Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Monday, February 9, 2009

Hudson Bay’s Revamped Strategy – The New Holt Renfrew?

On February 4th, Hudson’s Bay Co. announced an internal restructuring plan that involved cutting 1,000 jobs, while centralizing finance and logistics services and consolidating the executive team. Along with these operational changes comes the promise from new HBC CEO Jeff Sherman that the image of the Bay as we know it will be transformed under his direction. Changes began at Hudson’s Bay Co. in July, when they were bought out by NRDC Equity Partners, owners of Lord & Taylor and Fortunoff jewelry and décor. This move seemed ironic; Canada’s oldest company would now be owned by a Conneticut-based private equity firm. But to add to the confusion, the company is now trying to revive its brand image and change its offering in order to be viewed as a higher end department store, with designer brands in a smaller store format.

Traditionally, the Bay has relied on a retail strategy of ‘being all things to all people,’ an unsustainable approach given the migration of consumers from department stores to specialty chains and big-box retailers. Filling the department store gap that exists between Sears and Holt Renfrew, the Bay has never been able to establish itself as having a significant retail value proposition. Customers find it extremely difficult to navigate the eight floors and 900,000 square feet of the flagship store in Toronto, making an offering of selection almost completely counterproductive. The sheer size of the store adds to the brand’s difficulty in achieving focus or value. For example, fashion- friendly boutique Maison B., which opened earlier this year, goes completely unnoticed by most customers in the overwhelming store layout. As well, sales per square foot are estimated to be only $142, which can be compared to a much more efficient $480 at Wal-Mart. In-store experiences are characterized by unenthusiastic employees, confusing checkouts, and unkempt displays and shelving units. These are all clear indicators that change is necessary.

So what has the Bay decided to do? According to Sherman, “everything is being considered” (ie. he is completely unsure), but in the meantime they have gone ahead and hired Bonnie Brooks as president of the Bay chain under the HBC banner. Brooks has spent 25 years in the retail industry, refining retail formats such as Lane Crawford, Harvey Nichols, and leading designer brand stores in Asia. Interestingly, Brooks was also responsible for securing nearly every high-end fashion label at Holt Renfrew (Gucci, Prada, Armani, Dior) and has served as Editor-in-Chief of fashion magazine, FLARE. Her confidence in the Bay’s ability to bring in designer labels such as Diesel, and go up against retailers such as Holt Renfrew shows that she is quite unaware of the fact that it is hard to teach an old dog new tricks. Especially when that dog has been around since the 1800’s, and is one of the best known Canadian brands. I do not believe that simply bringing a high profile name on board will be enough to undo the history that is attached to the Bay, or its image as a mediocre mid-priced department store. It is very hard to imagine buying designer jeans at the same store I would go to if I was in the market for mid-priced linens. Additionally, changes at the Bay will be especially difficult given recent economic conditions, as a recessionary environment has fostered increasingly frugal consumers.

Overall, confusion seems to run deep at HBC. When asked if there are plans to bring Lord & Taylor into Canada, Sherman has wavered on his response several times within the past six months. Having a Canadian Lord & Taylor would simply result in competing with an ‘upscale Bay’ for the same customer, thereby cannibalizing their own strategic changes. Additionally, Sherman has even gone as far as admitting that, “it's hard to make customers return to a store they have abandoned.” Simply reducing the scale of the stores and attempting to upgrade the offering will only create a customer base who is just as perplexed as Sherman is about his own strategy.

Yes, there are shoppers out there who want high end goods from a department store that is easy to navigate and provides good customer service. They shop at Holt Renfrew. And with its established brand image, ubiquitous pink bags and essence of prestige, I do not see the day when these customers will shop at the Bay.

- Deirdre Magrane

(i)http://business.theglobeandmail.com/servlet/story/RTGAM.20090204.whbc0204/BNStory/Business/home, "Bay Puts Faith in its Games Plan"
(ii) http://www.thestar.com/Business/article/472415, "Bonnie Brooks taking over Bay chain"
(iii) http://www.torontolife.com/features/shop-girl/, "Shop Girl"

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