In what could be seen as a step towards to a potential merger, mass merchant Target has partnered with Best Buy for its consumer electronics expertise.
Beginning in October, Best Buy will place Geek Squad agents in 29 Target stores, mainly in the Denver, Colorado area. The onsite tech experts will provide the traditional range of services, from pre-purchase advice and in-store device repairs to home-theatre installation.
The six-month pilot project should benefit both retailers: Target will be able to leverage Best Buy’s brand and product know-how, while Best Buy will be able to reach a broader customer demographic, mainly more women.
Target certainly isn’t new to retail partnerships. It has capitalised on the elasticity of its brand by partnering with upmarket labels such as Missoni and Jason Wu for clothing, as well as independents as part of its Shops at Target initiative and, more recently, department store chain Neiman Marcus.
There’s no denying that Target has broad appeal. However, like any mass retailer today, it is up against a new set of competitive forces that is pressuring it to validate every single category, brand and SKU available on shelves in order to ensure it doesn’t fall victim to the showrooming effect.
Despite Target’s recent push into grocery, hardlines (of which consumer electronics, entertainment and books are major components) still account for 19% of sales. It has strengthened the electronics category in particular over the past 12 months, with new Apple concessions launching in May.
So although it may seem counterintuitive to join forces with rival Best Buy, there is a much bigger common threat in the form of Amazon.
Target recently stopped selling Amazon’s Kindle in its stores.
The impact on Best Buy has been much greater in the form of store closures. It won’t beat Amazon on price or assortment, so it must leverage its renowned customer service and look for alternative revenue streams, both of which Target can help do.
So could this latest move in fact be one step closer to a merger? The consumer electronics store as a bricks-and-mortar concept may not be dead, but it is certainly over-represented given new competitive threats. Best Buy may have outlived Circuit City but it must restructure in order to avoid a similar fate.
- Natalie Berg, global research director, Planet Retail.
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