Canadian Tire was supposed to get run over by Target when the U.S. chain arrived in Canada last year. Instead, the 92-year-old retailer, once known for its annoying ads and eclectic merchandise, watched sales at its stores increase and its stock price surge by 40 per cent. It’s no accident. While CEO Stephen Wetmore is the first to admit that Canadian Tire’s sell-everything strategy should be a recipe for business failure, the familiar Canadian brand has worked hard to rebuild core strengths such as automotive, and expand its presence in sports, including the 2011 purchase of the Forzani Group (owner of Sport Chek). It has also made huge investments in technology.
Q: There were concerns that retailers such as Canadian Tire were going to get creamed by U.S. competition, particularly Target. But the opposite seems to be happening. How did you manage that?
A: I suspect that, back in 1994, when Wal-Mart came in, the same types of questions were being asked. Now, obviously, it’s extremely intense out there, compared to 10 or 15 years ago. But our brand and Canada’s brand are almost synonymous. So, as long as we understand who we are and what we have to do— in our main categories of living, playing, fixing and automotive—and stay focused on it, I can’t see how anybody is going to beat us. Plus, with Canadian Tire retail, we have an association with our dealers that makes them local business owners, in effect. Their attachment to their communities far exceeds our competitors’.
Q: Let’s talk about the brand. It’s a strange beast. Everyone knows Canadian Tire, and feels a connection to it, but it’s also one of those brands that people love to badmouth a bit—the whole “Crappy Tire” thing. It seems unwieldy. You’re universally known, but not as the coolest guy on the block. What’s your vision?
A: I often describe the Canadian Tire brand by using the analogy of the tall ships. Whenever you see the tall ships come into a harbour, they’re a replica of days gone by. But when you get on-board, they’ve got all the latest technology. No matter what you lift up, there’s a computer or some other piece of unbelievable technology underneath. In many ways, that’s what Canadian Tire is turning itself into. The future for us is rooted in technology and data, so we’ve made huge investments. The really interesting thing about retail, at the moment, is that you’re still taking care of the Baby Boomer population—those people who grew up with the Canadian Tire experience of old, which we maintain. It’s a bit of a treasure hunt when you go into a Canadian Tire. If you just moved to Canada, you could go into a Canadian Tire and walk around and it would tell you what life here is like. We have to maintain that, and we will maintain that. Overlaying that, and supplementing it, is technology. Shouldn’t we know when our highest-value customer walks into the store, and shouldn’t we know where she is in the store? That way, our dealer and his staff can walk up to her and say, “Thank you for being our best customer. What can we help you with?”
Q: So you’re trialling a loyalty card program?.?.?.
A: Well, we already have a loyalty program, which is Canadian Tire money. And that’s national.
Q: But you don’t get any data on customers from that.
A: Exactly. But we get a lot of data from our credit card business, with two million active customers. So it’s not like we don’t have data. But the benefits of the loyalty program we’re trialling in Nova Scotia are extensive. And we’re testing everything you could possibly think of in order to stimulate shopping, adjust customer behaviour, drive more traffic, [offer] redemption schemes, and all sorts of things. We’ve long operated as a general retailer who sells to everybody, as opposed to knowing who our most valuable customers are and being extremely loyal to them. And that’s all I want. I just want to know who they are. I want to treat them extremely well. I want our stores to understand the shopping behaviour of those who buy the most from them. I want our dealers sitting in their offices analyzing customer data, not doing ordering. We’ll change our assortments, our in-store presentations and our marketing in the years to come based on knowing our customers better. Data, and the analytics behind data, are going to be the foundation of how we run the business, which is not what we do today. Let me give you an example: As it turns out, customers buy all of our lavender products together—any product that has lavender in it.
Q: They don’t want to mix scents?
A: See, we didn’t know that. So why don’t you put them all together instead of spreading them out across the store? And, when you go in to buy something to wash your car, do you buy it by brand, or do you buy it by function? Do you want all the washing products together? You have to be very good at data and very good at data analytics. We’re in the process of understanding it, which is why we’re running that [loyalty] trial longer. But it’s a huge part of who we will be in the future. It’s the new Canadian Tire.
Q: How does the online piece fit in? Canadian Tire had an online shopping portal before it was shelved back in 2009. What was wrong?
A: Selling online is complicated. It’s simpler for the customer, but it’s very complicated for the retailer. We just weren’t set up for it. The idea of bypassing our dealers to sell directly to our customers was complicated, given our business model. We didn’t have any of the investment in technology. We hadn’t set up the distribution centres. We hadn’t figured out how to sell online, and have you pick it up in-store. In my opinion, none of the basics were in place to give the customers the experience we wanted them to have. Right now, we’re in the middle of an online shopping test. We hope to go 100 per cent live by the end of the year, and do it properly. The bene?t of having so many stores, so close to Canadians, is that we can offer an online experience with in-store pick up that’s unparallelled in the country.
Q: You also discovered that a lot of Canadians were buying tires online, but not from Canadian Tire. How big a business is this?
A: When we analyzed this three or four years ago, we estimated that about $75 million of tires were being sold online in Canada from companies that didn’t even have one employee here. A friend of mine in St. John’s, [N.L.], bought his winter tires for his BMW, on rims, that he apparently had a hard time finding in St. John’s. They were delivered to his door, and then he just went to wherever and slapped them on. And it wasn’t only tires with us. We’re in the automotive business, which is, like, $3 billion a year. It’s a monstrous business, with 5,500 bays across the country. But how does a general merchandiser deal with that, while also trying to sell household cleaning products? You’re trying to drive traffic into the store by taking a GPS unit and discounting it to two per cent above cost, so people will come in and, we hope, buy something else, too. But you’re ruining your car-accessories business in the process. We were doing the same thing with MotoMaster tires—just positioning them incorrectly to make them look like we’re a low-end tire retailer, when, in fact, we’re just the opposite. So we took it all apart. We took it away from the rest of Canadian Tire. We have separate executives to run it who now travel the world to find great products, not just try to bring in something that’s cheap. We run an automotive business now. And if you’re running an automotive business, you have to sell tires online. You have to sell everything online. Nobody buys a part for his car or truck without first going online to research it and figure out whether it’s available in the store. That front-end online experience is absolutely critical. We changed all the IT, all the infrastructure, and we put 7,000 or 8,000 people through retraining. And now, you have a good [business] quarter or two, and people say, “Geez, what’s going on?” And then I have to go back and explain. It’s a huge, long, time-consuming, heavy-lifting exercise.
Q: What I find fascinating about Canadian Tire is that, if you asked, people still wouldn’t consider it cutting-edge. But it seems to be loved—like a family member is loved, warts and all. Is that what makes it so effective?
A: I think we represent the country, and how well we can perform against the best in the world. The biggest retailer in the world is here [Wal-Mart], and we’re doing just fine, thank you very much. We’re better than we think we are, which is so typically Canadian. During the Stanley Cup playoffs in Vancouver, all we did is buy three triangles behind the boards. We didn’t put our name on there or anything. All my American friends were saying, “Steve, you’ve got to put your name on it!” But we don’t have to, and that’s something very special. The deeper you get into Canadian Tire, the more you go, “Oh my God, this company is so Canadian.” There’s nothing fancy or tricky. You can look right through us. We are who we are.