Best Buy Co Inc (NYSE:BBY)’s Bagging Of Apple (AAPL) Is A Major Conquest
Best Buy Co Inc (NYSE:BBY) stands out as one of the few independent retailers selling brand new Apple Inc. (NASDAQ:AAPL) products in their stores. Winning over a major brand such as Apple is no mean feat, but Best Buy has had several successes with major brands in its stores. The company also sells Microsoft Corporation (NASDAQ:MSFT), Samsung and Sony Corp (ADR) (NYSE:SNE) products in its stores.
There are important lessons that other retailers can learn from Best Buy Co Inc (NYSE:BBY)’s relationship building with major brands. For Best Buy, though, the strategy of courting major brands has had far-reaching favorable impact on its performance.
Fruits of its labor
Best Buy Co Inc (NYSE:BBY) uses store-within-a-store concept to sell products from major brands like Apple, Microsoft, Samsung and Sony. The company introduced the within-a-store strategy in 2013 and there are great results to show for the efforts. For example, in its fiscal 2015, the retailer saw its sales rise by $2 billion to $40.3 billion. That compared to sales of $38.3 billion in fiscal 2013. Additionally, the company managed to convert its $441 million loss in fiscal 2013 to a profit of $1.2 billion in fiscal 2015. Those gains came courtesy of relationship with major brands.
What comes out clearly is that by getting major brands in its stores, Best Buy has been able to offset the competition that those major brands pose to its business by running company-owned retail outlets.
Relying on few suppliers for merchandise
As Best Buy Co Inc (NYSE:BBY) gets deeper with key brands, the retailer has been increasingly sourcing significant merchandise from a small number of suppliers. For example, in fiscal 2015, Best Buy obtained about 47% of its suppliers from HP Inc (NYSE:HPQ), Samsung, Apple, Sony and LG Electronics. Additionally, the top-20 suppliers in the fiscal year accounted for nearly 75% of the merchandise that Best Buy purchased.
Although Best Buy Co Inc (NYSE:BBY) appears to depend on fewer suppliers for most of its merchandise, the company understands the risk of such arrangements and has been careful to avoid potentially risky deals. For example, the company doesn’t sign long-term contracts with the major suppliers, which makes it flexible for the retailer to alter the deals.
Additionally, the retailer has been careful by trying to woo only the most relevant vendors to put their products in its stores.
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