Blurring the boundaries

Will retail expansion confuse consumers? Analysts don't think so

Mac’s Milk now carries M+M Meats. Canadian Tire has Mark’s Work Wearhouse and Budget Rent-a-Car. Canada Post sells gifts and Loblaws sells everything – just like Wal-Mart. And the trend is growing. As John Torella, senior partner and retail consultant at Toronto-based J.C. Williams Group, puts it: ‘Everybody is in everybody else’s business and nobody is protected.’

More and more, retailers are trying to expand their businesses to get extra dollars out of finicky customers. The question is: how do you add products and services without blurring your brand in the mind of the consumer?

‘Communication is critical – internal and external,’ says Torella. He points to Loblaws as an example of a company that has ‘consistently made a large investment in communications. For them, it’s not a question of keeping the brand intact. It’s a question of evolving it. When you look at the television support of President’s Choice, it’s a major commitment and that’s served them well.’

Loblaws is now the third-largest retailer of kids’ clothes in Canada. In the past two years the company has transcended its traditional grocery offerings by moving into clothing, soft home goods, cosmetics, office supplies and electronics, living up to its tagline in Quebec: ‘C’est bon d’en avoir plus.’

The Loblaws strategy is a smart one. Like Wal-Mart, it wants to provide the best possible assortment for potential customers at each location. According to Geoff Wilson, VP, industry and industrial relations at Toronto HQ, ‘every new product line is serving a demand.’ That allows the company to focus mainly on in-store advertising and merchandising, as it is now doing with the roll-out of PC Maison, the President’s Choice home label designed by Joe Mimram of Club Monaco fame.

Torella thinks that will work. ‘The perception of Loblaws hasn’t changed – it’s evolved,’ he stresses. ‘Its message is about value, which is that balance between quality and price. And after that comes a focus on what’s new and interesting and unique. It all comes together in the retail environment where the shopping experience is not only worthwhile, but also enjoyable.’

In fact, Torella thinks it takes a lot of confusion out of the marketplace. ‘If you’ve got confidence in the Loblaws brand and its President’s Choice brand, it saves you time and effort. It adds a lot of trust, and that’s one of the cornerstones of retail.’

‘The key element is complementarity,’ says Len Kubas of Toronto’s Kubas Consulting. He agrees that Loblaws’ upsell strategy is right on target, and he thinks consumers are more than ready for it. ‘Most of the retailers that are developing multiple lines through their stores are using flyers as a principal way of communicating. When you see the picture and the price and the colour every week, it starts to create an image.’

Canadian Tire is another large retailer that’s been eyeing new territory recently. This fall, it’s planning to unveil a new store it’s calling the Concept 20/20. The stores will offer everything you find in a normal Canadian Tire store in a newer, more shopper-friendly retail design. The emphasis will be on housewares, home decor, home office products, ready-to-assemble furniture, stationery and back-to-school goods – as well as some new product areas not yet announced. The design will include less warehousing and more merchandising.

One might wonder why Canadian Tire would deliberately compete with such giants as Ikea, Business Depot, Staples, Sears Home Outlets and Home Outfitters. Torella says that the new store is less of an expansion and more of an example of ‘editing and focusing.’

‘It’s in between Wal-Mart and Home Depot,’ he says. ‘The two giants. It’s important for Canadian Tire to determine its turf and what it’s going to defend, and clarify that.’

Canadian Tire spokesperson Jennifer Sexton says that Concept 20/20 will serve as an evolution of the Canadian Tire brand – and will still reflect the needs and demands of the traditional Canadian Tire customer.

Canadian Tire’s traditionally strong branding should allow it to do that without confusing its customer. ‘Its branding campaign ['It all starts here'] is one of the best examples of retail branding out there,’ Torella says. ‘It’s an extremely established position and I think they can pay it off.’

Major retailers aren’t the only ones looking to expand their product offerings. Convenience store chain Mac’s Milk opened its first Toronto-area store featuring M+M Meat Shops at St. Clair and Yonge at the end of May.

Mac’s marketing manager Mary Georgio says the partnership is a natural extension of their brand’s goal to ‘become an essential part of the neighbourhood and meet consumer needs.’ The idea has taken off in rural areas where outlets (owned by Quebec-based Alimentation Couche-Tard and including the Becker’s and Mike’s Mart chains which are in the process of being brought under the Mac’s banner) have already added convenience partners Subway, Mr. Sub, Pizza Pizza and will be opening its first Mail Boxes Etc. this summer. One shop in Meaford, Ont. features a Liquor Control Board of Ontario store.

‘Product assortment is one of the key ways to differentiate your brand,’ says Torella. ‘Adding relevant and important products is just going to enhance the brand, but it has to be done well. What will help [Mac's] is a well-branded product and M+M Meats is well branded. You don’t have to explain it to the customer, which is key.’

Mac’s leveraged the M+M brand heavily for its first downtown opening. Subway posters at St. Clair station featured both brands. Mac’s also aired M+M radio spots and sent out 12,000 flyers to announce the new store – and the M+M specials. Mac’s cross-promotes its new service by offering a free item, like a bag of chips or a drink, from a Mac’s store with a $30 purchase from M+M Meats.

Partnering with strong brands is a deliberate strategy, says Georgio. ‘Not that we wouldn’t consider opportunities with a smaller type of retail partner, but for us, we also leverage the brand equity of the partner. Anything equal or greater to your own brand equity will strengthen it.’

Meanwhile, the company is safeguarding its existing equity with a branding campaign by Montreal agency Bos. TV ads are presently playing in eight markets across Ontario with the message, ‘Your neighborhood, your Mac’s.’

For those who still wonder if frozen meat is a good convenience store item, Georgio says this: ‘Think of how limited today’s consumer’s time is. They want to be able to take advantage of one-stop shopping. Mac’s can be an integral part of a neighbourhood and people’s daily needs.’

At a place like Loblaw’s, or even a convenience store, the shopping environment itself is also important for upselling to existing customers. ‘Once you have somebody in the store, it’s a lot easier to get them to look at purchasing something else,’ Kubas says. ‘Wal-Mart is the classic example.’ He points to London Drugs in western Canada, a full-service pharmacy that is also one of the largest distributors of cameras and computers in the west.

‘When there’s something that can be added on, it makes sense to capitalize on the core strengths of the existing retailer – including the brand image.’