Traditional brick-and-mortar stores are closing at an alarming rate.
The electronics retail market in Toronto is experiencing significant challenges. Traditional brick-and-mortar stores are closing at an alarming rate, with Canada Computers and Electronics recently shutting down its Yonge St location on June 1, 2024. The Source, once known as Radio Shack, has rebranded as Best Buy Express, shifting its focus towards small-format consumer electronics. This report explores the factors contributing to the decline of physical electronics retail stores in Toronto, the impact of the COVID-19 pandemic, consumer preferences, and the strategic adaptations required for survival in this competitive market.
Market Overview
Store Closures and Rebranding
The closure of electronic retailers in Canada is not a new trend. Future Shop, once a favourite in Canada, was acquired by Best Buy in 2001. In 2013, Best Buy closed 15 locations across Canada, affecting approximately 900 employees. In 2015, 66 Future Shop stores were completely shut down, and another 65 were converted to Best Buy stores, affecting 500 full-time and 1,000 part-time employees.
The Source, historically known as Radio Shack, was rebranded as The Source in 2005 after Bell Canada acquired it. Recently, around 70 Source stores were rebranded as Best Buy Express, focusing on consumer electronics. These stores will offer leading consumer electronics from Best Buy, protection and services by Geek Squad, and telecommunications services from Bell, Virgin Plus, and Lucky Mobile. Earlier this year, the Vaughan, Ontario-based retailer Factory Direct closed its 14 stores in the province. Therefore, the closure of Canada Computers and Electronics’ 2433 Yonge St location in Toronto is not surprising. Currently, the retailer operates 42 stores across Canada, with four remaining in Toronto (Markham, Vaughan, Downtown, and North York).
The Shift in Consumer Preferences
Based on the Consumer Insights Global survey 2024 by Statista, only 32% of respondents preferred offline shopping for electronics, indicating a significant shift towards online shopping. This trend is driven by the convenience of comparing products, prices, and features online, as well as the ability to read reviews and make informed decisions without visiting a physical store.
Factors Contributing to Market Decline
TThe pandemic accelerated the decline of brick-and-mortar electronics stores. Lockdowns and social distancing measures forced consumers to shift to online shopping. The convenience and safety of online shopping became apparent, leading to a lasting change in consumer behaviour.
Consumer Behavior and Preferences
- Analytical Buyers: Consumers prefer online shopping for its ability to provide comprehensive product information, comparisons, and reviews. Additionally, there is an abundance of international sellers, primarily from developing economies, flooding the domestic market with low-cost imports that sell directly on Amazon or other online portals. This allows consumers to purchase products at competitive prices (IBIS World, 2023).
- Tactile Shoppers: Elders and certain buyers still prefer the tactile experience of shopping in physical stores, though their numbers are dwindling.
- Big-Box Stores: Retailers like Walmart and Costco offer a one-stop shopping experience with additional services (e.g., food courts, pharmacies, salons) to attract consumers who want to combine multiple errands, including electronics purchases, in one trip. These stores provide a comprehensive shopping experience that electronics retailers struggle to match.
Strategic Adaptations for Survival
Electronics retailers must adopt smart retail models to attract customers back to physical stores. Many electronic retailers provide omnichannel integration like click-and-collect, integrating online and offline channels to provide a consistent and convenient shopping experience. They offer personalized consultations and services that cannot be easily replicated online, such as technical support, installation services, and customized product recommendations.
To further enhance the in-store experience, interactive and engaging showrooms where consumers can test and compare products before purchase using advanced technologies like augmented reality (AR) and virtual reality (VR) can be adopted.
Leveraging Partnerships
Retailers can benefit from strategic partnerships with major brands and service providers. For instance, The Source’s partnership with Bell Canada and Best Buy provides access to leading consumer electronics, protection plans, and telecommunications services, creating a competitive edge. In an online survey by Swagbucks in September 2020, around 68% of respondents out of 5000 said they prefer department stores for the varieties they offer. In the same survey, around 9% of participants responded that when it comes to big brands, they prefer to buy in the brands’ store than from a retailer. Electronics retailers can tap into this potential by partnering with major and highly desirable brands.
The electronics retail market in Toronto is undergoing a significant transformation. Traditional brick-and-mortar stores are facing immense pressure from the rise of online shopping and competition from big-box retailers. To survive and thrive, electronics retailers must adopt innovative strategies that enhance the in-store experience to navigate the challenges of the current market and attract and retain customers in a rapidly evolving market landscape.