Best Buy's Store-Within-a-Store Bet Is Paying Off

Top Brands Like Apple, Windows to Get More Shelf Space Before Holiday

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best buy store
best buy store

Best Buy's store-within-a-store bet is starting to pay off.

The world's largest electronics chain posted its fourth-straight quarter of same-store sales gains thanks to higher demand for appliances, TVs and phones, and is preparing to offer top brands like Apple and Microsoft even more shelf space heading into the holiday season.

Same-store sales rose 3.8% in the second quarter of 2015, the company said in a statement on Tuesday.

The retailer, which is in the third year of a turnaround plan led by CEO Hubert Joly, has been strengthening its relationship with key marketers such as Samsung and Sony to include dedicated in-store areas and close collaboration on merchandising and marketing for new product launches.

Best Buy is also beefing up the in-store experience for anticipated big sellers like the Apple Watch, which Best Buy began selling this month, and Windows 10 -- released in July. It's revamping a majority of Apple's stores-within-a-store by holiday -- outfitting them with new fixtures and additional displays for the Apple Watch and other products -- while bringing the watch to more locations. It is also expanding the in-store Windows shops from 600 to 800 locations.

Online comparable sales soared 17% last quarter, driven mainly by ship-from-store digital marketing and website enhancements, said Mr. Joly. More people took advantage of free two-day shipping offers, and the retailer pushed more clearance items and online-only flash sales.

The company's customer data system, Athena, is also allowing Best Buy to serve up more targeted, relevant ads based on the brands and products that customers are interested in. "When we go into holiday this year, we are definitely going to have a more robust experience for our customers coming out of the efforts that we put forward with Athena," said Chief Financial Officer Sharon McCollam, on a conference call with analysts.

Best Buy's marketing has been in flux in recent years, following the departure of Global CMO Barry Judge in 2012 and the appointment of Mr. Joly, who stepped into the CEO position a few months later.

Last November, Greg Revelle took on the CMO role and refocused the retailer on digital -- introducing a wedding gift registry and in-store pickup this year, and pursuing more digital marketing while sitting out major TV advertising events like the Super Bowl.

Mr. Revelle also moved the company away from an agency-of-record model earlier this year in favor of hiring shops on a project basis and bringing more work in-house. Best Buy selected Grey New York for the first major marketing efforts since the shift: holiday and the pre-Super Bowl home entertainment push.

Best Buy spent more than $59 million on U.S. measured-media during the first six months of 2015, down from nearly $116 million during the same period in 2014, according to Kantar Media. Overall, the retailer spent $635.5 on domestic advertising last year, according to the Ad Age DataCenter.

-- With contributions from Bloomberg News --

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