Samsung takes smartphone battle to the storefront

The Korean electronics giant will open minishops within all U.S. Best Buy stores in the coming months, showcasing how its products interact and potentially making it tougher for rival devices to get attention from buyers.

Samsung will open "Samsung Experience Shops" in all Best Buy venues in the coming weeks. One of its first is located in a Dallas suburb, not far from Samsung Telecommunications America's headquarters. Shara Tibken/CNET

DALLAS -- Samsung has opened a new front in its battle for smartphone supremacy: the storefront.

The Korean electronics giant plans to set up mini Samsung stores inside all U.S. Best Buy and Best Buy Mobile venues within the next couple of months -- just in time for the Galaxy S4 launch. The "Samsung Experience Shops," which start rolling out Monday, will be in 500 big-box Best Buy stores and all 410 Best Buy Mobile locations by early May. Best Buy's remaining 550 large-format Best Buy stores will feature the shops by early June.

A larger retail presence within Best Buy -- one of the world's largest tech retailers -- gives Samsung a place to directly pitch its products to consumers without shouldering the risks inherent to the retail business. Think of it as a lite version of Apple's retail strategy: a lot of the benefits without the hefty costs. With the stakes so high and competition so fierce in the mobile-devices business, Samsung couldn't take a chance that its retail partners alone could effectively sell its products.

"Retail is not something you jump into lightly, especially given consumers have been expecting this as a next step for Samsung," Ketrina Dunagan, vice president of retail marketing for Samsung Telecommunications America, told CNET. "Although the carriers and retailers today provide a solid retail experience for our consumers, what we find is a lot of [buyers'] deeper questions just aren't answered."

Operating standalone retail stores has been a huge advantage for Apple, but it's a strategy that few companies have been able to replicate . But with its position atop the smartphone market and a breadth of products few can match, Samsung wasn't content to have its contents stuck in part of a single aisle.

The shops in large-format Best Buy stores will include blue-shirted consultants who are employed and trained by Samsung, as well as Best Buy staffers who receive special instruction. They will be able to demonstrate products, make certain repairs, and sell and activate the devices. Customers will be able to return to the Samsung Experience Shop for further training or customer support for the life of their devices. Best Buy Mobile stores won't have Samsung consultants, but the Best Buy employees will have special training about Samsung products.

The stores will feature smartphones (Galaxy S3, Galaxy S4, and Galaxy Note 2), as well as tablets, PCs, and other connected devices like cameras all displayed on sleek white tables. Each shop also will include a Samsung smart TV to show users how the products can interact with each other. For instance, sales representatives will show shop goers how to control the Samsung TV with a Galaxy S4.

As Dunagan noted, Samsung had been expected to make a bigger move into U.S. retail. The company operates a limited number of standalone stores in places like Asia, Canada, and Australia, but its U.S. footprint has been minimal. Samsung opened temporary pop-up shops, dubbed Samsung Galaxy Studios, in 14 malls in December, and it also operated a "Samsung Experience" showroom in New York's Time Warner Center before shuttering it in late 2011. It has predominantly relied on mobile carriers and retailers to explain and sell its products.

Connecting the dots
Best Buy already sells Samsung products, but they're typically lumped in with all the other phones or TVs that are spread out across the store. By setting up an area that's all Samsung, the company can more easily show just how big its portfolio is and, more importantly, demonstrate how the products work together.

Setting up an family of products that interact with each other is a key part of Samsung's strategy. The company is known for cramming new capabilities into its devices, but many consumers don't even know they exist. As the company tries to set itself apart from Android rivals, as well as compete with Apple, demonstrating those unique features will become more important. And if consumers see the benefit of the interlinking gadgets, they may be more inclined to buy multiple products.

"To a certain extent, Samsung is a very well-known brand but somewhat of a blank slate for consumers," Forrester analyst Tony Costa said. "They see the products but don't understand how they interact or understand what Samsung stands for beyond being a tech leader."

Samsung retail stores within Best Buy aren't likely to pose a huge threat to Apple, which has 740 mini Best Buy-housed stores of its own, as well as 400 Apple Stores. The ones that may be hurt by the move are Samsung's Android rivals who have to fight for shelf space and a way to stand out in a sea of similar Android smartphones. Such companies have to count on sales reps at Best Buy and other retailers to understand their products and push them to consumers, but doing so can be risky when there are so many devices competing for attention.

While other companies have minishops in Best Buy stores, the Samsung Experience Shops are the only such fixtures where consumers can actually buy and activate their devices. To purchase an iPhone from a Best Buy store, a user would have to go to the mobile section, even if the store had a special Apple shop.

"This is a full end-to-end experience where consumers can come test out the products, get their products activated, and get service all in one place," Best Buy spokeswoman Shandra Tollefson told CNET.

She added that Samsung's shops won't displace other mobile products but will replace less popular items such as DVDs and CDs.

A Samsung consultant at a Best Buy store near Dallas demos how TecTiles work with the Galaxy S3. Shara Tibken/CNET
Stores-in-stores versus standalone shops
It may seem Samsung is only dipping its toes into retail, but stores-in-stores have certain advantages over standalone shops, including cost and time to market. It takes Samsung only one night to install a Samsung Experience Shop in a Best Buy store, compared with months to open a new retail store. Working with Best Buy also brings a level of stability relative to trying out new store formats.

Of course, success isn't guaranteed. The tech retail environment is a tough one, and Best Buy itself has been struggling. To avoid "showrooming," where consumers check out products in Best Buy stores but then purchases them online for a lower price, Best Buy now matches online pricing. And as part of its turnaround plan, Best Buy also has voiced plans to feature more partners' products, which could mean the Samsung Experience Shop may soon be located next to an LG or Motorola Experience Shop.

In addition, some consumers may compare Samsung's Best Buy fixtures to Apple Stores and find the Samsung Experience Shops to be lacking in terms of polish. And while the stores will be able to open quickly, there's some skepticism about the real return Samsung will get from its efforts. After all, it has hired many workers to staff the stores (it's not saying how many), and it will be investing in a big marketing campaign this quarter to bring awareness to the shops.

Gartner analyst Carolina Milanesi said her main concern is the shops will turn into support centers instead of locations to drive higher sales. But "from a brand perspective, it will certainly help put the Samsung name more in front of the consumer," she added.

Samsung did consider opening standalone stores in the U.S. but ultimately decided to work with Best Buy instead as it was the fastest way to reach consumers.

"Given that our brand has grown so quickly, had we opened our own retail stores, I think we felt that, frankly, it wouldn't provide as much benefit as it would potentially cost in time to market and relationships," Dunagan said.

 

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