Guardians of the Galaxy

Samsung’s New Stores May Signal Apple-Like Retail Expansion

Yesterday, Samsung opened three new Samsung Experience Stores in the US. The move coincided with the announcement of the Galaxy Fold and Galaxy S10 family of devices at simultaneous Unpacked events in San Francisco and London, which CCS Insight attended (see Instant Insight: Samsung Unveils Galaxy Fold and Galaxy S10 Portfolio). The stores are located in Los Angeles, Houston and Garden City in New York.

Samsung already has a very elaborate experience store in Manhattan, where consumers can get hands-on with its huge range of products spanning smartphones, virtual reality headsets and washing machines. The store, which takes up some of the most expensive real estate in the world, doesn’t actually sell products, but it helps in Samsung’s brand-building efforts. The company opens pop-up shops from time to time, and also runs stores within many Best Buy locations.

The three new storefronts are true retail shops where consumers can get advice and buy its products. Its Galaxy S10 smartphone family features prominently, but Samsung is keen to market its entire range of products, promoting everything from its smartphones, its smart home ecosystem SmartThings, as well as TVs and wearables.

In many markets, Samsung has been living in the shadow of arch-rival Apple, and it appears to have decided that two can play the retail game. Apple now has about 275 stores in the US and more than 500 around the globe. These have been very successful as a sales channel and as an exercise to elevate its brand. Apple stores offer a place where customers can not only shop, but also feel like they’re among their contemporaries. There’s a feeling of exclusivity.

Samsung is facing competitive pressure from Apple, which has been taking a greater share of the top end of the smartphone market in many countries. It’s also under increasing pressure from Chinese smartphone brands in markets around the world. Although Chinese phone-makers — particularly Huawei — have suffered significant setbacks in the US, Samsung has every reason to be concerned. OnePlus has now built a successful relationship with T-Mobile, and Xiaomi is rumoured to be expanding into the US and already has numerous flagship stores in various locations including in London.

The new Samsung experience stores are likely to set the wheels in motion for further retail expansion, but the South Korean giant will need to work with its channel partners to assure them they’re not becoming a competing force. This is particularly true for major wireless carriers in the US, which use their own retail storefronts to create and maintain relationships with subscribers. The same dynamic exists in many international markets.

We believe that Samsung will press on cautiously with its retail plans given the risk of alienating current partners. The manufacturer also knows that this strategy isn’t without risk: not all efforts to build out a bricks-and-mortar presence have reached their goals. A good example is Microsoft, which has about 100 stores in the US, but they appear to be more for symbolic reasons than to generate substantial sales. Curiously, the Redmond company will soon be opening a flagship store in central London.

Apple raised the bar when it launched its chain of retail stores in 2001, quickly becoming a $1 billion business. But beyond boosting revenue, Apple stores have helped create a loyal fan base and the most valuable brand in the world. But it’s been a slow-moving process. A decade from now, Samsung’s retail presence could be seen as a genius move.