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Best Buy, Movie Gallery Use Local Acquisitions to Navigate Canada

19 Sep, 2002 By: Joan Villa

Consumer electronics retailer Best Buy and rental chain Movie Gallery have opened their first Canadian stores in individual new forays into the northern territory.

Both companies already have a base in Canada through acquisition and are using those management teams to spot choice real estate and navigate the local market. Best Buy acquired the 100-store Future Shop last year, and Movie Gallery inherited 100 Canadian Video Update stores when it took over the St. Paul, Minn.-based chain during its bankruptcy. The acquisition also included more than 200 U.S. locations, mostly in Midwestern and Eastern states.

Movie Gallery Moves In
Movie Gallery chose Princeton, British Columbia, for its first store, which opened last month with a ribbon-cutting and remote radio broadcast.

“It's a small town of 9,000 people and matches up to our strategy of going into rural and secondary markets in the United States,” explained Ted Innes, Movie Gallery SVP of marketing and sales. “We're learning about Canada because they have different holidays and different types of events and festivals. We try to take advantage of advertising aimed at those from a neighborhood marketing perspective.”

Movie Gallery is also converting the old Video Update locations -- concentrated in British Columbia and Alberta -- to its own signage and design scheme. Plus, the Canadian stores are part of a Movie Gallery marketing campaign aimed at luring back former Video Update customers lost after the bankrupt chain failed to keep up on new-release purchasing.

“When we took over those stores, we put in a lot of DVD, VHS product and games that Video Update had not bought for a long time, [and now] we are seeing rental of DVD up there as strong as in the U.S.,” Innes said. “We're way ahead of target in terms of winning customers back, with our launch primarily in weekly newspapers, direct mail and radio, to carry the message ‘Video Update is now owned and operated by Movie Gallery.’

Movie Gallery will continue to develop new locations and seek acquisitions as part of a Canadian expansion, Innes said, although the Dothan, Ala.-based chain has not revealed how many of the 150 to 200 new locations planned for next year might be opened in Canada.

Best Buy's Northern Migration
Best Buy, on the other hand, chose Toronto for its first Canadian store, slating seven more for the area and a total of 65 nationwide as part of a multiyear plan to “bring that whole Best Buy experience to Canada,” according to spokesperson Lisa Hawks.

However, Best Buy Canada Ltd., located in Burnaby, British Columbia, is utilizing Future Shop's expertise to enter the market. The two chains operate independently for merchandising and marketing but share functions such as human resources and information systems, she said.

“What we found from other people acquiring companies and going into foreign countries [is that] the lesson they learned was to use the leadership that comes from that area because they know the marketplace,” she explained.

An expansion of 10 stores this year is also underway for Future Shop, which is a cutting-edge technology store about 10,000 square feet smaller than the average 36,000-square-foot Canadian Best Buy, but with listening and game stations, home theater displays, cameras and camcorders, and plenty of music, movies and games.

“What we found when we went out and talked to consumers and did market analysis is consumers want alternative shopping experiences,” Hawks said. “Future Shop is a fun shopping experience. We hope it's an environment where people can touch and feel and play with the products.”

Hawks said Best Buy is fine-tuning its Canadian strategy before contemplating entering other international territories.

“We're really focusing on doing Canada right,” she said. “The history of other retailers would dictate to go to Canada first and then go into other countries, but first get that market where we want it to be.”

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