As sales continue to slide and shop windows sport ‘50% OFF’ signs long past Boxing Day, recession retail is not for the faint of heart. One thing is for sure, though:Canadian retailers have this country covered. The saturation of the market makes differentiation the real challenge – and for second- or third-place retailers, the hunt for a USP can be elusive. We checked in with two Canadian retailers in two very different circumstances to see how business has been, and where to go next.
SOBEYS URBAN FRESH
Stellarton, N.S.-based Sobeys is reaching out to urban shoppers with its Urban Fresh format, which tailors grocery, fresh food items and ready-made meals to a smaller basket size and high shopping frequency. With nine stores from 3,000 to 20,000 sq. ft. in Edmonton and Toronto and one more to open this summer, the banner has already evolved from Express to Urban Fresh to suggest more than speed. It’s still in the test-and-learn stage, with plans for expansion into urban centres such as Calgary. We asked CMO Belinda Youngs how the banner is fitting into the new neighbourhood.
Filling a new niche
Youngs says the new, European-style ‘urban convenience’ format – one of five in Sobeys’ portfolio, which range from full-service to rural convenience – is a response to broader trends as well as competitive advantage. ‘Food retail is fairly well saturated across the country; we’ve got square footage outpacing demand for a number of years now,’ she says. ‘Finding those ideal full-service sites is becoming harder. We need to become more relevant and meaningful to customers in respect to some of the macro trends: urbanization, smaller households, less time, environmental consciousness, health and wellness and also local sourcing.’
‘We now have vast numbers of people living in condos in dense areas, so it makes sense. At the same time, the people shopping at the traditional markets are going there less frequently but are spending more. It’s a sell-off.’ -John Williams, J.C. Williams Group
‘Sobeys has created an experience for a subset of their consumer base. Its design reflects the needs of the city dweller. The attention to detail is the key here. Produce is displayed like in a market. They offer smaller portion sizes, meals-to-go options, higher end finishings, street access.’ -Jill Nykoliation, Juniper Park
In the mix
Finding the right assortment of brands in a smaller footprint store is a challenge, and the offering varies according to the neighbourhood, says Youngs. The stores work on a logistics model that allows for single-unit picks – crucial when there’s no room for pallets. It also leaves less room for house brands, which other grocers are promoting vigorously. ‘We take a slightly different approach to our competition,’ she says. ‘It’s not our job to limit choice for our customers; it’s more important that, rather than choosing from three different orange juices, I have a choice of three different flavours. In these stores we don’t carry the entry price-point value brand as much, because customers are looking more for convenience, choice and meal solutions and less for cheap functional products.’
‘If they start to move their private label aggressively into that format, then the number of SKU facings available for breadth of brands is going to reduce even more, so I think that’s going to be an interesting challenge for them.’ -Chris Lund, Perennial
But what about the you-know-what?
With its high-end stock position and high margins to cover higher rent costs, Urban Fresh depends on a shopper who has been willing to pay more – at least until the recession reared its ugly head. However, Youngs is confident that they will keep coming back – and so far, the StatsCan numbers support it, with food-and-beverage sales rising 0.5% in November. ‘Globally, when you look at food retail, discount and convenience are the two single biggest growth formats,’ she says. ‘People have less disposable income and are being more careful, but at the same time, people eat out less often and centre their activities much more around the home. So there’s opportunity and there’s challenge.’
‘Our research says there was a segment, about 25% of the population, that was willing to pay for convenience. My guess is that has drifted way down now.’ -Williams
‘As much as I would give Sobeys credit for having the courage to go there first, everybody’s going to follow. We’re starting to see it now with unique banners, but the big boys will come to play in this market as well. So they’ve got some work to do on clarifying their positioning.’ -Lund
ZELLERS
The 78-year-old Zellers banner has been undergoing a massive reorganization after it was purchased in the sale of Hbc to NRDC Equity Partners last summer. Former Loblaw president Mark Foote stepped in as president and CEO, luring Pat Wilkinson back from Home Depot HQ in Atlanta to join his team as VP marketing in January. So what shape will the new Zellers take? According to Wilkinson, the first stock and assortment adjustments will be visible on shelves in the next 90 to 120 days, with a longer makeover timeline of one year to 18 months. We asked her how.
Identity crisis
It isn’t easy to delineate Zellers’ USP. ‘I would argue that we’ve gotten to the place that says there isn’t one,’ says Wilkinson, two weeks into the job. ‘Everybody knows that we have a lot of stuff. What we haven’t done is create that reason yet for them to say, ‘I’m going to go to Zellers instead of somewhere else.’ We need to create a distinct pricing strategy, a distinct merchandise offering, and we need to be really clear about who our core customer is and then the secondary customers around that. But the answer is that I don’t have the answer to that yet.’
‘How do you have a store that clearly conveys value and competitive pricing and, at the same time, offers a more inviting shopping experience than Walmart and the Great Canadian Superstore? At this point, they’re always going to be a number two player. It’s easy to say they should become Target – I’m not sure our marketplace is that sophisticated. But they can’t be Walmart, because they’ve got it all.’ -Williams
‘Some of them have restaurants inside them. They could be great little diners, especially if there was a relationship between the restaurant and the grocery offer inside the store. Their fashion is not Holt Renfrew, but they could be unique and better than Walmart’s. Their food effort could be great. I would take the Truly brand, which has some exceptional products both in value and quality, and leverage it.’ -Lund
A store is a store is a store
One challenge for Zellers has been around its lack of a consistent store experience, both in terms of merchandise and design. Wilkinson says finding the optimum layout – part of the current redesign – is a delicate balance. ‘We have 280 stores,’ she says. ‘It’s probably not realistic to say that every one of them is going to be cookie cutter – and I would argue, nor should they be. But we do have different formats, and those different formats work in different communities, so part of the important thing is making sure that we’re meeting the needs of that community, not just because it’s easier for us to do a layout and a planogram.’
‘They could design their stores in a way that made people feel like ‘I’m getting great value but I’m not shopping in a dungeon.’ The floors always look dirty not because they are dirty, but because the lighting fixtures are all off. They don’t light their fashion in a way that celebrates it from a visual merchandising point of view.’ -Lund
Know thy customer
An important caveat is to remember the consumer who has remained loyal to Zellers – the mom demo and up. ‘We need to make sure that whatever we do isn’t alienating that broad base, because in many communities, Zellers is the major destination,’ says Wilkinson. ‘From a merchandise assortment [point of view], we need to be focused on Canadian families: everyday family needs will be our sweet spot, and that includes grannies and teens.’
‘They’re not going to be for everybody, but they could say to their consumer set, ‘We offer a lot more and you haven’t given us credit for it. Now we’re going to celebrate it and show it off.’ In the short term, I think Zellers can become a rocket ship just by doing that.’ -Lund
CATEGORY Rx
‘Canada is getting a lot more sophisticated with respect to its retail impressions. Over the last decade, [Perennial client] Loblaw were the first ones to say, ‘We’re not just going to be tactical merchants that run warehouses for consumer brands. There’s a store brand here, and our store brand is going to differentiate us from our competitors in the marketplace.’ We’re a huge country with only 34 million people. Canada is a very tough place to be a retailer, and so if you’re a successful retailer in Canada you have to be a great retailer.’ -Chris Lund, Perennial
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