North West Co. nurtures roots

It's a long way from downtown Toronto - in more ways than one....

It’s a long way from downtown Toronto – in more ways than one.

While little known in warmer climes, The North West Company is something of an institution in the remote communities of Northern Canada and Alaska that it serves.

More than 200 years old, the company is today the largest retailer in the north – and as such, faces marketing challenges that its more southerly counterparts couldn’t even begin to imagine.

"Most stores are one of dozens or hundreds in a city, and they come and go," says Edward Kennedy, president and CEO of The North West Company. "We have a long-standing relationship with the community. There’s a mutual respect and a dependency that’s grown up over the years. In many cases, both lifestyle and quality of life would change if we weren’t there. That gives us a strong sense of pride and purpose, but it also has high obligations attached."

Founded in 1783, the company started out running trading posts in competition with those of the Hudson’s Bay Company. In the early 1800s, it was acquired by its rival, and for decades afterward operated as the Northern Stores division of Hudson’s Bay. Then, in 1987 it was purchased by a group of investors and senior executives, who changed the name back to The North West Company.

In all, the company operates more than 170 stores, under a number of different banners: Northern, NorthMart and Quickstop (in Northern Canada), as well as AC Value Center and AC Express Center (in Alaska). The stores, most of which offer food and other everyday basics, along with general merchandise and apparel, are located across the north – many in towns with as few as 300 people.

The North West Company also sells through direct channels, including in-store kiosks, a catalogue (Selections) and the Web. Sales last year totaled $650 million.

Kennedy, who was himself a Northern store customer while growing up in The Pas, Man., says the company’s customer base consists of three major segments: necessity or impulse shoppers; low-income customers seeking strong selection; and high-income customers, who tend to be short-term residents working in the North on a contract basis. More than half of its customers are under the age of 20, which means a considerable potential for future growth.

While the company employs conventional forms of retail advertising, such as weekly and monthly circulars, it isn’t always easy to ensure that the advertised product is actually in stock. Transportation to many northern communities is difficult at best, forcing the company to operate on longer lead times than most mainstream retailers would find acceptable.

"It can take six weeks to get product to some stores – and that’s working efficiently," Kennedy says. "In smaller communities, some stores get their freight by road, then by rail, then by ship or plane. Some people describe us as a logistics company as much as a retailer."

At the core of The North West Company’s marketing philosophy is a sense of responsibility to the community. Grassroots activities such as funding hockey schools, donating much-needed items to community organizations, distributing Christmas gift bags to households and sponsoring elders’ feasts or other special events are crucial to building and maintaining the retailer’s image.

"We have this long-term relationship with customers," Kennedy says. "To keep it alive, we give our store managers a lot of flexibility [when it comes to developing] community relationships and sponsorships."

The company does have rivals at the local level – usually co-op stores, or franchise operations like Home Hardware or IGA. But Kennedy says the real competition lies outside the community: It comes from those retailers that allow people to shop via telephone or Internet – and from those that northern residents may happen to visit on excursions southward.

"There is a large increase in people’s awareness of shopping options," he says.

Plans for the near future include beefing up The North West Company’s direct channels. Kennedy says the company is also hoping to broaden its current offerings, primarily through partnerships with other retailers.

The company’s Quickstop stores already have alliances with KFC and Pizza Hut. There are also some retailers from the south who sell through the Selections catalogue, and the company is hoping to develop more such partnerships, notably in the areas of clothing and consumer electronics.

"We have the locations, the in-depth customer database and the logistics to bring an assortment of merchandise from the south to customers in the north," Kennedy says. "We’ve got a real offer that allows us to go beyond food and everyday basics. It’s about giving people the ultimate choice."

Also in this report:

- Harry gets hip with casual campaign: Upscale retailer makes a play for younger, "new economy" business executives p.24

- POP progress slow but sure: With the promise of credible data, point-of-purchase is poised to prove its worth as a medium p.25

- Interactive merchandising on the rise: Just one of several trends apparent at GlobalShop 2000 show in Chicago p.25

- Traditional retailers can thrive in online world p.27

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