Best Buy, Sears failing to compete with online market, incoming U.S. chains: Analyst
Published Friday, February 1, 2013 9:18AM EST
After two major Canadian retailers announced layoffs and store closures, one retail industry analyst says the moves signal changes coming to this country’s retail landscape.
That transformation was highlighted Thursday, when Best Buy abruptly closed 15 locations across Canada as part of “a long-term transformational strategy to optimize the company’s retail footprint across the country.”
The same day, Sears Canada announced it would be laying off 700 department stores workers as part of its own business model restructuring.
While the closures came as a surprise to employees across the country, one retail industry expert say the fallout was inevitable.
With its big-box approach to selling electronics, Best Buy emerged as a go-to store for many shoppers who wanted to compare a lot of products in one place, but retail industry analyst Doug Stephens told CTV’s Canada AM the chain has failed to compete with the ease and allure of shopping online.
“After we’ve now had a taste of Amazon and online shopping, that selection no longer seems all that phenomenal and certainly, pricing is a lot more competitive in the marketplace,” he said.
The company has been a victim of what is known as “showrooming,” a practice in which shoppers browse in-store and then buy the products online at a lower price from competitors.
The store closures north of the border mirror a similar change happening in the U.S.
Best Buy announced last March that it was closing 50 stores in the U.S. This past holiday season the company posted mediocre holiday sales.
Best Buy Canada says that, over the next 36 months, it will move into the second phase of its renewal strategy and will open Future Shop “small-concept web stores” and new Best Buy Mobile locations across Canada, where and when appropriate.
“This move will enable the company to better serve its customers in both more locations and smaller markets across the country,” it said in a statement.
Stephens said it’s unlikely Best Buy will ever be able to be the price leader in the marketplace, so they’ll have to find a new way to lead.
“It’s really up to Best Buy to redefine the whole electronics buying experience for consumers and create something that doesn’t exist right now,” Stephens said.
Stephens was less optimistic for the future of Sears, which he said has been suffering a decline in sales for years. The department store chain has seen its target consumers snatched up by bulk stores like Costco, and higher-end retailers.
“It’s the middle ground that has been having trouble for decades now,” Stephens said.
Sears had been attempting to revitalize its brand to lure back customers and to prepare for incoming U.S. discount retailers such as Target, Nordstrom and Marshall’s.
But with such change on the horizon, Sears could be beyond the point of resuscitation, Stephens said.
“It’s like turning around an aircraft carrier now that has a lot of momentum now, and it unfortunately it’s a downward momentum.”
In January, Sears announced a partnership with the Aldo Group to design and manufacture footwear lines.
With files from The Canadian Press