The back page challenge

When it comes to imagining what a refurbished HBC would look like, there are a lot of questions that spring to mind. Mainly, is a mid-market department store chain even viable? We decided to ask the retail experts at Toronto-based consultancy J.C. Williams Group, led by founder John C. Williams. Here, is his team's advice to American owner Jerry Zucker on what it will take to succeed in Canada.

When it comes to imagining what a refurbished HBC would look like, there are a lot of questions that spring to mind. Mainly, is a mid-market department store chain even viable? We decided to ask the retail experts at Toronto-based consultancy J.C. Williams Group, led by founder John C. Williams. Here, is his team’s advice to American owner Jerry Zucker on what it will take to succeed in Canada.

Jerry Zucker

Governor and CEO

Hudson’s Bay Company

Re: Whither The Bay?

Dear Governor Zucker,

You must have questions. We will try to give you answers.

How do you kick-start this great Canadian icon?

A good place to look for the answers is to start with the facts.

This is not the good old U.S. of A. We don’t have a lot of really rich people – or really poor people either. In our large cities, we are very ethnically diverse – and not just with blacks and Hispanics. The boomers are maturing and not spending much on the stuff that stores sell.

Competition is brutal. Wal-Mart, Loblaws, Zellers, and Costco have the low end of the market well served. As for the high end, well, there isn’t very much of it. The Bay can’t beat Holt Renfrew, Harry Rosen, Birks, or William Ashley at their game. So that leaves the middle, which is being aggressively attacked by world-class niche specialists that fill the malls between The Bay and Sears.

You own one heck of a lot of real estate. How will the 800,000-sq.-ft. flagship look compared to the 120,000-sq.-ft. store? Highly efficient retailers have one or two model stores. You could downsize the flagship to specialized, urban branch stores for the lucrative, core markets and then spin off excess space for their mixed-use development. The cost of effectively operating this range of store sizes is crippling.

How do you inspire 65,000 people to dedicate themselves to your vision? It has to be about something that is meaningful, that they believe in, and that will ‘fly.’ It has to be refreshing and different.

What is The Bay going to sell? The answer is easy: Canada, much like the States, is filled up with stores that sell the same thing. As consumers, our eyes glaze over as we see the same brands in all the stores. Your new store has to be a wonderland or a global marketplace of the newest, the different, and the exclusive. Why not align The Bay’s merchandise with Target or Federated for their exclusive lines, plus new items from around the world?

How do we tell consumers about your new toy? Again, it’s not with the old media. You seem to have spent $100 million on communications. What impact on brand equity, traffic, and gross margin has that had? There is no single target market segment. There are millions of reasonably well-off families that each have different shopping needs, and like to be communicated to individually. Your CRM and e-retail programs will help here.

What should The Bay’s service profile be? Well, that depends on your gross margin (should be close to 40%), which is trapped in The Bay’s ‘always on sale’ program. And that depends on your target market and merchandise mix as well as the store environment. It can’t be self-service and it can’t be super service (it will take shoppers two years to begin to appreciate it, which is too expensive). There are new service aids and e-retail strategies (e.g. web-based/online services) to give shoppers the information they want – and make a positive impact on sales. And there are business processes and IT, logistics and credit – all of which must be synchronized with every other element.

So what will the outcome of all this be? Hopefully, a new type of store that strikes a rational cord for value and an emotional cord for an exciting, new shopping experience. We are sure of one, very fundamental thing: It won’t be a traditional department store – that dog doesn’t hunt anymore.

With every best wish for success,

John Williams and your friends at J.C. Williams Group