Samsung to open 1,400 mini-stores within Best Buys, challenging Apple

Samsung Electronics is throwing down the gauntlet to Apple (NASDAQ:AAPL) and every other electronics and smartphone maker by partnering with Best Buy to open 1,400 "Samsung Experience Shops" within Best Buy locations nationwide. The store-within-a-store concept will allow Samsung to highlight its wares and demonstrate how its smartphone, tablets, TVs, laptops, cameras and other connected devices interact.

Samsung said that by early May, 900 Best Buy and Best Buy Mobile stores will feature the new Samsung mini-stores, with the remainder launching by early summer. Samsung and Best Buy have been testing the concept in six stores thus far.

The only other companies with the product portfolios to launch such a concept are probably Apple, LG Electronics and Sony, but Samsung is now the world's largest handset and smartphone maker and is flexing its muscles. Best Buy employees will be trained to educate consumers on Samsung devices, and Samsung will hire its own staff to demonstrate how its new flagship Galaxy S4 smartphone can transfer content between Samsung devices, for example.

"This effort is the last of a three-legged stool, from products to marketing and now retail," Ketrina Dunagan, vice president of retail marketing for Samsung Mobile's U.S. unit, told Bloomberg.

Indeed, the retail expansion dovetails with a ramping up of Samsung's marketing budget. After being outspent by Apple in 2011, Samsung spent $401 million last year advertising its phones in the United States, outpacing Apple's $333 million, according to data from ad research and consulting firm Kantar Media and cited in the Wall Street Journal.

The placement inside Best Buy is another way for Samsung to extend the presence of its brand. "70 percent of the U.S. population is within 10 miles of a Best Buy," Dunagan noted to The Verge.

For Best Buy, the alignment with Samsung gives it a chance to hitch its star to the world's most popular global smartphone maker at a time when the company will be making a major marketing push for the Galaxy S4. Best Buy has struggled in recent years in the face of intensifying competition from the likes of Walmart as well as online alternatives like Amazon. However, for the quarter ended Feb. 2, Best Buy reported its first same-store sales gain in more than a year and trimmed its loss to $409 million, compared with a loss of $1.82 billion in the year-ago period, according to the Journal.

"This is part of our Renew Blue transformation strategy--working closely with vendor partners to innovate and drive value, while also updating our stores to focus on growing and profitable categories," Shawn Score, head of U.S. Retail for Best Buy, said in a statement. "Our promise to our customers is simple: We're committed to providing the best value, service and selection. Our partnership with Samsung on the Samsung Experience Shop is another way we're delivering on that promise."

For Apple, the Samsung mini-stores mean that Apple has another front to compete against Samsung. Apple has around 400 bricks-and-mortar retail stores around the world, according to the New York Times. Apple also has mini-stores inside Best Buy locations and deals with retailers like Walmart and Target to display its iPhones and iPads.

Samsung's expansion could spell even greater trouble for smaller smartphone rivals, especially HTC. HTC's One smartphone will go on sale later this month through AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and T-Mobile USA and at Best Buy, but the marketing push Samsung is making will likely dwarf HTC's efforts. HTC has said it will increase its digital marketing budget by 250 percent this year compared with 2012, and will increase its traditional media marketing spending by 100 percent.

Samsung is paying Best Buy for the right to have its products placed so prominently in Best Buy stores, but Samsung declined to say how much. Dunagan told The Verge that Samsung would rather partner with a retailer than build its own standalone stores. "We felt that this partnership was the quickest way to address consumer needs," she said.

For more:
- see this release
- see this AllThingsD article
- see this NYT article
- see this WSJ article (sub. req.)
- see this The Verge article
- see this Bloomberg article

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