Best Buy, the American retail consumer electronics giant, plans to turn on the fun quotient when it lands in Western Canada this spring.
By providing consumers with a unique shopping experience that focuses on interactivity and no-pressure browsing, Best Buy Canada Ltd. hopes to carve a niche in an increasingly crowded marketplace.
The company, a wholly owned subsidiary of Best Buy Co. Inc., also owns Future Shop, which it bought in 2001 for $580 million Canadian, avoiding what was expected to have been a costly knockdown battle between the two electronics giants.
Now, after sweeping into Toronto late last year with eight stores, Edmonton – with an emerging reputation as Canada’s retail playground – will become home to the next two Canadian Best Buys.
The outlets at South Edmonton Common and 17539 Stony Plain Rd. in the west end are scheduled for early April openings, with each to employ between 120 and 150 people.
They’re the first of 15 Best Buys expected to open across Canada this year as the chain grows to a level of 60 to 70 stores nationwide. After Edmonton, store No. 11 opens in London, Ont.
Meanwhile, a third Edmonton outlet is in the works for the northern sector of the city. It could be greeting its first customers by the end of the year.
Other Alberta markets, including Calgary and Red Deer, are on the radar screen, but it will be at least 2004 before stores are opened there.
“All I can say right now is that neither Calgary nor Red Deer are expected to open this year. We certainly are actively looking in the Calgary market, but Red Deer is a little bit further down the road,” said Lori DeCou, director of corporate communications for Best Buy Canada, adding it would be preferable to enter Calgary with two stores.
Best Buy is a natural fit for Edmonton, with its ample space and love for retail, said Paul Messinger, director of the Canadian Institute of Retailing and Services at the University of Alberta.
“Some people look at Edmonton as a retailer’s playground,” said Messinger. “The cost of real estate is low, consumer interest in retailing is high and people stay indoors a lot (in the winter).”
Messinger, however, questions whether the strategy to keep Best Buy and Future Shop as competing entities will work.
Future Shop, which was initially to be rebranded under the Best Buy label and switched from commissioned to non- commissioned sales staff, remains intact. It now operates as a division of Best Buy Canada and competes directly with Best Buy – in some cases across the street from each other.
“Ownership of the two store banners will bring about economies of scale,” Messinger said, “and on a logistics side they can use certain common corporate offices and departments, economizing on costs.”
But he wonders if their market niches are distinct enough. “It remains to be seen whether it will be successful. The overlap of merchandise at Best Buy and Future Shop is likely to be high.”
DeCou says there is about a 50-per-cent assortment difference between Best Buy and Future Shop stores. “This difference comes mostly in the selection (models) and number of brands with a category.”
Additionally, DeCou points to the customer experience at each banner.
“When a customer walks into a Best Buy store, it will have a noticeably different look and feel. It is a bit brighter, a bit more open, a bit bigger,” she said.
The two Edmonton Best Buys measure 36,000 sq. ft., while the average Future Shop is about 27,000 sq. ft. Best Buys will have more interactive kiosks, enabling people to interact, sample and play with the products – what it calls the fun quotient.
The experience will also differ in the way in which employees and customers interact.
A trip to Best Buy is being labelled the “grab-and-go experience” with non- commissioned sales staff readily available, but only if needed. It’s aimed at customers who know a lot about a product or have a very good idea of what they want.
A Future Shop excursion, however, translates to commissioned sales staff there to help customers with purchase decisions, from understanding products to matching them to a buyer’s needs.
Because of its commissioned structure, Future Shop will carry more higher-end brands. “The more expensive product normally has more features and benefits that require an assisted selling situation,” said DeCou.
Best Buy, meanwhile, will carry a larger selection of entertainment products, such as DVD movies, gaming and music because of their grab-and-go nature.
“I think Future Shop feels they’re not cannibalizing their own market share and believe they’re going to cut into the competition like A&B Sound and London Drugs,” said Messinger.
“Best Buy and Future Shop are American companies that will be trying to reset the way we Canadians shop,” said Wynne Powell, president of London Drugs.
“London Drugs has for years incorporated similar concepts, and as a result, customer support is very strong in these types of environments.”
American retailers bring in larger stores and greater varieties in a cost-efficient way,” said Powell. But London Drugs has been doing this for years, has loyal customers and long-term experienced and knowledgeable staff who care about their customers, he said.
“Competition is always good for the consumer, and London Drugs welcomes such competition.”
Best Buy says early results look promising.
“What we experienced in the Toronto market is that there was less cannibalization than what we expected, and we have seen strong overall market growth,” said DeCou, pointing to spots where a Best Buy is in close proximity to a Future Shop.
“Normally, when a strong competitor moves into a market, it lifts the entire market because more consumers travel to that market. The Future Shop is surviving well against the Best Buy, and there’s enough increase in the entire market that the Best Buy is finding its own customer base,” said DeCou.
