Big-box hardware retailers in Ontario are preparing for what analysts say is shaping up to be a pitched marketing war in Toronto.
Home Depot, the most established of the players, has had Canada’s largest market to itself for almost a decade, but now has competitors approaching on two flanks: Revy from the West and Réno-Dép`t and Rona from Quebec. It’ll be a war fought on the branding front – a challenge in the warehouse category, say analysts – and won or lost on the ability to capture key customer segments, particularly young families and women.
With that in mind, the weapons in this battle won’t be the reciprocating saws, biscuit joiners and I-joists of a few years ago when everyone set their sights on catering to professional building contractors. This war will be waged with perennial plants, pillow cases and fashionable fixtures as the big-box players try to win over those responsible for fuelling real estate growth in the Toronto area.
‘It’s important to stress that we’re really looking at a reconceptualization of the format,’ says Richard Blickstead, president of Montreal-based Rona’s retail division. ‘We have a much greater softer side, we’re much more into the boutique and home environment.’
Although Rona is still ‘tweaking’ its concept for the Toronto market, its existing stores are a radical departure from the traditional big-box home improvement store. The shop carries bedding alongside its decorative paints and floorings. It’s also designed with a perimeter of ’boutiques’ or home settings that allow customers to peruse interior design elements and develop room décor ideas.
That’s part of Rona’s goal to go beyond products and services to enter the realm of ‘home environment solutions’, which Blickstead characterizes as providing inspiration, ideas and models in-store to enable customers to complete not just a home improvement project, but fashion a new living environment.
Rona is trying to differentiate itself from the competition with its ambiance and offerings, he says, and is reviewing how it can be more ‘kid-friendly’. It wants to cater to women, but so does the competition.
According to Home Depot spokesperson Dave Day, it’s important not to pigeonhole women as home décor buyers, because plenty of women are also buying power tools and lumber. It’s because of that, Day says, that Home Depot has introduced a series of in-store how-to workshops for the entire family, including birdhouse-building workshops for kids.
Revy, meanwhile, which currently has two stores in the Greater Toronto Area and three more planned for the next year, is taking a page from Zellers’ marketing handbook and moving towards being ‘mom’s store’.
Given its Lansing Buildall and Revelstoke background, it’ll be tough to shed its lumberyard image, but John Kitchen, president of Lansing and VP of Revy’s Ontario division, says the chain is differentiating itself by being ‘cleaner, neater and brighter’. It has also introduced designated parking for young mothers with children, and built in-store distractions for kids, such as wooden-toy building areas during the holiday season.
Another strong contender is The Building Box, a new banner run by Quebec’s Réno-Dép`t. In October, the company announced its plan to enter Ontario, saying it would differentiate itself by offering more variety to customers, particularly in home décor products.
Sylvain Toutant, the company’s VP marketing and development, says it will leverage its international ties through French parent company Castorama to pick up more international stylings.
‘We carry over 200 different table lamps in our stores, whereas our closest competitors will have about 10 or 12,’ Toutant says. ‘We’re trying to show a full array of products which will allow a female customer to find exactly what she wants to complete a décor project.’
That old stalwart Pro Hardware, meanwhile, is introducing interactive electronic kiosks into its stores, providing customers access to 75,000 different products that can be shipped overnight to the stores for pick-up.
‘It gives an independent retailer anywhere in Canada the same or better selection than any big-box store,’ says Pierre Racette, corporate vice-president of marketing for Sodisco-Howden, the company that supplies the 750 stores under the Pro Hardware banner. That number will soon double to 1,500 when the company rebrands a slew of its independently operated outlets this spring.
In addition to their merchandising and in-store design strategies, the hardware combatants are also drawing lines in the media sand with their advertising plans.
Home Depot, for instance, will continue its focus on flyers, catalogue and radio, says Day, adding that it gets television exposure through its sponsorship of Hockey Night in Canada, Nascar racing and the home improvement shows, Just Ask Jon Eakes and Lynette Jennings Design. Eakes and Jennings also do personal appearances for the company.
Rona won’t use broadcast until it has a critical mass of stores in the Greater Toronto Area, says Blickstead, and will focus on a more localized approach.
Similarly, Revy’s focus is on flyers within a six-mile radius of its stores, and is launching stores with the help of Don Cherry. But Kitchen says the company will move into radio later this year.
Standing out will be The Building Box. The store’s advertising mix will have strong print and television components, but it will also publish a magalogue similar to Les idées Réno-Dép`t, which Réno-Dép`t uses to promote its wares in Quebec. The magazine, part This Old House, part Martha Stewart Living, and part catalogue, showcases product, highlights design trends, and provides home decorating and improvement ideas.
Sidebar: Category Profile
It’s been eight years since big-box retailers entered the home improvement category in Canada, but the market is just now reaching full boil. Today, there are four major players, and they’re all eyeing Ontario’s share of the $20-billion Canadian industry.
In the last couple of years, competitors to market leader Home Depot have all cleared significant hurdles, freeing them to expand to the much-desired Ontario market.
To start with, Montreal-based Réno-Dép`t’s purchase in 1997 by France’s Castorama, a home improvement giant, helped put an end to a non-competition agreement it had with Home Depot. When Revy, which is owned by West Fraser Timber, bought Lansing Buildall in 1998, it gained the foothold it needed to enter the Ontario market. And Quebec’s Rona reorganized its senior management in January to propel its development nationally.
As all of these operators expand their presence in Ontario, they need to build a beachhead in the Greater Toronto Area (GTA), says John Torella, a retail analyst with Toronto-based J.C. Williams Group. It’s a lucrative market and a crucial one for anyone with aspirations of being a national player (Réno-Dép`t and Rona are based primarily in Quebec, while Revy has 13 stores throughout the West. Rona has entered Ottawa, and Revy already has two stores in Toronto).
Even if that wasn’t the case, the GTA is a market ripe for picking. Housing starts were above the national average of 9.1% in 1999, and the GTA will continue to outperform the rest of Canada for the next two years, according to Statistics Canada. New home starts in the GTA alone exceed the total for the province of Quebec.
Young families are fuelling the growth as Gen Xers begin to settle down, says Ray Wong, director of national research for Royal LePage. Also, rising house prices mean more homeowners are tackling projects like finishing basements and adding bathrooms themselves, rather than buy a bigger house.
Home Depot plans another 10 stores in the GTA this year, while Revy plans to add three this year and eight more next year. The Building Box announced its first two sites, and plans 15 in the next four years. Rona is working with its dealer-operators to enter the GTA, and just underwent a massive expansion of its regional (mid-box) stores by acquiring Cashway for $50 million, expanding its chain to 110 stores. Rona said it would invest $400 million in the market, which it pegs at $8 billion in Ontario.
The big boxes account for 19% of Canada’s $20-billion home improvement market. (See accompanying chart for breakdown.)
From the ground up: Big-box market share in the home improvement category
Home Depot: 55.2%
Réno-Dép`t: 16.8%
Ro-Na: 12.3%
Revy: 12.1%
Kent Warehouse: 3.6%
Source: Hardlines magazine
