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Consumers Distributing

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Consumers Distributing
Company typeSubsidiary
IndustryCatalogue store
Founded1957
FounderJack Stupp
Defunct1996
FateBankruptcy
Headquarters
6303 Airport Road
Mississauga, Ontario
,
Canada
Number of locations
219 (Canada)
153 (United States)
Key people
Jack Stupp (CEO,1957–1986)
Michael Haberman (CEO, 1986–1996)
Perry Caicco (CEO, 1996)
ProductsSeasonal goods, jewellery, appliances, kitchenware, personal care, discount furniture, electronics, toys
ParentOshawa Group (1971–1987)
Provigo (1987–1991)
Ackermans & van Haaren (1991–1996)

Consumers Distributing (known in Quebec as Distribution aux Consommateurs, and informally as Consumers) was a catalogue store in Canada and the United States and China that operated from 1957 to 1996. At its peak, the company operated 219 outlets in Canada and 153 in the United States,[1] including stores in every province in Canada and in the states of New Hampshire, Massachusetts, Connecticut, New York, New Jersey, Pennsylvania, Maryland, California and Nevada.

Consumers Distributing aimed to reduce costs for customers by stocking merchandise in a warehouse-type stocking system instead of displaying them in a costly showroom. Customers made their selections from a catalogue, filled out a form listing the items they wanted, then waited for stock staff to retrieve the items from the warehouse. The business model of Consumers Distributing has been described as "Internet shopping before the Internet".[2]

History

The first Consumers Distributing store was opened in 1957 by Jack Stupp in Toronto.[1][2] The company was taken public in 1969.[3]

Logo from 1970 to 1988

In 1971, to expand his chain store across Canada, Jack Stupp formed a joint company with Oshawa Group, valid outside of Ontario.[4] On September 15, 1971, Consumers Distributing opened its first stores outside of Ontario, with eight stores in the region of Montreal in Quebec.[5]

Logo from 1975 to 1988

In August 1972, May Department Stores became a partner in the company and in May 1975, bought a 50% stake in the American division of Consumers Distributing.[6]

In 1978, Oshawa Group sold the 50% interest it had acquired.[7]

In 1978, Consumers Distributing founded a chain of toy stores called Toy City (Toyville in Quebec).[8][9][10] From 1988 to 1991, some stores became Toy City+Consumers Distributing combination stores.[11] They closed in the mid-1990s.

In August 1978, Consumers Distributing purchased in exchange the unprofitable 70-store American chain Consumers from May Department Stores for a 24% interest in the company and in 1979, purchased the 42-store Cardinal Distributors catalogue chain from Steinberg, bringing its total store count to approximately 400 in 1981.[12][13]

In June 1983, May Department Stores sold its stake in the company for $24 million.[14]

In 1985, the Quebec-based grocery retailer Provigo purchased 20% of shares of Consumers Distributing,[15] and in August 1985, purchased a majority stake by increasing its stake in the company from 23% to 46%.[16]

In December 1985, trucks were unable to unload their merchandise because a new computerized distribution system had broken down. The company lost $29.2 million that holiday season.[16]

On February 7, 1986, Jack Stupp resigned from his position as chairman and chief executive officer, and was replaced by executive vice president and chief operating officer Michael Haberman.[1]

Logo from 1986 to 1993

From 1986 to 1988, Consumers Distributing gradually disposed of its establishments in the United States, where activities were lagging behind.[17][18][19]

In December 1987, Provigo acquired the company by purchasing the remaining shares of Consumers Distributing.[20]

In 1988, revenues topped $1-billion to reach $1.8 billion.[21][2]

In May 1990, an agreement with International Semi Tech Microelectronics to acquire the company for $165 million was terminated and Provigo faced legal action.[22][23]

In April 1991, Consumers Distributing is sold at around $190 million to a group controlled by Ackermans & van Haaren, a Belgian holding company.[17]

By 1995, revenues had declined to $580 million.[24][21]

In the 1990s, Consumers Distributing struggled to compete with Zellers then Walmart Canada. On July 29, 1996, Consumers Distributing filed for protection from its creditors under the Companies' Creditors Arrangement Act.[25][24] On August 2, 1996, Consumers Distributing, which owed nearly $250 million in debt, laid off half of the 210 employees at its head office.[26] On August 9, 1996, Consumers Distributing announced the closure of 129 of its 219 stores, including all of its branches outside of Ontario and Quebec.[27][28] On August 21, 1996, the Ontario justice approved agreements of stock liquidation which was to start on August 23, 1996, and of printing for three million catalogues at cost of $3.8 million resulting from a two-year contract extension until 2001, that Consumers Distributing had respectively concluded with the Hilco/Great American group and the Quebecor printing companies.[29] In August 1996, a group of former Consumers Distributing executives led by president Michael Haberman offered to buy the company for approximately $75 million.[30] In September 1996, four potential new buyers were in the running to acquire the company, two Canadian groups and two other American.[30] Liquidation sales added to regular sales reduced the amount that Consumers Distributing owed to banking institutions to $46 million.[31] In October 1996, Consumers Distributing went to bankruptcy and liquidated its remaining stores from October 16, 1996.[32]

Ten years following the bankruptcy, former Consumers Distributing employee Marc King relaunched the company as an online retailer. The new Consumers Distributing website operated in the run up to the 2012 holiday season, taking orders for furniture and brand-name electronics, but the site was shuttered in January 2013, and King was accused of owing back wages to employees.[2] In May 2015, the company was issued a compliance order by Consumer Protection BC for deceptive acts and practices and for failing to issue refunds.[33] The regulator reopened the investigation in October 2016 when it received a new complaint, noting that the company still had not paid penalties from the prior investigation.[34]

Store format

The main focus of the retailer was jewellery, appliances, kitchenware, toys, personal care, discount furniture, electronics and seasonal goods. The retail store layout consisted of a series of glass cabinets that displayed merchandise. Customers were for the most part required to select their products from catalogues that were located throughout the store, filling out a request form for the item they desired. This form was given to a store clerk and processed for fulfilment, with the goods stored in non-public space in a warehouse system stock area, behind the counters.

There were two main catalogue launches per year, with seasonal mini-catalogues issued more frequently to highlight certain items. The entire line changed twice a year with few exceptions. New items were introduced only with a new catalogue. A few specialty lines, such as batteries, film and some jewellery lines on counter racks, and were not found in the catalogue. Photo processing was another service available in many stores.

Business model issues and attempts to address them

Consumers Distributing was plagued by the perception that items were frequently out of stock due to the catalogue shopping nature of the store.[24] With the catalogue concept, the customer selected the item either at home while looking through the company's catalogue, or by a group of catalogues in the showroom of every store. It was not uncommon for a customer to wait in line only to be told by a clerk that the merchandise was not in stock.[21] In 1984, a concept called the Flashboard was introduced. The Flashboard was a steel bulletin board with magnetic catalogue numbers for out of stock items. Customers were able to look at the Flashboard for their item and if it was listed, they knew that it was out of stock and they did not have to wait in line. This concept was used in some New York and New Jersey stores before computerization became mainstream.

Consumers Distributing undertook several initiatives to dispel this out-of-stock perception, including superstores that had all of the in-stock products on display, and free home delivery or store to store transfer for items that were not in stock. It also implemented a state-of-the-art inventory system that could check the availability of other stores in real time, and also would suggest alternate products at the store which were in stock.

Consumers Distributing was one of the first to implement real-time stock checking and prepayment for products available at other branches and the main warehouse. These initiatives, including the superstores expansion, costly free delivery, and costly new inventory management software, overextended the company.[24]

High operating expenses, increasing competition, changing retailing trends (such as warehouse format stores), deflation in several product categories (jewellery and electronics), a deep lingering recession and the expansion of Walmart into Canada all contributed to the company's bankruptcy in 1996.

Competitors and similar retailers

Hudson's Bay Company, which operates Canadian department stores under The Bay and formerly Zellers names, acquired the small Shop-Rite catalogue chain in 1972 and quickly expanded it in an attempt to compete with Consumers Distributing. The chain never reached profitability, and ceased operations in 1982.[12]

American competition was mainly from the catalog showroom retail store chains Best Products (also known simply as Best) and Service Merchandise. Both Best Products and Service Merchandise ultimately declared bankruptcy and ceased operations.

Argos, which was modelled on the format of Consumers Distributing, continues to exist in the United Kingdom and the Republic of Ireland.

See also

References

  1. ^ a b c WALMSLEY, ANN (February 24, 1986). "An aggressive company changes course". Maclean's.
  2. ^ a b c d Kopun, Francine (January 11, 2013). "Woes hit reborn Consumers Distributing". Toronto Star.
  3. ^ "Consumers Distributing 1984 Annual Report" (PDF). McGill Library. May 8, 1985.
  4. ^ "Consumers Distributing aura dix "magasins" au Québec" (PDF). BAnQ (in French). La Presse. May 7, 1971. p. C1.
  5. ^ "Un nouveau style de magasinage: Distribution aux Consommateurs" (PDF). BAnQ (in French). La Presse. September 7, 1971. p. A17.
  6. ^ "Consumers Distributing ANNUAL REPORT 1975" (PDF). McGill Library. May 28, 1976.
  7. ^ "History of THE OSHAWA GROUP LIMITED". FundingUniverse.
  8. ^ "Consumers Distributing Annual Report 1983" (PDF). McGill Library. June 6, 1984.
  9. ^ "Consumers Distributing Annual Report 1985" (PDF). McGill Library. March 27, 1986.
  10. ^ SALTER, MICHAEL (December 15, 1986). "BIG STORES, BIGGER SAIES". Maclean's.
  11. ^ "1988 Christmas Consumers Distributing". YouTube.
  12. ^ a b "600 to lose jobs as Bay closes Shop-Rite stores". Ottawa Citizen. November 18, 1981.
  13. ^ RECKERT, CLARE M. (March 22, 1979). "EARNINGS". The New York Times.
  14. ^ "May Sells Stake". The New York Times. The Associated Press. June 29, 1983.
  15. ^ "Distribution aux Consommateurs fait son entrée chez Provigo" (PDF). BAnQ (in French). La Presse. March 4, 1986. p. D4.
  16. ^ a b SHORTELL, ANN (December 7, 1987). "Hidden costs of takeovers". Maclean's.
  17. ^ a b "Provigo a vendu Distribution aux consommateurs" (PDF). BAnQ (in French). La Presse. April 18, 1991. p. D5.
  18. ^ "Provigo acquiert un autre bloc de Distribution aux consommateurs" (PDF). BAnQ (in French). La Presse. May 10, 1986. p. H4.
  19. ^ "Provigo tente d'acheter Steinberg à rabais, mais garde confiance" (PDF). BAnQ (in French). La Presse. April 6, 1988. p. E1.
  20. ^ "Western Libraries - Historical Annual Reports - CH-CZ". University of Western Ontario.
  21. ^ a b c Tiffany, Paul; Peterson, Steven D.; Wagner, Nada; Epstein, Lita; Laurin, Cecile (December 12, 2012). Small Business for Canadians Bundle For Dummies Business: Business Plans For Dummies & Bookkeeping For Dummies. John Wiley & Sons.
  22. ^ "BRIEFS". The New York Times. May 1, 1990.
  23. ^ "Semi-tech fait volte-face : DAC coûte trop cher" (PDF). BAnQ (in French). La Presse. May 1, 1990. p. C1.
  24. ^ a b c d ESTOK, DAVID (August 12, 1996). "Trouble in store". Maclean's.
  25. ^ "Shares Edge Lower". The Wall Street Journal. July 30, 1996.
  26. ^ "DAC licencie la moitié des employés de son siège social" (PDF). BAnQ (in French). La Presse. August 3, 1996. p. E2.
  27. ^ "Consumers Distributing closes the book on catalogue shopping". CBC News. August 9, 1996. Retrieved August 10, 2017.
  28. ^ "DAC ferme 129 magasins mais consolide sa position au Québec" (PDF). BAnQ (in French). La Presse. August 10, 1996. p. E10.
  29. ^ "DAC s'entend avec Quebecor" (PDF). BAnQ (in French). La Presse. August 22, 1996. p. B4.
  30. ^ a b "Quatre nouveaux acheteurs potentiels s'intéressent à Distribution aux consommateurs" (PDF). BAnQ (in French). La Presse. September 4, 1996. p. D7.
  31. ^ "Les banques forcent la faillite de DAC" (PDF). BAnQ (in French). La Presse. September 7, 1996. p. F4.
  32. ^ "Vente de faillite de Distribution aux consommateurs" (PDF). BAnQ (in French). La Presse. October 15, 1996. p. D8.
  33. ^ "Vancouver, BC business faces compliance order, administrative penalty from Consumer Protection BC". Consumer Protection BC. May 27, 2015. Archived from the original on April 28, 2019. Retrieved August 29, 2021.
  34. ^ "Consumer Protection BC reopens investigation; impacted consumers asked to come forward". Consumer Protection BC. October 31, 2016. Archived from the original on April 30, 2019. Retrieved August 29, 2021.
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