Although a number of Canadian retailers have recently folded or are downsizing, some are succeeding and growing substantially. We interviewed retail expert Antony Karabus on what some retailers are doing right, and why investing in physical stores and omni-channel will be crucial to retailers seeking success in 2015.
Online retail in Canada is growing 15% this year and expected to grow by 11-13% over the next three years (Source: Forrester), versus bricks-and-mortar's anticipated current year to date sales growth of under 4% (Source: Retail Council of Canada Fast Facts).
As a result of the minimal brick and mortar growth, the majority of store sales growth for retailers will have to come from capturing market share. Therefore retailers will need to invest in creating compelling reasons for shoppers to come into their physical stores. Mr. Karabus says that a number of Canadian retailers are doing it the right way -- that is, they're creating engagement in-store, as well as creating a differentiated digital presence. As a result, retailers investing in stores will see customers willing to pay full-price, as opposed to retailers who rely on discounts for foot traffic. Some of the more innovative retailers include (and are not limited to) Indigo Books (with the creation of the first “cultural department store” and the partnership with American Girl to offset the secular decline in physical books), Aritzia, Sport Chek and MEC -- all which have built businesses based on positive in-store experiences, as well as investing heavily in creating a digital experience.
A number of Canadian retailers are re-invigorating their store fleet and investing tens or even hundreds of millions to create compelling reasons for customers to keep coming back. Harry Rosen, Holt Renfrew and La Maison Simons, for example, are spending hundreds of millions on store upgrades and new stores, as well as revamping e-commerce sites. Harry Rosen's new Ottawa shoe store, for example, is "a brilliant move" according to Mr. Karabus, as it speaks to an innovative in-store experience in a segment that is poised for significant growth, namely better men’s shoes.
Mr. Karabus predicts that 'click-and-collect' will be a trend for 2015, where shoppers buy online and pick up purchases in-store. There's a convenience factor involved -- rather than wait for (and possibly miss) a delivery at home from an online purchase, shoppers may pick up items at their local store at their convenience. Retailers will have to make modifications to their fulfillment and backroom processes and infrastructure to facilitate these omni-channel capabilities. The retailer may ultimately benefit from this arrangement according to Mr. Karabus - the possibility to up-sell products to the purchaser is easier face-to-face in the store, not to mention human interaction which personalizes the purchase experience. Mr. Karabus says that shopping centres may be able to facilitate the 'click-and-collect' trend by modifying real estate to include drive-through centres, for example. As a result, retailers must develop and implement omni-channel capabilities to capture the growing number of consumers who research before buying and want to 'reserve' or order the items in store for pickup or return.
Mr. Karabus notes that the retailer's existing cost structure that supports the legacy bricks-and-mortar business will need to be meaningfully re-invented to fund the massive additional investments which are required to fund the creation of new omni-channel, fulfillment and online capabilities and the re-invigoration of store fleets to create more compelling store experiences. Those who ignore this could be doomed to fail.
Consumers are ultimately looking for positive experiences, be it a trip to an exotic destination, or a new jacket in a store. In order to compete for limited shopping dollars, retailers must create an engaging experience. Retailers that can engage shoppers and increase loyalty and shopping frequency will succeed and on the flipside, those who fail to engage risk losing out to better retailers, not to mention the proliferation of e-commerce possibilities.
In Summary, the entry into Canada of world-class retailers such as Nordstrom as well as incumbent retailers that are “ raising the bar” on their existing operations, will be excellent for Canadian consumers as it both provides much increased choice and availability of places to visit and shop, as well as more interesting shopping experiences.
About Our Expert:
Antony Karabus became CEO of HRC Advisory in January of 2013. He has been a trusted and passionate advisor to retailers on strategic and financial performance issues for over 25 years. He has assisted numerous North American retailers to create significant shareholder value during this time. He has worked with numerous well known retail chains in key sectors such as department store, specialty apparel and hard lines, big box chains and food and convenience.
Antony began his career at Arthur Andersen in Cape Town, South Africa and moved with the firm to Toronto, where he founded Karabus Management as a Canadian retail advisory firm in 1990. In 2001, Karabus Management expanded into the United States, where the firm became a leading North American specialist retail consulting firm. In 2008 he sold the firm to an International Accounting/Consulting firm where he served as the leader of that firm’s Retail Consulting Services practice until he left the firm in December 2011.
Antony conducts annual surveys of Retail CFO and CEOs to determine key priorities in assisting their business to enable substantive value creation.
Antony is a recognized speaker and a published author providing thought leadership at industry forums, including the National Retail Federation, Retail Council of Canada, World Retail Congress and the Fashion Institute of Technology and providing content to The Wall Street Journal, The New York Times, Stores Magazine, The Globe & Mail, Chain Store Age, National Post, Toronto Star and Women’s Wear Daily, among others.
About HRC: HRC Advisory is a specialist boutique retail advisory firm. Together with its predecessor firms, it has been assisting Canadian and US Retail Chains to improve their profitability and strategic positioning for more than 25 years. Many of HRC’s senior advisors were previously at Senn Delaney Retail Consultants and Karabus Management following retail leadership roles. Other senior advisors at HRC have a mix of retail leadership and retail consulting experience gained with other leading firms
HRC has significant retail depth in strategic planning, buying, merchandise planning and inventory management, indirect procurement, store operations and omni-channel processes, supply chain/logistics and fulfillment, and comprehensive cost optimization services. HRC has worked extensively with both healthy top performing chains as well as developing and executing turnaround mandates at a number of retailers in difficult situations. For more information, please visit www.HRCadvisory.com.