This past Saturday, Canadians woke up to some ‘surprising’ news in regards to a Canadian brand which was owned by Best Buy. Best Buy decided to close down the majority of Future Shop stores, which were bought in November 2001 for $580 million. In total, there are 66 Future Shops stores which will be closed down. All other Future Shop stores will be rebranded to the Best Buy brand.
Personally, I am not surprised with the decision to close and rebrand the remaining stores, but I was surprised with how it as done. As with many cases, and as I had shown with the closure of Target across Canada, there is the good, the bad, and the ugly in this decision.
The Good: Shareholders of Best Buy should be able to see their margins increase. No longer are there two different flyers, with the same sale items (and at times laid out in the flyer the same way). Some Future Shop and Best Buy stores were geographically close to each other. This possibly could of caused cannibalism of consumers for the chain and redundancies. Lastly, even with the closure of the 66 locations, the average Canadian will still be a 15 minute drive from a Best Buy location.
The Bad: Landlords, many who are also losing Target as a key leaseholder, will have more space which will be required to be filled. Lease prices could decrease with all of the supply now hitting the market. When Target’s leases became available on the market, there was nervousness about which companies would be able to fill the key spaces. The amount of space is smaller, but in many facilities, the Future Shop and Best Buy locations are key to shopping district.
The Ugly: With the closure of the stores, there are 1,500 jobs lost in the Canadian retail market. Coupled with the departure of Target, there are a large number of customer service skilled people now available on the job market. This could make the market for those looking for a job harder.
What do you think of the decision for the closure of the stores and the Best Buy re-branding? Is this an opportunity for a regional electrical retailer like Visions? Do you see another retailer closing their doors?
Have an awesome week.
Kevin MacDonald is the CEO of L6S Business Consulting Inc. L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.
Kevin is active in the community by volunteering for different groups, his condo board and donates platelets at the Canadian Blood Services clinics on a bi-weekly basis.