Future Shop feels the snowball effect of crowds in closure

Empty stores make people even more hesitant to shop there, compounding the Amazon problem.

 

future shop, best buy

I went to a comedy show recently and had an okay time. The comedians, all seasoned pros, had great material and stage presence, but truth be told, I’ve laughed harder and longer at individuals with much less polish.

There were only a handful of people in the audience at this particular show, and that smallness makes a world of difference. When it’s just a few of you, people clamp down. No one wants to be the only one laughing at a joke, because people generally don’t want to stand out. Small shows must be tough for comedians.

On the other hand, there’s something reaffirming about laughing with a big crowd. If you all chuckle at the same things, it’s reassurance that you’re not an outlier or some sort of social misfit. The reverse happens – no one wants to be the one not laughing. It’s a lot easier for comedians to get laughs, because they’re infectious.

It’s the same with shopping. I’ve caught myself a few times in a similar situation – browsing items on the shelves, picking them up, considering buying them, only to then look around and realize I’m the only one in the store. Armed with that knowledge, I can’t get out of there any faster, empty handed no less. After all, there must be something wrong with the store or its goods if no one else is there, right?

Contrast that with Apple stores. Always jammed, their success snowballs. People buy confidently, even when the stuff is high priced, because so many other people are doing it. It’s a self-feeding loop that continually delivers record profits for the company.

When I think of ghost-town stores – the sort I’d flee after absent-mindedly wandering into them – I usually picture Future Shop. In recent years, many of the stores have become cavernous, empty-feeling spaces where employees often outnumber customers. They were, in essence, that poorly attended comedy show, where the few who ventured in were afraid to laugh.

Which is why I wasn’t surprised with the news on Saturday that the chain is closing down. The Burnaby, B.C.-based company announced it was shuttering all 131 stores in Canada immediately, with about half being rebranded into Best Buy locations within a week. About 500 full-time and 1,000 part-time jobs will be cut, the company said.

The reasons for the failure are obvious – electronics, DVDs and everything else Future Shop sells have been commoditized products for some time now. Amazon and other online retailers that don’t have high bricks-and-mortar costs have been able to move such goods more cheaply and efficiently, putting major pressure on physical world retailers.

If there’s anything surprising about the closure, it’s how long Future Shop was able to forestall it. It’s about a decade overdue, by my estimation.

Rather than compete against Best Buy when it expanded into Canada, the chain chose to sell out to the U.S. retailing giant in 2001 for $580 million. It was a smart move because Canadian retailers don’t tend to fare well against larger U.S. companies and their superior marketing muscle.

More importantly, Best Buy had more stores and therefore more scale – it could buy and sell products more cheaply because it moved them in larger volumes. In the low-margin business of electronics hardware, the ability to sell large volumes is all-important.

The smart money would have had Future Shop going under many years ago, had it chosen to compete against Best Buy instead.

The bigger question, then, might be why the parent company kept Future Shop going for so long. The two chains’ stores were often located in close proximity to each other, usually selling the exact same things at the exact same prices. There was little to tell them apart, other than slight differences in how sales staff dealt with customers.

The issue now is how long Best Buy can survive. The Minnesota-based chain has been feeling the Amazon pinch for some time, although it has managed to recently halt the slide of previous years with a strategy that hinges on matching online pricing and training staff in the various gadgetry they sell.

There’s doubt this plan will pan out in the long run, despite recent modest upticks in sales, because of the seeming incongruity of it. As some commentators have pointed out, it doesn’t make a lot of sense to spend more on employee training and cut prices at the same time. Doing so creates a pinch at both ends.

Like a sparsely attended comedy show, there’s little joy in that.

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