Who wants to take on dozens of leases for store spaces in shopping malls right now? The same person who bought a chain of CD stores in the middle of the digital music revolution.
Sunrise Records owner Doug Putman has scooped up 45 leases for stores recently vacated by insolvent beverage chain DavidsTea, and plans to launch his own chain called T. Kettle across Canada and in the United States. Stores will begin opening in the next five to 10 days, starting with the first location in Toronto’s Yorkdale Mall.
“We’ve done this before,” Mr. Putman said in an interview, describing how the team has scrambled to change stores’ colour schemes and fixtures in recent weeks.
Mr. Putman’s parents founded the game and toy distributor Everest Toys in the 1990s, and have invested in other businesses over the years. In 2014, he bought five Sunrise Records stores, and then in 2017 expanded to 70 locations with the purchase of the bankrupt HMV retail business in Canada. The chain has since expanded to 84 Sunrise stores, and Mr. Putman has also bought the HMV chain in the United Kingdom – which closed some locations – and FYE entertainment stores in the U.S. The shops have changed to focus more heavily on vinyl records, T-shirts and other ancillary products related to music and entertainment.
“It’s crazy times,” Mr. Putman said of operating mall-based businesses during a global pandemic that has been devastating for the retail industry. Malls that have reopened have seen foot traffic decrease significantly. But he believes T. Kettle and Sunrise have an advantage. “We have one owner, which is me. We have no debt, no bank financing. That makes it easier to navigate through this.”
The crisis has sent a number of Canadian retailers into creditor protection as they attempt to restructure or sell the businesses. That has meant a rise in storefront vacancies. Shopping mall staple Le Château announced last week that it would be closing down all of its stores in Canada after 60 years in business. DavidsTea had 222 stores in the U.S. and Canada when it obtained creditor protection in the summer. It has now closed all but 18 of those locations.
Mr. Putman began speaking with landlords and suppliers in the summer shortly after DavidsTea announced the closings. Many of the locations he has secured are owned by landlords who also work with Sunrise Records. While Mr. Putman would not say how much of a discount is available from landlords looking to fill vacant spaces, he said they have been willing to work with retailers to keep businesses going. He is hoping to expand T. Kettle to more than 100 stores. He has also hired some former DavidsTea store staff.
Tea consumption has been growing by 7 per cent to 8 per cent annually in Canada in recent years, but is still a small market, said Robert Carter, an industry adviser with consultancy the StratonHunter Group. There are roughly 400 million out-of-home servings of tea each year in Canada compared with roughly three billion coffee servings.
“To come in and take on bricks and mortar with the majority of locations in malls, with declining mall traffic, it’s going to be a challenge,” Mr. Carter said. “There is opportunity to carve out a niche, but you’ve got brands like DavidsTea and Teavana who have tried to do this. … I just don’t think there’s the volume of consumption.”
The T. Kettle stores will be opening during the busy holiday shopping season, though the chain is still working on setting up an e-commerce business.
“I don’t believe brick and mortar goes away,” Mr. Putman said. “We’re going to see more challenging times. Christmas is obviously important. If there happens to be a lockdown between now and Christmas, all bets are off – you’re handing the keys to Walmart and Amazon. … It’s going to be a tough recovery. But there are going to be some opportunities.”
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.