👉 Background: The Reject Shop, founded in 1979, started with the plan to sell discontinued lines of products and factory rejects (hence the name) It floated on the ASX in 1994 and tripled in its market value within two years of going public. But in the past decade, The Reject Shop has struggled to find its niche in the market as it competed with the likes of Kmart, Shein and Temu.

‍👉 What happened: Now, Canadian retailer Dollarama has made an offer to acquire The Reject Shop for $259 million —  a 112% premium to its previous closing price. Dollarama is Canada's biggest retailer of items for five dollars or less, or essentially, the maple syrup-covered cousin of The Reject Shop.

‍👉 What else: The Reject Shop's board unanimously encouraged shareholders to vote in favour of the deal. If it goes through, Dollarama would add The Reject Shop to its 1,600 discount retailers in Canada and 588 discount stores in Colombia, El Salvador and Peru... because a global presence is the only way to compete in this new world of retail.

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‍What's the key learning?

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‍💡Takeovers aren’t just about the money — they’re often about scale and plain-old survival. The Reject Shop has been fighting a tough battle against both online stores like Shein and Temu and Kmart.

💡Shein and Temu are able to sidestep the traditional costs of physical stores — no rent, no wages, no electricity bills… and they offer ultra-cheap products delivered to your door. On the other hand, Kmart has managed to scale its brand globally.

💡Without a global presence or a strong online presence, The Reject Shop couldn't match the scale and efficiency of global giants. In fact, The Reject Shop’s net profit margin was just over 3% last year and that had improved compared to previous years. So, these days, brick-and-mortar stores need scale and a strong global supply chains to survive… something that The Reject Shop didn’t have alone.