Why Couldn’t Future Shop See the Future?

At Thursday’s Best Buy/ Future Shop layoff announcement, the media was aflutter how online shopping & Target’s entry have forced the closure of dozens of big Canadian stores. Look closer. Newscasts love the ‘new’, but often fail to cite inexorable, slow building, predictable factors. Such as demographics & geography.

Oversized Best Buy / Future Shop outlets in suburbia were a ‘moment in time’ phase that’s now done. The Future Shop/ Best Buy store closings surprised no one in my MRK 526 Marketing Channels course. For months we have discussed how Best Buy & Future Shop must close or downsize their suburban outlets.

Some context:

Future Shop outlets added Appliances to their product mix, just as Sears was weakening & Sears’ once-revered Kenmore brand lost its edge. Appliances require tons of display space. When fresh suburbs are freshly built, these Best Buys & Future Shops were surrounded by ‘fresh new’ homes, all needing an oven, fridge, washer & dryer. But after the ‘initial fill’ demand is met? Appliances in maturing neighbourhoods? Few repeat purchases. Sales tumble.

Future Shop added 50 – 100′ of DVD’s & CD’s just in time for Boomers to build home libraries of all-time favorites. Stores devoted massive space to titles arranged by genre, title, etc. And now? DVD + CD sales potential = zilch.

Appliances, DVD’s & CD’s together made up about a third of floorspace at suburban Best Buys & Future Shops. Ouch.

Add those factors together: it’s a recipe for Best Buy to shift to a small store, high service format- more urban, closer to work not home, concentrating on selling small but high value items such as smartphones.

Suburban monster outlets, with massive floorspace for appliances, DVD’s and CD’s? Not the future.

The Layoffs are a predictable result of

  • a Technology shift (DVD’s and CD’s shifting to online delivery); and
  • Life Stage Demographics (appliances etc).

 

What’s Next- More To Come:

I’ve also told students to expect poor performance from Rona & Home Depot’s big suburban stores. Once a new homeowner insulates a basement & buys landscaping plants & patio furniture, they’ll rarely visit a mega-sized Home Reno outlet. These stores boom when 1st surrounded by new subdivisions, but are way too big for mature neighbourhoods.

Watch With Caution:

The ‘newscasts’ angle is that the layoffs are a surprise -and are due to online shopping and Target’s entry to Canada. These are contributing factors, but large-format electronics stores in maturing suburbia were already the Walking Dead. And the Home Reno outlets are soon to follow. Who will be affected by Target’s entry? Sears, of course- already weak & wobbing. Also: Expect some Men’s & Women’s apparel chains to feel stress eg Le Chateau, Reitmans, Suzy Shier, Talbots, Moores, Danier- I’ll be surprised if some don’t announce ‘rightsizing’ or remodeling of their own, fairly soon.

Steven Litt