This article originally appeared in the Spring 2023 issue of strategy.

Zellers is coming back to Canada. As of spring 2023, 25 store-within-a-store experiences will open in select Hudson’s Bay locations, along with the value-conscious brand’s first e-commerce platform.

At first blush – and in the short term – the store-within-a-store looks like an effective way to leverage HBC’s real estate, with each Zellers experience taking up approximately 8,000 to 10,000 square feet, depending on location. But, asks Joe Jackman, founder and CEO of Jackman, a business consultancy known for retail reinvention: “Can they carve out a meaningfully differentiated and ownable position in discount?”

Zellers owned discount for over 80 years, until the brand was forced to shut down in 2013. Ten years later, “judging by the buzz generated when they announced the move in the summer of last year,” he says, “there appears to be equity in the name and a fondness for the brand, at least with Canadians of a certain age.”

Why now? According to Jackman, “sales at discount stores are growing at twice the rate of conventional stores, so timing is spot on, and they will have a consumer tailwind while they work to re-establish the brand.”

Lisa Hutcheson, retail strategist and managing partner at J.C. Williams Group, says that while there is a legacy to leverage, “millennials and Gen Z won’t necessarily know the brand,” so nailing down the “new” Zellers audience will be pivotal.

Overall, “based on the current economic challenges, I do think there is a market for value retailers and Zellers has that history already with the consumer,” she says, noting that there is potential added value for HBC overall. “I think it could drive traffic to the HBC stores that may not otherwise visit right now. In the short-term there will likely be those that want to see the offering.”

Zellers nostalgia is real. The company has received positive feedback on social media so far.

In its efforts to build awareness around the brand’s return, and in response to significant social media buzz around what that will look like, Zellers announced that a fleet of food trucks will greet customers at some of its first location openings this spring, featuring “fan favourites” from the Zellers Family Restaurant.

“The moment is certainly right,” says Shelley Brown, CSO at FCB Canada. “People want value. They need value. They’re concerned about inflation and the impact it’s having on their households. It’s a beloved brand with a long and very strong history, so why not go for it?”

Adds Brown, “The pop-up stores and food trucks are an indication that this isn’t the old Zellers coming back. This is something new, fresh and a different way for Zellers to be what it once was
for Canadians.”

If it’s that, she says, “then this could be very interesting.” But, to make that happen, she emphasizes that whatever Zellers does will have to go beyond brick-and-mortar. “We all shop online now,” she says, both urban and rural, “and we’re all looking for that experience, so what will that look like for Zellers?”

As far as whether the strategy will be enough to revive the Zellers brand itself, Brown acknowledges that the store-within-a-store concept is a proven one. But for Zellers? “My crystal ball is in the shop. To even hazard a guess, I would need a lot more information about the business and I’d want to do a good deal of research on the consumer side, too,” she says.

But, strategy-wise, this is exactly the type of thing that HBC should be doing, Brown says. “In a recession, many marketers have a tendency to pull in their horns and focus on a narrower, more loyal core target audience. But this is exactly the wrong thing to do. If everyone is spending less, then smart marketers target more broadly.”

Ultimately, “Canada’s retail sector from a department store perspective is still fairly consolidated,” says Dana Toering, formerly VP of Walmart Connect Canada who is now consulting to the retail media industry. “Bringing back a competitive, cost-conscious brand like Zellers is a smart move, especially if their product assortment is large and diverse.”

He calls out apparel specifically, noting that Walmart isn’t as strong in certain categories, and Zellers could compete if the price is right. “If they can get product selection and prices right, combined with a unique experience and strong marketing effort, it could be interesting. I can see more and more retailers partnering around pop-up-type experiences,” he says, noting that the brand will likely be able to piggyback off of HBC’s retail media network to promote that offering.”

But competition at the price/value end of the market is intense today, so digital is what could differentiate the brand, he says. Ultimately, Jackman says “differentiated discount” is a proven formula that’s worth pursuing. “Look no further than the multi-generational, multi-decade run of the beloved Honest Ed’s, the breakthrough launch of Old Navy in Canada, or, more recently, the much-lauded ‘Haulerverse’ advertising from No Frills. Discount needn’t be dull. If the folks at HBC are creative out of the gate and stay bold, focusing on building a true omnichannel brand with some chutzpah, they just might surprise the naysayers.”