Arts and crafts retailer battle brewing as Michaels enters Quebec market

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Arts and crafts retailer battle brewing as Michaels enters Quebec market

MONTREAL - A battle is brewing for the patronage of Quebec's arts and crafts shopper as North American giant Michaels prepares to enter the province Friday with the simultaneous opening of seven stores.

The move by the Texas-based retailer will put it in closer competition with Walmart and homegrown DeSerres, which has 18 locations in the province and 27 across Canada.

After three years of planning, Michaels will open stores in suburban locations in Gatineau, LaSalle, Lachenaie, St-Jean-sur-Richelieu, St-Jerome, Vaudreuil-Dorion, and Laval.

The move comes 17 years after it expanded into English Canada.

"We wanted to make sure we were 100 per cent compliant to the rules and regulations of the Quebec government and we wanted to make sure that we were going to provide an unbelievable shopping experience to our customer," Tom Making, president of Michaels Canada, said in an interview from St-Jean-sur-Richelieu.

He said Michaels translated 2.5 million words to ensure that its packaging and signage was trilingual in English, French and Spanish to service customers in Quebec and the United States.

Michaels has invested $20 million in the Quebec stores, hired 500 workers and developed a new store prototype that includes better lighting, wall graphics and wider aisles. It has also signed up four Quebec vendors to supply books, stamping and scrapbooking materials.

The Quebec stores will offer the same merchandising as its 92 other stores in Canada, but it will target the Quebec consumer with a larger yarn department, beading area and expanded framing section.

"The Quebec public is a very creative customer in crafts, in fine arts and we offer that unique shopping experience in all of our stores."

Making said the arrival of Michaels will "enhance" the market along side the 104-year-old DeSerres chain.

"We offer a different product line. Our objective is to bring a whole new crafting experience to the Quebec consumer and I think we will enhance one another."

The larger stores offer a broader selection of products such as cake decorating, beading, wedding decorations, yarn, framing and kids areas, Making said.

But DeSerres president Marc DeSerres said Michaels will only have a short-term impact on a few of its nearby stores.

"You always have to be concerned when someone with large means comes in your territory but I feel we are prepared," he said in an interview from Paris where he is shopping for new products.

"We have a different offer, we're based here, we're Canadian-owned, we know the market and we adjust our stores based on the market."

As a smaller company, DeSerres said it can bring in new products and follow trends much quicker than a company the size of Michaels.

While Michaels is strong in crafts, DeSerres said his stores excel at fine arts. They sell canvases made in Montreal, notebooks manufactured in Toronto and artist paints made in Canada.

"(Michaels is) putting themselves close to Walmart so the selection is probably close to Walmart's and they will probably compete more with Walmart and the dollar store than us."

Michaels operates more than 1,070 big box stores averaging 1,800 square metres and plans to add more stores in Quebec in the next five years.

About nine per cent of its more than US$4.2 billion of sales in fiscal 2011 came from Canada.

The stores carry more than 35,000 products. Nearly half its sales are in general products and children's crafts, according to its 2011 annual report. The rest is divided among home decor and seasonal, framed and scrapbooking goods.

Opened in 1983, it was purchased in 2006 by private equity firms Bain Capital, founded by U.S. presidential candidate Mitt Romney, and The Blackstone Group. Michaels plans to go public.

Michaels expected to open or relocate up to 50 stores this year and says the U.S. and Canadian markets can support 1,400 to 1,600 of its stores.

It is the largest arts and crafts speciality retailer within an US$33 billion market. Competition in the highly fragmented market includes small, independent retailers, along with a few regional and national chains.

Walmart and Target, which is set to open stores in Canada early next year to replace Zellers, sell high volumes but offer more limited selection of home decor, arts and crafts supplies and seasonal merchandise.

Dollarama (TSX:DOL) sells basic party decoration and arts supplies.

In its annual report, Michaels said customers choose where to shop based on store location, breadth of selection, price, quality of merchandise, availability of product, and customer service.

Michaels employs about 45,300 non-union workers, including 34,600 who are part-time and nearly 5,000 in Canada.

Note to readers: This is a corrected story. An earlier version said Michaels had 89 other stores in Canada

Organizations: Walmart, North American, Michaels Canada Bain Capital The Blackstone Group TSX

Geographic location: Quebec, Canada, MONTREAL United States Gatineau Paris Toronto

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