Mega stays the course
Will compete with Cantrex-Sears
Michael Knell -- Furniture Today, April 1, 2005
SASKATOON, Saskatchewan — Mega Group intends to stay the course in a retail environment that’s bound to be roiled in coming months as Sears Canada prepares to acquire Cantrex Group, Mega’s major competitor and Canada’s No. 2 furniture buying and marketing group.
“It really doesn’t change our plans,” said Mega President and CEO Michael Graydon of the pending deal. “We are member owned and we’re large enough now that we can offer the same services they can.” With 340 furniture members operating 390 stores, and retail furniture and bedding sales of C$400 million at the end of 2003, Mega is Canada’s largest furniture buying group, a position Cantrex had held for at least a decade.In coming weeks, Sears Canada is expected to receive regulatory approval to acquire Montreal-based Cantrex from a Canadian subsidiary of GE Capital Corp.The acquisition, Graydon said, is just the latest move in a constantly changing and complex retail environment.
The Brick’s purchase of United Furniture Warehouse and subsequent entry into the Quebec market in 2004, and the emergence of big retailers such as Wal-Mart and Loblaws as furniture merchants are of equal concern to Mega management, he said.Since Sears Canada announced its intention to buy Cantrex, Mega has sought to recruit Cantrex members, something Graydon described as the normal course of business.“Four years ago, Cantrex took a run at our business in much the same way, so this is nothing really new,” he said. “But we felt this was an opportunity to communicate with other independent retailers. Our message appealed to a number of them and we’ve had some success in bringing a few people over.”Historically, competition among Canada’s buying groups for members has been fierce, and has become more so in recent years as the number of independent retailers has declined.Graydon doesn’t expect a major exodus from Cantrex, at least in the short term, and said current Cantrex members shouldn’t make a hasty decision. “I don’t want to see any jump just for the sake of doing so,” he said. “I would encourage every independent retailer to make the decision that’s in the best interest of his retail business.”
The ownership change will do nothing to minimize the major differences between Cantrex and Mega, he said. Cantrex is a fee-for-services business. “One of the things that continues to resonate is that, because we are member owned, there really is a different culture here,” Graydon said, citing the differences as particularly noticeable in areas such as open account financing. “We take a business development approach rather than a lender approach,” he said. “And in (Mega) group, the profitability flows back to the members, while in the other it flows into the pockets of your competitor,” Graydon added, referring to Cantrex when and if it becomes owned by Sears Canada, this country’s No. 2 furniture retailer.
Mega’s response to changes in the furniture retailing landscape has been an increasing emphasis on the development of retail systems, a more disciplined take on the traditional buying group banner. Countrywide and Multi-Meubles are the current mainstays of Mega’s Retail Systems Group, which is based in Boucherville, Quebec, under the leadership of Vice President Benoit Simard.
“It has its own leadership; it has its own budget,” Graydon said, adding the group now has 70 stores operating across the country. “Countrywide has done an amazing job. They’ve been achieving 6% to 8% same-store sales growth every year, with corresponding improvements in profitability, because of the program.”Countrywide, a full-line furniture retailer focused on midrange price points, operates throughout Ontario, western and Atlantic Canada. Multi-Meubles is its French-speaking counterpart serving Quebec and New Brunswick. About 18 months ago, Mega rolled out Sleep Experience, its specialty sleep shop. There now are 15 stores in operation, with more to come. Mega also is hard at work developing a retail system for independent appliance retailers.The success of Countrywide has convinced Mega management that systems are the key for smaller independents. “The less systems are involved, the less profitable the store,” Graydon said. “The branded entities have the systems in place.”Mega’s first priority is to enhance the banner systems and broaden the networks. With a total of 440 members, Mega’s growth potential is considerable, he said.“Our priority is to get our distribution and logistics to the next level of operational excellence,” Graydon said. “And to find new opportunities to enhance supplier value by leveraging the strengths we bring to the table.”Mega already has a private-label bedding line and is developing a private-label furniture collection, while grappling with the complexities of sourcing product in Asia. “We are making the logistics work,” he said.
The combination of systems and culture will secure Mega’s position as Canada’s largest furniture buying group, Graydon believes.
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Mega stays the course
Apr 10, 2005
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