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Yeah, I noticed Panago in the Liberties (Gerrard E of Bay)...
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Best Buy's two-step begins to click
MARINA STRAUSS
From Tuesday's Globe and Mail
June 5, 2007 at 4:19 AM EDT
TORONTO — When U.S. electronics giant Best Buy Co. Inc. [BBY-N] snapped up Future Shop in 2001, critics took shots at its decision to run with both retail banners in Canada as being an unnecessary expense.
But Best Buy has proven the naysayers wrong. The two-name strategy has worked, giving consumers yet another place to shop, company executives say. Over the past six years, the retailer has managed to almost double its market share to more than 30 per cent from 17 per cent of the domestic electronics market, they said yesterday.
In fact, the approach has worked so well that the U.S. parent is now copying the two-banner model in other countries that it is entering, said Bob Willett, chief executive officer of Best Buy International.
"It increases the choice to the consumer," Mr. Willett said after a presentation to the Retail Council of Canada annual conference. "There are whole segments of different behaviour and different customers in Canada. They don't all want the same thing. They don't all want to shop in the same boring environment."
Critics had warned that keeping two store chains would force the company to run different marketing and buying programs for the two banners, piling on costs and reducing acquisition savings.
But Mr. Willett said that the extra work has been worth it. The company has found ways to leverage its massive purchasing and distribution capabilities while still tailoring its products and services to diverse customer needs, he said. Meanwhile, Best Buy Canada's sales have soared to almost $5-billion, from $2-billion six years ago.
"You can't be all things to all men," Mr. Willett asserted.
Best Buy will soon be following a similar two-banner path in other countries it is entering or plans to enter, including Mexico, Turkey and Britain. It already has gone that route in China, where it acquired Jiangsu Five Star Appliance Co. about 18 months ago and is keeping that banner along with the Best Buy name.
And when Best Buy went about developing its business in China, it tapped into its Canadian team and expertise for help, he said.
Kevin Layden, president of the Canadian division, said the Future Shop chain has kept itself distinct from Best Buy in a number of ways. Future Shop has commissioned sales staff, more high-end goods and a larger immigrant shopper following.
Future Shop's commissioned sales people tend to have more dealings with customers, discussing various options available in the converging electronics world, he said. "It's very similar to the cultures they come from and their background," he said.
Future Shop also tends to attract more technically savvy consumers who want to talk about the latest gadgets and get advice on mixing and matching merchandise, he said. Best Buy customers "want a ready-made solution"-- the stores attract more women with self-serve displays and wider aisles.
The marrying of the two types of customers -- and chains -- in one company has helped achieve a market share percentage in the "low 30s" while other retailers have difficulty getting to 20 or 25 per cent share, he said.
Best Buy Canada thinks it still has room to expand. With 122 Future Shop and 47 Best Buy outlets, it plans about 135 Future Shop stores over the next couple of years, and as many as 100 or 120 Best Buys. It will soon start to test a smaller Best Buy format, which could be an engine of growth for that banner.
*****
Different strokes ...
In Canada, Future Shop and Best Buy have a combined market share of more than 30 per cent, almost double the 17-per-cent share that Future Shop alone had in 2001 when Best Buy Co. arrived, according to the company.
DISTINCTIONS
FUTURE SHOP
commissioned sales staff
more high-end home theatres
attracts more immigrant customers
attracts more tech-savvy customers
BEST BUY
more self-service, no commissioned sales staff
more ready-made electronics packages
attracts more women customers
wider aisles, more interactive displays
Best Buy to shrink store size
AIMS TO BROADEN REACH INTO SMALLER COMMUNITIES
Hollie Shaw, Financial Post
Published: Tuesday, June 05, 2007
Best Buy Canada, the biggest seller of electronics in the country, will explore a small-format outlet to extend its brand further into smaller communities.
The owner of the Best Buy and Future Shop chains confirmed yesterday that it will pilot a smaller store under the Best Buy banner, likely in fiscal 2008.
"We have a couple of 20,000 [-square-foot] stores in the real estate pipeline right now," Kevin Layden, president and chief operating officer of Best Buy and Future Shop in Canada, said yesterday at a Retail Council of Canada convention.
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Best Buy locations range in size from 25,000 to 36,000 square feet, while Future Shops average about 26,000.
Future Shop has 122 outlets and Best Buy 47, with a stated target of opening up to 65 stores in Canada. But extending the brand into smaller locations could expand the Best Buy Canada chain to 100 or 120 stores, Mr. Layden said.
Minneapolis-based Best Buy Co. bought Burnaby, B.C.-based Future Shop in 2001. While industry watchers speculated that the U.S. operation would eventually enlarge Future Shop stores and convert them to the Best Buy banner, executives soon saw the benefits of keeping two separate but distinct brands in the market.
Unlike the Best Buy brand, Future Shop has opened smaller stores in regional markets.
"Most brands top out at a 20% to 25% market share [in a given market], even the most successful," said Robert Willett, chief executive of Best Buy International. "With two brands you have that much more opportunity: You can't be all things to all men."
The executives said the chains have distinct personalities that tend to appeal to different sets of consumers. Best Buy has a higher percentage of female consumers and likely appeals more to women because of its wider aisles and self-service model. At Future Shop, customers are approached frequently by sales staff working on commission. At Best Buy, electronics tend to be sold in packages for a household, such as an entire home theatre system, while Future Shop is tailored more to individuals buying a single product, such as a set of speakers.
Future Shop stores also appeal more to new Canadians, Mr. Layden noted.
"There is an interaction between commission sales associates and consumers that appeals to new Canadians.... It feels familiar to them."
Combined, Best Buy and Future Shop have roughly one third of the electronics market in Canada, a vast jump from Future Shop's pre-takeover market share of 17%. Since then, annual sales have grown from $2-billion to almost $5-billion.
Having two distinct banners also appeals to a "customer-centric" philosophy that Best Buy has developed over the past couple of years, one that aims at better customer service and tailoring specific formats and stores to meet customer needs.
Best Buy has used customer research, mystery shoppers and the Geek Squad -- a fleet of employees who troubleshoot in the stores or at a customer's home on such things as computer setup, repair and wireless networking -- to improve service.
"Our industry is moving toward the service model, so when you buy your TV you can connect it with your PC," said Mr. Willett, adding the retailer's aim was "to create a connected world on behalf of the consumer."
Knowing consumer needs is also more important now that personal computers have a life cycle of seven to eight weeks before they are eclipsed by a newer, better model, he said.