Why Best Buy and Microsoft Are Teaming Up

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Microsoft (MSFT) has announced that it will be partnering with Best Buy (BBY) to open 500 Windows Store locations inside Best Buy stores across the country.

The move could help both brands, which are struggling against changing business realities. Microsoft was late to the game on tablets and smartphones, and its offerings -- the Surface and the Windows Phone, respectively -- have struggled to win over consumers. More concerning is its latest operating system, Windows 8, which overhauled the user experience but is now being blamed for a downturn in PC sales.

Meanwhile, Best Buy is fighting off price competition from online competitors and dealing with a changing consumer electronics market in which people no longer seem all that interested in buying televisions.

So is this a case of tying two rocks together and hoping they'll float? Not quite. There are a few reasons why this deal might make sense for both parties.

1. It minimizes real estate costs for Microsoft. Microsoft has already made its first foray into retail with its Microsoft Stores -- shops, kiosks and and pop-ups mainly dedicated to Surface tablets. The Windows Stores it has planned for Best Buy will expand that model to include PCs from its original equipment manufacturer partners. The store-within-store format inside Best Buy will help Microsoft get its brand seen by electronics shoppers without having to make a big investment and sign a 10-year lease for a proper storefront.

2. It gives Best Buy something to do with its excess floor space. Here's the problem with HDTVs: Pretty much everyone has them at this point, and electronics manufacturers have been unable to identify the next big thing in televisions that will get people buying again. 3D TVs have been largely ignored -- see ESPN's decision to shutter ESPN 3D earlier this week -- and the industry has had trouble convincing consumers to buy pricey, "ultra-high-resolution" 4K TVs.

This doesn't bode well for Best Buy, which built a bunch of huge stores to fill with TVs and now finds a buying public that's more interested in phones and tablets. The solution is to sublet some of that empty floorspace to brands that could use it, which it's already done for Samsung and Apple (AAPL). Continuing that strategy with Microsoft lets the retailer actually do something about its untenable real estate position without closing down its stores.

3. It improves customer service. Best Buy is attempting to compete on price by offering to price-match online competitors like Amazon (AMZN) and NewEgg, but customer service is where it's really trying to best e-commerce.

Forrester analyst J.P. Gowender writes that the Microsoft stores will effectively replace the PC department at your local Best Buy, and Best Buy will have Microsoft-trained employees selling the computers. Assuming these specialists are more knowledgeable about PCs and Windows than the usual Best Buy blue shirts, that means Best Buy will get to provide a better customer experience and Microsoft will get to put its best foot forward.

That doesn't mean this deal is necessarily going to save Best Buy and Microsoft. But it's a step in the right direction for both companies.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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14 Comments

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ctitus6108

So let me get this straight. Best buy, The company that sells over priced electronics is teaming up with Microsoft. The one and only software company that lacks innovative ideas, sells software that is hardly ever ready for the public ( meaning continuous glitches) and creates devices that have already been on the market for at least five years. (meaning they are followers). will be in one location, sharing floor space to sell all their over priced useless crap in one place? Perfect

June 19 2013 at 4:37 PM Report abuse +1 rate up rate down Reply
Dennis

Another clearly bound to fail attempt at marketing by Microsoft, with a product, Windows 8, that has largely been rejected by both consumer users and the business users. Combine that with the failed Microsoft efforts at tablet PC's and you see a company that is fast becoming a relic of the past. Best Buy is also doing their best attempt at becoming a relic of the past. They are generally unable to compete in the present day market for electronics and related products. Best Buy likes to blame the various on-line sellers, but the issue is what do you get for a higher price from Best Buy and the answer is for the most part nothing. The shopping experience at Best Buy is generally poor, and most often the reason I buy from on-line sellers. Even the late Sun TV. Roberds, etc.. learned that "hard ball" and "bait and switch" sales tactics do not work forever. Best Buy and Microsoft are making it increasingly obvious they are little more than relics of a time gone by. They did not change the world did.

June 19 2013 at 3:16 AM Report abuse rate up rate down Reply
Ghetto Cat

Wal*Mart is only dead in stupid people places, like LA. Like where Paris Hilton never even heard of Wal*Mart and thought they sold "Wall supplies".

June 19 2013 at 2:02 AM Report abuse rate up rate down Reply
ole.obamy.failedagain

OBAMY ECONOMY="BENGHAZI"~"SPYING"~"BENGHAZI"~"SPYING"

June 18 2013 at 6:53 PM Report abuse +1 rate up rate down Reply
bwhitedjr

I buy everything at Best Buy. Well, all my electronics anyways. Why anybody would want to buy their computers and other electronics over the internet is crazy. Best Buys warranty program is the best I have ever bought. It may be a little pricey, but if you break your computer, they will replace it with no questions ask. I turned in a Tom Tom twice because it wasn't doing what it was suppose to. I am a Best Buy fan.

June 18 2013 at 6:35 PM Report abuse -1 rate up rate down Reply
1 reply to bwhitedjr's comment
STAN

". I turned in a Tom Tom twice because it wasn't doing what it was suppose to."
" I am a Best Buy fan."
Anyone see something wrong here?

June 18 2013 at 7:06 PM Report abuse +1 rate up rate down Reply
dfoster

Sort of like welding the Titanic to the Lusitania. A desperate ploy on Best Buy's part, almost certainly destined to fail.

June 18 2013 at 3:42 PM Report abuse +1 rate up rate down Reply
nnojr

Wow, a way to get ride of two bad companies with one bad alliance!

June 18 2013 at 2:41 PM Report abuse +1 rate up rate down Reply
Sae Rom

Of course they're allowing it. If people don't realize what is actually happening... Xbox one? End of gamestop? "help me!" - Best buy to microsoft.

June 18 2013 at 2:40 PM Report abuse rate up rate down Reply
seekthetruth123

Seems to me like it is a very vain attempt the save that garbage OS Windows 8. My father n law bought a computer from Bestbuy with WIndows on it (against my warnings). Needles to say it is on the way back. Microsoft must have been drunk when they came up this this garbage !

June 18 2013 at 1:28 AM Report abuse rate up rate down Reply
topaz59

Best Buy and the so-called Geek Squad, a Best Buy's subsidiary, share a horrendous reputation. I am surprised that they are still in business.

June 17 2013 at 10:49 PM Report abuse rate up rate down Reply