Blogs & Comment

Bell's retail strategy: go to The Source

Bell announced yesterdayit was acquiring all 750 of The Source electronics retail stores in Canada.
The price was not disclosed, but you can bet Bell got a good deal. According to a Globe and Mail story, Wade Oosterman, president of Bell Mobility and the chief brand officer of Bell Canada said his company paid “considerably less” than the $334-million that Circuit City paid for the company five years ago. And you’d certainly hope so, considering the U.S.-based Circuit City, formerly the second largest electronics retailer in that country, is currently liquidating its stores under bankruptcy protection proceedings.
So what did Bell get? At first blush, not much. The Source has about 5% of the fiercely competitive electronics retail market in the country, a segment that is not immune to an economy in recession. As a shopper, I don’t have a particularly favourable impression of the odd mix of products (many of them loud and flashing) on its shelves. Why would Bell want its mobile phones, satellite and Internet services associated with that?
If you read the Globe story, the analysis from the usual suspects is scattershot: Rogers and Telus expanded their retail presences significantly in recent years, but Bell has lagged, so this is an easy way to catch up; The Source’s mall-based stores will help them reach out to women and teens; the stores’ inventory of gadgetry, electronic gewgaws, and high-profit-margin cables, are “complimentary” to Bell’s services; it gets Bell high-profile marketing space.
Perhaps all of the above is true, and taken together, bought at a discounted price, makes this strategy reasonable. But the real kicker is that The Source has a deal with Bell’s competitor, Rogers (which also owns this website and signs my pay cheques), to sell mobile phones and services. So this move takes 750 retail stores out of Rogers hands as of the end of this year. Probably not a huge loss for Rogers, given its been converting its video stores into destinations for all Rogers services, but better for Bell than letting The Source fall into Rogers’ hands.
Nevertheless, it seems strange that BCE, a company that has been persistently divesting itself of any assets that don’t directly tie into its phone, mobile, Internet or satellite services, would suddenly acquire a loud, junky electronics retailer. So I view with some skepticism Oosterman’s remark, “The Source will continue to sell the broad array of products and services that it does today. For now, perhaps. But ultimately, if this strategy is really going to pay off, I expect to see underperforming stores closed and the remaining ones overhauled.