Future Shop of horrors

I liked the bookstore idea better.

It seemed intriguing, earlier this year, when Future Shop stuck its big, corporate nose into the uncomfortable merger talks between Chapters and Indigo. Its bid for 100 per cent of the latter’s shares never worked out, but I kept puzzling over what kind of entity we might see come out as a result. A bookstore chain that already sold multimedia products combined with an electronics retail giant — wait a minute, isn’t that called a department store? Oh right: no clothes.

Today’s announcement, that Best Buy would purchase Future Shop for some $580 million, seems like a much simpler, more appropriate arrangement from an integration standpoint. It’s a sad, sad statement, however, for the state of Canadian electronic consumer channels.

Half a dozen years ago, when the retail market was growing on the strength of Nintendo, Sony and Sega game stations, coupled with the surge of low-cost home PCs, Plesman launched a spin-off to Computer Dealer News called Computer and Entertainment Retailing (C&ER). This was not our first attempt to tackle this segment. Earlier still, we’d had a consumer publication called Home Computing and Entertainment (a great publication, I thought, but perhaps a bit ahead of its time). When C&ER was launched it seemed like the business-to-business side of retail was the place to focus on, because the channel seemed to be smaller than what customer demands dictated. By the time I arrived at Plesman in 1997, however, things had taken a turn for the worse. PCs were coming down in price to a point where it was difficult to compete. The second-home PC phenomenon which so many companies talked about failed to happen. Ad pages started slipping, then fell to a point where it made no sense to keep on trying. We folded C&ER in 1998, turning it into a CDN section called Storefront.

There’s still some life in the retail channel, but it’s becoming a less interesting story to tell as consolidation has overtaken the industry. At one point, we at least had the two-horse race of Future Shop and Computer City. I remember covering the story when Future Shop bought out its rival. I was told that the two chains would continue to thrive under their own brand names. A Future Shop executive at the time downplayed the thought of store closings, even in locations where each chain a store next to each other. Of course, it didn’t work out. This past March, Future Shop closed the five remaining Computer City stores citing lack of profits and an inability to differentiate the two brands.

When it bid for Chapters, I felt Future Shop was looking for new ways to expand its product mix and, in essence, its entire company mandate. I’m not sure that it would have worked in the long term — books are commodities, electronics are commodities, and eventually even the biggest players seem to plateau. As the failure of C&ER shows, there is sometimes little room in the high-volume segment for more than a few players. Like Litchman’s, the wonderful bookstore chain that collapsed under the weight of competitive pressure from Chapters and Indigo, it becomes increasingly difficult for independent players to maneuver in this part of the channel. If there was a place for customer relationship management (technology to cement loyalty in your client base) this is it.

It was bad enough having only one large technology retailer left in Canada. It’s worse knowing it took an American company to keep its momentum going.

sschick@plesman.com

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