With Future Shop and Target Closing, do Big Box Stores have a Future in Canada?

It turns out that big box stores are perhaps not as invincible as they seemed just a decade ago. On the morning of Saturday, March 28, Future Shop announced it would be closing all locations effective immediately, although 65 of the stores will be converted to the Best Buy banner. Many of Canada’s urbanists are gleefully writing the obituary of big box stores at the moment on twitter – and who could blame them – but I would be hesitant to make this prediction too quickly. Just look at department stores which still seem to be hanging on against all odds, and in certain cases, perhaps even recovering.

Online shopping in Canada is growing faster than individual consumer expenditures, meaning each year more sales divert to e-Commerce and fewer dollar are available for “bricks & mortar stores” (i.e. physical stores). If done right, online commerce can be far more cost efficient than physical store retailing. Walmart, for example, has 4.5 employees for every $1 million dollars in revenue. Amazon achieves the same amount of revenue with only 1.3 employees. As anyone who has stood in a Future Shop searching for product information on their smartphone can attest (either because you can’t find a sales representative, or because you don’t think they actually have a clue), its no real surprise that online shopping is killing big box consumer electronics stores.

While its fairly easy to bring consumer electronics retailing online, its not so straightforward to deliver someone eggs and milk. Costco is definitely not going anywhere anytime soon, and while Walmart isn’t doing stellar at the moment, its very far from being a Target. We recently did some research on the status of large format stores in Canada and it may be of some interest given today’s news. I should caution that I’m sure some of this information is already out of date (for example Future Shop’s public plans prior to today were to close just 8 stores in Canada and move towards smaller format locations). Feel free to point out corrections or information on stores we have missed in the comments section.

DYING: 

Future Shop
Brand is being consolidated under Best Buy, which I should add was the original plan when they were bought out in 2001. 66 locations will close permanently, 65 will convert to Best Buy.

Best Buy
In 2013 they announced plans to close 7 Canadian stores but to open more Best Buy Mobile locations over the next three years. Looks like they have 65 for more locations now!

Target Canada
Is currently shuttering 133 stores, affecting 17,600 employees. The company had racked up over US$2-billion in losses in just two years in Canada.

Staples Canada
Recently closed 15 of 331 Canadian stores, focus will be to move towards online sales.

Rona
2014 – closed 11 unprofitable stores in Ontario and BC (Derek Dley of Canaccord Genuity of says “This to me shows that they’re just not able to compete on the big-box level with the likes of Home Depot and Lowe’s in those key markets anywhere outside of Quebec”).

Linens ‘n Things
Now online only, all stores are closed.

Grand and Toy
Now online only.

Zellers
Essentially dead, but has a couple of locations still open as a liquidator for Hudson’s Bay and Home Outfitters. Ironically, Zellers may actually outlive Target Canada.

Chapters / Indigo
Closing stores, including some flagship locations.

AT RISK: 

Movie Theatres
This is more personal speculation (and I have heard there are fewer openings than in the past) but I just can’t imagine how teenagers of the future will still want to go and sit in a movie theatre. It seems so archaic in an era of instant on-demand Netflix gratification.

EXPANDING: 

Costco
2013 – announced plan to build 25 more outlets in Canada, bringing their total to 110 locations.

Walmart Canada
Just opened 11 new supercenters across Canada. This will complete its previously announced plan for opening 35 supercenters in the region by January 2015. Total store count of 394 by February 2015, including 280 supercenters and 114 discount stores.
February 2014 – announced investment of $500 million over the year. Of the total investment, $376 million was allotted for store projects, $91 million for distribution networks to expand fresh food capability, and $31 million for e-Commerce projects.

Lowe’s Canada
Spring 2015 – will open three new stores in Alberta, Saskatchewan and Ontario. Lowe’s opened 1st store in Canada in Dec 2007; now has 37 stores in Ontario, Alberta, Saskatchewan and BC.

Canadian Tire
Still opening big box stores, but has been diversifying its retail presence by exploring smaller formats in urban locations, and expanding sports stores under the Forzani Group banner.