Best Buy Goes From Big Box to Boutique

Big-box retailer Best Buy (BBY) is going small in an effort to reap sizeable sales of smartphones.

The company is opening slimmed-down stores -- up to 3000 square feet -- exclusively devoted to the sale of wireless equipment. The reason: Apple's (AAPL) iPhone, Research In Motion's (RIMM) BlackBerry and other smartphones offer the tantalizing prospect of growth in an otherwise sour retail market.

The whiz-bang devices often combine voice communication with Web browsing, music players and digital cameras. Better yet, smartphones generate solid profit margins.

Best Buy's new stores offer about 90 different phones and service from 9 separate wireless carriers. So far, the company has opened 41 Best Buy Mobile locations in the US and 3 in Canada. And, according to the Wall Street Journal, the company has added the new store-within-a-store to about 1000 of its existing outlets.

The company declined to say how many mobile stores it plans to open in 2009, but it hopes the unconventional move will help it better meet the stiff competition it faces from Wal-Mart (WMT), the world's largest retailer, and RadioShack (RSH), both of which sell smartphones.
Best Buy isn't abandoning its big-box format. The company has expressed interest in acquiring some of the yet-to-be-closed stores of its now-defunct rival, Circuit City.

"We're looking at some of those (stores), but our first priority is to stay cash-strong," Best Buy's outgoing CEO Brad Anderson told Reuters.