Canadian retailers piggyback smaller players

Some of Canada's large e-tailers are emerging as so-called 'Internet providers.' Retailers like Sears and Indigo are forging deals that enable them to broaden their online offerings - without having to make serious operational, or marketing, investments - by piggybacking smaller...

Some of Canada’s large e-tailers are emerging as so-called ‘Internet providers.’ Retailers like Sears and Indigo are forging deals that enable them to broaden their online offerings – without having to make serious operational, or marketing, investments – by piggybacking smaller Canadian cataloguers and retailers, for whom launching and operating a retail Web site may pose a real challenge.

Earlier this year, Indigo.ca acquired Cruickshank’s, a Canadian retail and mail order garden company, and has since launched Cruickshank’s@Indigo. The duo will continue to work together to integrate the garden company’s catalogue offering into Indigo.ca (Cruickshank’s management will continue to operate its retail and mail order components).

Faced with increasing competition in online music sales, Sams Online – the dot-com business of Toronto-based Sam the Record Man – was recently forced to pull the plug on its e-com venture, and is now looking for a new online partner to help run its Web site. Beyond the typical e-tail suspects, another ideal partner profile would be a complementary strong music brand with an established Web presence and a platform that extends to other media (an MTV-type entity). This brand partnering to take advantage of distribution and platform visibility synergy is a trend currently being led in the U.S. by the likes of Amazon.com, which handles the technical backup for Toys ‘R’ Us and Borders.

For its part, Sears is now handling the online business for Toronto-based Roots, starting with a Roots boutique within the Sears.ca site that will carry a small selection of Roots products. The expanded alliance comes in the wake of Sears Canada confirming last month that it is shutting down its other retail Web site, Eatons online.

Garry Smith, Sears Canada’s VP of online merchandising, believes Sears and Roots are a perfect fit. ‘Roots is a strong brand, and Sears is strong at direct mail fulfillment. Both parties work well together.’

The courtship between the two retailers blossomed a couple of years ago when Sears placed Roots products in its Christmas wish book. Since then, the relationship has continued to grow. ‘It just seemed to be a natural evolution to shift to the Web,’ says Smith.

Analysts, however, remained uninspired by the news.

‘I guess it makes sense for Roots,’ explains Maureen Atkinson, a retail consultant with the Toronto-based J.C. Williams Group. ‘It allows Roots to get online with a big player. But Sears isn’t exactly an identical fit. There isn’t the same appeal. The danger arises from who controls the brand. In this particular case: Is Roots going to be damaged by being featured on the Sears site?’

Richard Talbot, president of the Unionville, Ontario-based Talbot Consultants International, isn’t totally convinced the union makes sense either. ‘It will be interesting to see where pricing comes from,’ he says. ‘You can’t undercut Roots’ prices.’ Talbot points out it would be more impressive if Sears was the only chain to exclusively carry Roots apparel. ‘It’s not like Zellers, which is the exclusive carrier of Martha Stewart products. The problem with expanded alliances is that lines like Tommy Hilfiger are carried everywhere.’

Still, Talbot isn’t surprised that Sears would expand its Web operations in spite of the recent Eatons online woes. ‘Sears is much better positioned than other retailers because of its extensive experience in catalogue. It should therefore exploit that advantage.’

The Eatons.com disappointment is one of many problems that have plagued Sears Canada this year. The uncertain economy and setting up Eatons retail outlets all combined to create tough financial times for the retail giant, say analysts. So, it is not surprising that Sears will take no extraordinary measures to market this new joint venture. The company recently reported that it suffered a first-quarter loss of $11.2 million and plans to cut expenses of up to $100 million.

‘We will advertise in our books, flyers and in-store ads,’ Smith confirmed, adding that both firms will be promoting the Web site, but only as part of their initiatives to promote the Internet presence in general. ‘For example, Sears will use existing advertising, such as catalogues and retail flyers, to talk about Roots as one of the reasons to shop Sears.ca. You will not see any large and/or dedicated campaigns to support the initiative.’

Smith reveals that the company is looking at more joint online ventures – ‘we have had conversations with other companies,’ – and says he sees expanded alliances as a possible way of the future for online businesses. ‘If it makes sense for both sides, you’ll see more of them.’