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Best Buy’s Samsung Open House Attempts to Deepen Supplier Ties

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Best Buy’s relationship with Samsung

In Part 1 of this series, we discussed Best Buy’s (BBY) launch of Samsung Open House store-within-a-store. Best Buy has further strengthened its relationship with Samsung (SSNLF)(005930.KS) through its June 30 introduction of Samsung Open House, which is the largest in-store branded display of Samsung appliances in the United States.

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Best Buy’s key suppliers

In fiscal 2015, which ended January 31, 2015, Best Buy’s 20 largest suppliers represented 73% of its purchased merchandise. The company’s five main suppliers—Apple (AAPL), Samsung, Hewlett-Packard (HPQ), Sony (SNE), and LG Electronics (LGEAF)—accounted for ~47% of Best Buy’s total purchased merchandise. This number compares to 45% of the total purchased merchandise in fiscal 2014 and fiscal 2013.

Why Best Buy needs to focus on suppliers

Major suppliers like Apple have aggressively expanded their retail business and have started to threaten Best Buy. For instance, as of March 28, 2015, Apple had 453 retail stores worldwide. In this scenario, enhancing relationships with key suppliers is vital for Best Buy. With its vast presence in the United States, Best Buy can ensure its suppliers have a better reach and more visibility. Best Buy makes up about 1% of the SPDR S&P Retail ETF (XRT).

Since 2013, Best Buy has opened 1,400 Samsung experience shops—stores-within-a-store that display a range of Samsung electronics like smartphones and tablets. In mid-2013, Best Buy partnered with Microsoft (MSFT) to open 600 Windows stores-within-a-store to showcase Windows-based tablets and PCs and other products and accessories.

In 2014, Best Buy opened about 500 Samsung Entertainment Experience and 350 Sony Experience mini stores within its locations to promote the brands’ respective home theater products. These stores specifically focused on in-demand ultra-high–definition televisions.

The next part of this series discusses how these steps and other initiatives have driven Best Buy’s same-store sales.

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