Aug 14, 2008 6:03 AM, PROMO Xtra, By Brian Quinton

Retailer Best Buy hopes that being the first third-party merchant to offer the new high-speed Apple iPhone 3G will help drive traffic in what might be a recessionary holiday shopping season this year.

The Minneapolis-based electronics chain said yesterday that it has been tapped as the first independent retailer to sell the new low-priced version of Apple’s latest smart phone, which connects to the Web at speeds that make mobile Internet use easy. Since its release in mid-July, the phone has only been available in stores run by Apple or AT&T, the only U.S. wireless carrier for the handset.

Best Buy said it will start selling the new phones in its 970 U.S. outlets on Sept. 7. About 600 of those stores will feature the phone in dedicated Apple mini-shop sales areas that also feature other Apple products, such as Mac laptops and desktops.

“We do believe that broadening our assortment and having iPhone in our stores is certainly going to be very important” in the run-up to holiday shopping, Best Buy Mobile president Shawn Score said in an interview with the Associated Press.

The iPhone deal “solidifies us as the place to go for the cool stuff,” he added. “Our customers are looking for this product.”

Best Buy has invested time and capital in enhancing its in-store mobile sales resources and last week announced completion of a two-year initiative to train staff and align merchandising for stronger mobile sales. Among other changes, the chain has improved in-store cell phone activation, a step that proved a problem for some early iPhone 3G buyers even in Apple and AT&T stores.

“We had a lot of work to do, obviously, to get in a position where Apple and AT&T would feel good about Best Buy Mobile carrying [the new iPhone], and that’s what we’ve done in the last 18 months,” Score said.

The iPhones will also be sold through the new Best Buy Mobile stores that the chain has opened in 15 cities around the U.S. in a joint venture with Carphone Warehouse Group Plc, Britain’s largest mobile phone retailer.

Best Buy will sell both the 8GB and 16GB models of the iPhone 3G for $199 and $299 respectively—the same price that both Apple and AT&T stores charge. Customers will also have to sign up for a new two-year phone contract with AT&T.

While Apple has not ruled out designating other pure-play electronics retailers, the deal is expected to give Best buy an early edge over rivals in the category such as Circuit City and Radio Shack.

But its real impact might be directed at out-of-vertical competition posed by big box discounters such as Walmart, Target and Costco. These brands have been siphoning off some sales from the electronics sellers. To date, chains such as Circuit City and Best Buy have been able to fend off those competitors with their superior tech support divisions. But a Monday research report from a Citi analyst suggested Walmart and Target may be ready to ramp up their customer service for tech items. Having a high-demand item that they are not able or allowed to offer could drive store traffic for Best Buy this fall.

Apple currently sells the new iPhone 3G in its 190 U.S. stores and in the 2,000 outlets operated by AT&T. The company said it sold 1 million of the second-generation handsets during the first weekend after its release, and Apple CEO Steve Jobs has predicted sales of 10 million iPhones by the end of 2008.

For more coverage on marketing at retail

Related links:

U.S. Mobile Internet at Critical Mass: Nielsen Mobile
http://promomagazine.com/research/mobile_internet_critical_mass_neilsen_0711/index.html

Dr Pepper Makes an iPhone House Call
http://promomagazine.com/interactivemarketing/news/pepper_iphone_call/index.html

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