Sunday, June 12, 2011

Canada's Hudson's Bay Company: A Challenging Revitalization Project

Canada's Hudson's Bay Company (aka 'The Bay') was incorporated in 1670. It evolved into a national department store chain. In the past couple of decades, The Bay appeared to be going downhill. Merchandise was dowdy and uninteresting. Store interiors were bland and dated. And finding a salesperson for assistance seemed next to impossible. A similarly described Canadian store, Eaton's, went bankrupt in 1999 due to consumer apathy. 

The Bay, Queen Street, Toronto Ontario

Bonnie Brooks,  President and CEO of The Bay since 2009 (formerly of Hong-Kong based Lane Crawford stores), is taking The Bay more upscale in an effort to revive the company. She dropped 800 under performing brands and added 200 new ones. Revenues are reportedly up. The Bay has 92 stores across Canada, making its 'transformation' extremely difficult and very expensive. Will the upscale-swing of The Bay work? Sales figures at flagship stores seem to indicate so. In 2009, sales at the 935,000 square foot flagship Queen Street Bay store were approximately $130 million. After the introduction of The Room, the luxury women's designer floor, 2010 sales spiked to about $170 million at the Queen Street store. A similar spike in sales is expected at the 650,000 square foot Vancouver Downtown Bay store after the fall 2011 Room introduction, which currently has sales of less than $120 million.

Bonnie Brooks, President & CEO, Hudson's Bay Company

So far, piecemeal store renovations have created areas that are bright, well designed, and have interesting new merchandise. Handbag departments in the Toronto Queen Street (a downtown flagship) and Downtown Vancouver stores have become bright white halls with various moderately upscale labels (Coach, Furla, Botkier, See by Chloe, Dooney & Bourke, Love Moschino), with bags generally under $1000 (Canadian Dollars). Currently, four Bay stores include women's departments called 'The White Space', set in a bright, open environment with glossy tiled floors. More will follow across Canada. Designers such as McQ/Alexander McQueen, Sonia by Sonia Rykiel, See by Chloe, Halston Heritage, and Armani Jeans have been introduced. A similar 'White Space' men's department will be launched in selected Bay stores by the Summer of 2011, after a successful Fall 2010 launch in Toronto. 

Newly renovated handbag hall at The Bay, Queen Street, Toronto

The Bay went extremely upscale with the introduction of its luxury department called 'The Room' at the Toronto Queen Street flagship store, described in this blog here: The Room (Coming to Vancouver) . Many retail analysts and retail watchers were in disbelief to think that a 21,500 square foot high-end designer floor (ie $10,000 gowns, $1500 shoes, $3500 bags) could be successful in The Bay, given its previous reputation. There was further surprise when The Room was announced to be opening in Vancouver September 2011, and in Montreal Spring 2012.  The upscale strategy worked for Bonnie Brooks at Hong Kong's Lane Crawford (where she oversaw its transformation into the Asian equivalent of Barneys New York), and has worked for others.

In London, Selfridge's move upscale, including luxury floors for clothing, shoes and accessories, have been met with tremendous success. It includes the world's largest shoe department, with an enormous selection of the world's top brands. In Paris, Au Printemps and Galeries Lafayette battle for customers with exceptional luxury-based retailing.  Printemps has an astonishing three-floors devoted to luxury accessories alone, totally over 100,000 square feet.  In Berlin, Ka De We's (Karstadt Group) successful introduction of upscale ground-floor boutiques led to familiar strategies in the chain's Oberpollinger (Munich) and Alsterhaus (Hamburg) stores. I could go on-and-on, be it Spain (El Corte Ingles), Italy (La Rinascente), Japan, China, or Australia.

The successful upscaling of many world department stores, however, has focused on or at least been initiated by the introduction of luxury ground-floor vendor shops, usually concentrating on accessories. Louis Vuitton, Gucci, Prada, Hermes, Burberry and Dior, among others, have become staple brands on luxury floors across the world's top department stores. Canada's Hudson's Bay Company has not one of these vendor shops. Holt Renfrew, Canada's premier upscale larger-format retailer, includes all of these vendors selectively at its various locations.

The introduction of 'The Room' to Bay stores, while getting people talking and some shopping, may best have been met with the inclusion of luxury accessory shops on the ground floor of its flagship locations. Limiting the luxury selection to a second or third floor of a large, relatively underwhelming store, may not have been the best strategy to attract shoppers looking for a luxury experience. Currently, Bay stores have no upscale restaurants, spas, or other services to keep 'The Room' shoppers within Bay stores beyond visiting The Room itself, though The Bay will soon open upscale restaurants at selected locations. The Bay offers very few high-margin luxury accessory vendors, as mentioned above, to attract crowds of well-heeled affluent and aspirational shoppers into its flagship stores.

The Bay, Downtown Montreal

Competition From New Entrant: La Maison Simons
The Bay will face stiff competition in its fashion sector when La Maison Simons expands West from its current seven Quebec-only stores. Over the next 10 years, Simons plans on opening up to 12 stores outside of Quebec, in Vancouver, Calgary, Edmonton (2012), Winnipeg, Toronto and Ottawa. Simons is known for its exceptional customer service, affordable/trendy private-labels,  top-of-the-line designer labels, within well-executed retail interiors. Given Simon's recent intention to expand across Canada in most of The Bay's key markets, The Bay will face considerable competition in its desired direction.

Competition From The Top: Holt Renfrew
Canada's Holt Renfrew fashion chain will also prove a potentially strong competitor to The Bay, especially with Holt Renfrew's tendancy towards opening/expanding to larger stores (80,000-150,000 square feet +, as opposed to its former 30,000-60,000 square foot stores) and its move towards carrying more affordable fashions. A fashion insider informs me that Holt Renfrew is fighting to attain some of The Bay's exclusive designer offerings, including Rachel Roy lables and Adam by Adam Lippes. Holts is also looking at expanding several of its current stores, including having recently announced that its Yorkdale Shopping Centre store will be enlarged to a gross 84,000 square feet. Designer tug-of-wars have already occurred at the top-end, as well, with designers such as Halston, Mark Fast and L'Wren Scott heading to The Bay, while Holt Renfrew fought successfully to stock Balmain, Aquilano.Rimondi and Brian Atwood shoes, formerly only at The Bay. 

2010 sales at Holt Renfrew's 137,000 square foot Vancouver store were about $127 million, being higher than The Bay's $118 million at 650,000 square feet. In 2006, sales at the 185,000 square foot Holt Renfrew Toronto Bloor Street location were about $150 million, being the highest of any store in Canada. Bloor's sales have since dropped to about $125 million in 2010 due to a recession and a major sidewalk construction project on Bloor Street.

See by Chloe boutique at The Bay, Queen Street, Toronto


Mathilde B. said...

I'm loving the changes at The Bay. Great article! :)

maneesh said...
This comment has been removed by the author.
Anonymous said...

the bay now has burberry, coach and see by chloe boutiques

Anonymous said...

Simons opened its new store here in Edmonton over the Thanksgiving long weekend with a stunning 115,000 square foot store in West Edmonton Mall. Both HBC and Holt Renfrew are going to have to "up the ante" in regards to what they offer in both product and store layouts (especially Holts and HBC in thier downtown Edmonton stores) as Simons is leaving them in the dust in regards to being new and wonderful instead of the bland and dull stores the other two "fashion" chains are operating in Edmonton's downtown.

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