The battle for Canada’s discount retail dollars is heating up, with Zellers and Wal-Mart Canada each using exclusive new brands to lure back-to-school shoppers into their stores.

Continuing a repositioning it began last year, Zellers is introducing more brand-name products, moving into larger stores, and beefing up its recently launched Truly private label line.

‘A year ago in June, we launched Martha Stewart,’ says Peter Housley, Zellers’ vice-president of marketing. ‘That was a fairly unlikely partner with Zellers because suddenly we brought the Martha Stewart taste and product line into Canada as the exclusive retailer and at mass merchant price points. That initiative alone began to reposition Zellers.’

Since then, Zellers has introduced its Gap-style Cherokee brand clothing, for which sales are expected to hit $200-million in its first year. Later this month, the company will launch the Request line of apparel for teenagers as well as Delta Burke, a plus-sized women’s line for sizes 18 to 28. All these brands are exclusive to Zellers.

Meanwhile, Wal-Mart Canada announced last week that it has become the exclusive retailer for B.U.M. Equipment, marking its first exclusivity deal for name-brand apparel. The head-to-toe line is for men, women and children of all ages, and was originally sold in department and specialty stores. Wal-Mart also announced it has secured exclusive rights for Sasson, a line of women’s apparel, which will appear in its stores around the world in spring of 2001.

‘I think it adds a little bit of breadth to our assortment that wasn’t there prior to the launch of this product,’ says Wal-Mart Canada CEO Dave Ferguson of the new B.U.M. line. ‘I think it gives us a product at the top of our assortment, but at great, great value and pricing that would be 30-40% below what department store pricing had this product at before.’

Both companies are heavily promoting the brands they carry as they vie for the lucrative back-to-school market. On Aug. 16, Wal-Mart will launch a TV campaign advertising its new B.U.M. brand with a strong focus on price. Zellers recently launched a campaign focusing on the name brands it carries. The spots show kids discovering the new products ‘don’t suck.’

Brand names are only part of Zellers’ repositioning strategy. This fall will also see the launch of Zellers’ new Truly Baby, Truly Delicious and Truly Home lines as part of an ongoing process that will eventually see the launch of hundreds of new private label products.

‘Truly is the most wide-ranging private brand in North America,’ says Johanna Hoffman, whose firm handles public relations for the Truly launches. ‘By the time Truly is fully launched, I would say it will be the most extensive private brand in the world.’

U.S. trade magazine Private Label recently declared Truly one of the top five brands in the world for 1999. Wal-Mart was also on the list and reports that its private labels are performing well.

Commenting on the new branding strategy, Housley says Zellers cannot merely rely on low pricing to maintain market share and profitability against Wal-Mart.

‘When Zellers tried to take Wal-Mart on five years ago, they tried to compete on price,’ says Housley, formerly of Eaton’s. ‘Zellers took every ounce of profitability and ran it into the ground to the point where it had zero profits.’

While its ‘Lowest price is the law’ strategy helped maintain market share, Zellers now advertises ‘Great Brands at Great Prices.’ The new tagline represents a strategic shift as Zellers adds marquee brands to lure shoppers into the stores and, the company hopes, persuade them to purchase higher profit-margin products.

‘(Zellers is) clearly differentiating themselves from Wal-Mart,’ says retail analyst Peter Dzendoletas of Thomas Consultants International. ‘The key is to not go head-to-head with them, especially with regards to the apparel.’

The third prong to Zellers’ repositioning is a new store design. Breaking away from what Housley describes as ‘dirty, dark and dangerous,’ the new stores are big, bright and beautiful. New stores measure around 100,000 square feet, and aisles are wider in order to allow ease of movement for strollers. Zellers is, after all, targeting mothers as their customer of choice.

With over 325 Zellers and Best Value stores, the chain is the most widespread chain of discount stores in Canada, and, in terms of revenue, it’s the fourth-largest in North America. Its repositioning is often likened to that of Target, an American chain with revenues about eight times those of Zellers.