Saturday, December 03, 2005

On a profitable Canadian company

Canadian retail is a tough business if you can't dominate your market.

Major retailers such as The Bay or Eaton's, have either failed or done poorly in terms of making money.

Eaton's, the original department store, is no more. The Bay, the centre piece of the oldest company in the world, The Hudson's Bay Company, the 335 year old, Company of Adventurers, doesn't make a lot of money.

Another Canadian retail icon, Canadian Tire, despite being in the sights of some major U.S. juggernauts like Home Depot, makes money hand over fist.

Years ago, when Eaton's was in the throes of its death rattle, the powers that be in that company decided to shoot their last wad by discarding all of the company's past and embracing the future fully and with their eyes closed. They discarded the iconography of the old, successful company. They discarded the business of the old, successful company. I'm sure they would have rolled old Timothy into the lake if they thought they could have gotten away with it. They spent a small fortune on advertising. They gave themselves over to some expensive consultants who drove the company into the ground so that they couldn't even meaningfully benefit from the substantial real-estate which the company owned.

Eaton's became an advertising monster for brand names. Calvin Klein was advertised heavily. I don't know if Eaton's sold a single t-shirt but they spent tens of millions advertising the brand. I doubt that CK could have afforded to spend the money that Eaton's did. My own suspicion is that customers heart rates climbed and then they went to go buy CK stuff elsewhere. There were other brands too but CK is the one that sticks in my memory.

For long years, I remember thinking that what Eaton's should do is develop their own line of clothes and other stuff. Growing up, I remember many people owning Viking brand kit, or Sears Kenmark or The Bay's Beaumark. Those were appliances and electronics but the mentality was the same. I was given and bought many house brand articles of clothing over the years.

By the end however, Eaton's could no longer sell their own brand. The Bay can't sell their own brand. I badly need an overcoat and I've visited two different Bay stores but all I've found is overpriced brands and coats that aren't particularly good. The cheapest coat that I desired at The Bay cost over $600. I don't have any statistics but I bet that if you charted the price that people are willing to pay for a coat (as in after the fact spent), you would only find a small fraction willing to spend that much money on a coat which didn't have a genuinely powerful brand cachet like a Hugo Boss. Fifty per cent of their floor space is given over to products that generate twenty per cent of their sales. Most people who do wish to spend that kind of money, who do want to be fashionable, won't go to a stodgy department store. They'll go to a store with a sense of fashion and style.

See, it doesn't have any hinges.
So, that's part of what makes it better.

This brings me to Canadian Tire. They have a widely ridiculed series of commercials that showcase products that are introduced at Canadian Tire. Today, I watched a commercial about a new, hingeless windshield wiper. I suspect that many people will buy this wiper. In the past, they have introduced various generators and power converters that bizarrely, spark conversations. What's more, the general feeling about some of their new products value versus their price, is that the pricing is pretty fair. That's impressive.

Their advertising is not anything like that which Eaton's spent money on or what The Bay does today. Canadian Tire eschews the 'lifestyle' type of advertising with beautifully shot imagery and uplifiting music but no or few words. Canadian Tire has dense, informative commercials that grind through all of the special features that differentiate their new products from the worn-out standards that their customers have been forced to live with over the years. I'm sure that David Ogilvy would approve.

These commercials give lessons on how products work in general and how new technology improves life. People who buy, or even consider buying, these products are capable of selling them to their friends and neighbours.

People eat this up. They also spend their money at Canadian Tire.


At 9:33 p.m. , Anonymous Anonymous said...

Canadian Tire is not Canadian. Companies in Canada that are Canadian are registered as ....Canada ltd..Canada Inc. Economics taught here in Canada


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