Bell Canada: Expanding its Distribution

We have seen in previous cases that multiple distribution channels can sometimes be difficult to manage, however, they can also provide opportunities for a competitive advantage over rivals. Bell Canada recently made a purchase of The Source from Circuit City, doubling their retail presence across Canada. While this may allow the company to better compete with rivals, this could potentially be an unsuccessful venture for Bell.

This purchase will increase Bell’s presence in the retail market as a majority of Canadians live within 5km of one of the stores purchased. Since Circuit City has filed for bankruptcy, this is a cost effective manor of increasing the different places consumers can purchase Bell products. Furthermore, The Source will be operated as a subsidiary of Bell, maintaining the brand image already developed as a leading retailer of electronics. This will allow Bell to expand its product offerings from what is currently offered in its retail stores, to include audio devices, computing technologies and televisions. The Source also carries Rogers’ products including home phone, wireless and Internet devices; this contract will not be renewed with Rogers when it expires at the end of 2009. This presents an opportunity for Bell to grow its brand presence in Canada and expand into complementary electronic devices. This is without having to obtain additional industry ‘know-how’, as the management team from The Source will remain the same.

While this may appear to be a great opportunity for Bell, there are risks associated with the expansion. It will be difficult to ensure the Bell image is maintained when its products are sold through a practically autonomous entity. Bell will have to put in place internal processes to make sure that all sales people are trained appropriately on Bell products and that they treat customers in a manner that is upheld to Bell standards. In addition, advertising of this new distribution channel needs to be effective. Since The Source is keeping its name and brand, consumers may go to the stores expecting to find Rogers products and be disappointed to find they are no longer available. This could tarnish the image of The Source and prevent these consumers from returning in the future for other electronic devices. Furthermore, the particular Bell products available need to be communicated to consumers so that customers do not go to The Source expecting the service and products of that in a regular Bell retail outlet. While Bell is retaining The Source’s knowledgeable management team, Bell is entering into the sale of new products with very successful competitors during a time where consumers are decreasing their spending. Hopefully Bell will be able to learn from Circuit City’s misfortune and turn this into a profitable venture.

Overall this will give Bell the opportunity to better compete with rivals’ distribution channels and increase sales as Bell products become more readily available. It is vital, however, that Bell considers the above risks and mitigates them appropriately to minimize consumer confusion and to increase profitability.

Courtney Lerman

Sources Used:
http://technology.canoe.ca/2009/03/02/8595726-cp.html
http://www.bce.ca/en/news/releases/corp/2009/03/02/75107.html
http://www.thestar.com/Business/article/595445