Canadian Tire looks to 'The Next Generation'

Home Channel News, May 1, 2000 by John Caulfield

Toronto-based retailer targets upscale consumers with prototype upgrades

TORONTO -- Canadian Tire is targeting the upscale consumer with refinements to its basic prototypes that present different product categories in showroom-like settings that stock better-grade merchandise bearing nationally known brands.

Canada's largest hardlines retailer, which has been criticized by some analysts for not remodeling its stores quicker, started rolling out this new version -- which it calls "The Next Generation" -- to 50 of its stores in late March. Another 50 stores will be converted by the fall. All told, 45 replacement stores and 55 existing units will get this treatment, as Canadian Tire integrates Next Generation into its ongoing "best of class" store improvement effort.

The latest prototype is seen by some company observers as a way for Canadian Tire to further differentiate its stores from its two big-box competitors, Wal-Mart and Home Depot. It also is aimed at bringing a different customer into Canadian Tire's stores at a time when consumers in this country have demonstrated a willingness to spend more money on their homes.

"Customers are fed up with junk' Steve Bachand, Canadian Tire's CEO, told the Toronto Stan He pointed out that while his company would not jettison its low-price

marketing strategy, Next Generation would "deepen" its stores' assortments to include higher-priced goods. To that end, some 4,000 skus have been added to the mix typically found in Canadian Tire's large-format stores, whose inside selling space range from 53,000 to 58,000 square feet. Many of these items are nationally branded, a significant change for Canadian Tire, which has always emphasized its proprietary brands.

"We make changes to our prototype every year, based on input from customers, and what we're doing with Next Generation is making it easier for consumers to shop our stores," explained Jennifer Sexton, a company spokeswoman.

Sexton told NHCN that Canadian Tire has been working on a store-within-a-store format "for a number of years," and introduced the concept to its automotives department a few years ago. Next Generation would represent the boldest move taken in this direction by the retailer, as it affects eight departments within its existing stores.

A work in progress

The retailer began experimenting with Next Generation 18 months ago at a testing lab it calls Retail City, a former distribution center in North York, Ontario, where it built full-sized versions of its large- and small-store formats (which, including their outside selling areas, measure 100,000 square feet and 30,000 square feet, respectively).

What emerged from this test were several new twists on Canadian Tire's basic formula that heretofore had been a straightforward gondola-endcapracking combination which bore more resemblance to department stores of the 1970s and 1980s than to the upmarket showrooms now favored by a growing number of retailers.

The departments where these changes are most noticeable are:

* The Kitchen Place. Canadian Tire is already Canada's largest retailer of housewares. But the boutique layout being presented here, accented by wood, tile and hanging plants, offers a very different image from what Canadian Tire customers would be used to. More than 600 skus have been added to this department, which now includes such brands of dinnerware as Pfaltzgraff, Studio Nova by Mikasa and Libbey.

* The Paint Gallery. Customers used to seeing paint stacked to the ceiling on wall racks at Canadian Tire are now presented with a less-imposing, easier-to-browse shopping area that features paint lines from Martha Stewart, Premier Paint and, starting this month, Pratt & Lambert.

* The Lighting Boutique. This department has 28 percent more selling space, and its wider aisles make way for stronger displays for lamps, wall-mounting light fixtures and a bigger light cloud.

* The Hardware Store. Tools have been moved to the front of the store, and 3,200 square feet have been added to the department. Space is more open, to give customers a better look at the merchandise, which includes another 1,000 skus and more branded lines from suppliers like Freud and Channelock. Taking a page out of Home Depot's Villager's Hardware format and some European dealers, Canadian Tire has also added an interactive demonstration area for tools.

* Plumbing and electricals. This area includes desks for customer service and product knowledge questions. It also has 64 more linear feet of display space.

Canadian Tire has made similar enhancements to areas selling camping and fishing, sporting goods and automotives. And even in departments that haven't been made over, the retailer has upgraded its merchandise. For example, the Toronto Star report alluded to $1,500 patio furniture sets and $500 bikes.

Throughout the store, customers find clearer directional signage as well as help stations and price look-up kiosks. Most of the reformatted departments include information desks.

Next Generation is now a component of a broader store remodeling and replacement initiative that Canadian Tire has been engaged in since 1994. Through April, the company had converted or relocated more than 200 of its 432 outlets. Its $1-billion-plus effort, though, is not expected to be finished for three or four years, which has made investors nervous and has been one of the causes blamed by analysts for the plummeting of its stock price.