and more importantly how it can better your life. It's time that our shopping environment matches that expectation.”

The new store concept includes at the center of the store Geek Squad Solution Central, a take on Apple Store’s Genius Bar, which features tech support, tutorials and a place where consumers can activate their devices.

It’s not immediately clear how storeroom interactivity could slow changes in consumer behavior, notably the practice of “showrooming,” whereby consumers examine merchandise and then purchase online on a competitor’s site such as Amazon.

Michael Pachter, analyst with Wedbush Securities in Los Angeles, said the Connected Stores are not Apple rip-offs (they’re a lot bigger), but do little to dissuade “showrooming.”

“I'd say it is a diversionary tactic to distract investors from the fundamental loss of market share to Internet retail, Pachter said.

“Making the store look nicer is always good," added Laura Kennedy, analyst with Boston-based Kantar Retail consulting. “But it's still not Apple in the end.”

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