Best Buy is riding high and heading West.
After gaining a foothold in Western Canada in 2003, with the opening of three stores in Edmonton and two in Winnipeg, the North American specialty retailer of consumer electronics, personal computers and entertainment software is setting its sights on both the Calgary and Vancouver markets.
Alberta, which became the second province to get Best Buy stores after Ontario, will see the addition of two new Best Buy outlets in Calgary in 2004 while the Greater Vancouver region will also get its first and possibly a second before the end of the year.
Best Buy Canada Ltd., a wholly owned subsidiary of Minneapolis, Minn.-based Best Buy Co., Inc., will focus its 2004 expansion plans on entering these two metropolitan regions along with beefing up its Ontario presence, where the company operates 14 stores – eight in the Greater Toronto area.
"Our new key markets are Calgary and Vancouver," said Lori DeCou, Best Buy Canada's director of corporate communications. "There are no plans to move into Quebec yet or Atlantic Canada, they are not on the radar for this year."
Deeper penetration into Western Canada had been delayed in part by the need to find the right real estate. It was also slowed by limitations on how many stores the company could open at one time, given that it is also expanding the Future Shop chain, which it purchased in August 2001 for $580 million Cdn.
"We can only open so many stores a year from a sheer
volume capacity," said DeCou, who pointed to the fact that there were no Best Buy stores in Canada until late 2002. "We opened nine (Best Buy) stores in the first year and 11 last year, and we're still opening Future Shops as well."
As Best Buy heads to a total store count of between 60 to 70 for the Canadian marketplace, the objective is to open eight
to 12 new storefronts this year along with three to five
additional Future Shops.
"From a resource base that's the level we can keep pace with," said DeCou, "and it's been really rapid. Four years ago in May we had 80 Future Shops, today we have 127 stores – 108 Future Shops and 19 Best Buys. We've opened 47 stores in four years."
Best Buy Canada Ltd.'s American parent is coming off a strong December with a 19-per-cent increase in revenue, for a total of $4.64 billion US.
But its international operations, composed of Canada's 108 Future Shops, 19 Best Buys and futureshop.ca, posted an even stronger revenue gain, at 22 per cent, as compared to the previous December. December 2003 revenue totals were $664.9 million Canadian.
Comparable store sales gains came in at 6.5 per cent.
In Calgary, the city's first Best Buy will open in late spring or early summer in the Sunridge Power Centre in the northeast sector. A second location is anticipated to be operational for the 2004 holiday season, this one in the Deerfoot Meadows Power Centre in the southeast.
"It's always a challenge in an established retail market like Calgary, and when you're looking for a big-box format like Best Buy, you need to ensure that you find the right location," said DeCou.
Calgary real-estate professionals, meanwhile, expect Best Buy will eventually add another two stores to the city's retail landscape, with one in the northwest and another in the southeast.
Best Buy Canada stores, which are typically 30,000 sq. ft. or 36,000 sq. ft., employ between 100 to 130 staff members depending on the size of the location. These new stores also include a TechZONE feature, a section with interactive learning pods and dynamic displays that are designed to help customers understand how the latest technology fits together and can enhance their lifestyle.
Product selection, once movies, gaming and software are taken out of the mix, will be about 60 per cent different than what customers will find at Future Shop. Best Buy sales staff are non-commissioned, while Future Shop retains its commissioned sales force model.
In markets such as Edmonton or Toronto, where Best Buy and Future Shop compete with each other and the competition, both brands are thriving, according to company officials.
"The cannibalization of the Future Shop store is less than what we anticipated and offset by the overall growth from adding a second brand," said DeCou.
For retail analyst John Williams, a senior partner and founder of the Toronto-based J.C. Williams Group, the fact that Best Buy has increased its market share in Canada is not surprising.
"They raised the bar and just heated up the competitive fire," said Williams.
"They've recently been ranked as one of the best-managed retail companies in the U.S.A. They're a very skilled and professional retailer. Now instead of having one big-box category killer in that segment, they're having two going at each other and the competition."
While he said that some of the competitors might be taking a hit, "it's a good thing for everybody that electronics and digital (products) are one of the brightest spots on the Canadian retail scene."
"This expansion of stores comes at a time when that segment is rapidly expanding, meaning there is less damage to the competitors and it's better for consumers," he added.
