October 29, 2008
Canadian Chain to Sell Groceries and Tires
When warehouse clubs were getting started in the U.S., people wondered if people would be willing to buy food in the same store where they bought tires. The answer was clearly yes. Now, a retail chain in Canada with the word tire in its name is looking to see if it can sell groceries along with all the hard goods that have made it successful over the years.
Canadian Tire, according to a report by The Globe and Mail, plans to test grocery sales at two of the company’s stores in Ottawa.
Tom Stephens, president of Brand Strategy Consultants Inc. and a former executive at Loblaw Cos., told the paper, “Canadian Tire is up against some really good food retailers. Food is a different ball of wax from screwdrivers and electric fans.”
Canadian Tire is not completely new to food. The chain stocks convenience foods at its big box stores and g-stores.
The chain’s test of food sales is a worrisome sign for Canadian grocers, said Kevin Grier, senior market analyst at the George Morris Centre and editor of the Grocery Trade Review.
“It’s more negative news for the grocery sector that already has been pummeled by Walmart and Costco,” he told The Globe and Mail. “Everybody is encroaching on grocers, but grocers haven’t done as good a job of encroaching into other areas.”
Discussion Questions: What do you think Canadian Tire will learn about the food business from its two store test? What will it need to do if it is to succeed in the business going forward? What must Canadian supermarkets do to compete against Canadian Tire and other formats selling groceries?
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When we look at how far Shopper’s Drug Mart has come in selling refrigerated and pantry staples here, Canadian Tire’s move is a little easier to understand. Quick “fill-in trips” to supplement the weekly stock-up are another area of incremental growth across retail channels, as shoppers become more purposed in their approach. Whether a Canadian Tire location can mirror a local Shopper’s Drug Mart as a milk and bread “quick stop” will be interesting to watch. As always, retail execution will tell the story.
Obviously, everyone is trying to sell food to increase traffic for their other offerings. The key here is, does food in this environment fit its target market? Also, will food dilute its current positioning?
There is a difference between limited food offerings for contractors and candy offerings at Halloween in Home Depot and a full assortment of groceries at a tire store.
As a regular shopper at Canadian Tire, I truly believe this will be a total disaster. Not because Canadian Tire doesn’t know how to merchandise, or because people won’t want to buy groceries from the same place they buy tires. It will fail because the vast majority of shoppers at Canadian Tire are men–blue collar trades people and handymen.
These men are looking for tires, tools, hardware, and plumbing fixtures. Not macaroni, broccoli and milk.
I give Canadian Tire points for trying. But in the end, the saying “stay with what you know” will be used a lot.
Club stores in the U.S. keep a lot of distance, in real terms but also psychologically, that separates where they sells food from where they sell tires.
Interesting time to launch into grocery. Still, CT gets high marks from me for still looking for new ways to grow. They’ll definitely face operational and competitive challenges, but CT also has a track record of innovative thinking and branching out into other consumer categories like financial services. I also like their recent small-market/rural-market format which combines both a CT and Mark’s Work Wearhouse.
Moving slowly with the grocery rollout is a positive that will give CT time to examine the operation and rethink where necessary. What would make me feel more positive is if CT had a differentiation strategy. Differentiating the CT grocery biz from competitors will be necessary if this test is to succeed.
Canadian Tire is an iconic brand here in Canada. They’re a lot more than just tires. Perhaps no other retailer in Canada has responded so successfully to the Walmart arrival years ago.
Having said that, I’m struggling to see this working much beyond the grocery assortment they already carry. I can’t envision my fellow Canadians warming up to the notion of buying perishable food products there. But, Canadian Tire has achieved such a deep penetration into the market, and has a remarkable shopping frequency with its customers, they just may pull it off. I just wouldn’t bet on this one.
Menards tried this in their home improvement stores in the Midwest. I don’t think any grocers lost sleep over it. Canadian Tire is just kicking the tires on this and I don’t think we will ever be having more discussion about it.
As hard as it is to successfully sell groceries, I will be very surprised if they do well at it. We have companies in this country that haven’t been able to learn how to sell groceries. Look at Target and Kmart for example. While it is not hard to sell dry goods and canned goods, the perishable departments are a real challenge that often separates the men from the boys.
Most on RetailWire (as well as the Toronto Star and Globe and Mail story discussion threads) were pretty negative on this piece. My take is below–but basically my thinking is that Canadian Tire doesn’t really act before being relatively sure of the outcome. Traditionally they have been a risk averse company so the format expansion to include grocery is either a well-thought-out strategy or a shift to be a more risk-taking company. To me, the former rationale is the more likely.
According to market data, 9 out of 10 adult Canadians shop at Canadian Tire stores at least twice a year, while some 40 percent stop in on a weekly basis. Add to this the fact that 85 percent of the country lives within a 15 minute drive and it is clear why they want to alter the Canadian Tire format in an effort to grab a share of the customer’s grocery wallet.
But will these drivers (and don’t forget the company’s wildly popular loyalty/frequent shopper rewards program where a percentage of each purchase is returned in “Canadian Tire money”) be enough to convert the brand’s traditional hardware, garden center, seasonal, and automotive department buyers into regular grocery shoppers? As pointed out on this discussion thread, we’ve all seen the one-stop-shop recipe fail before, but I’d argue that few have had the luxury of a fiercely loyal Canadian Tire customer base to “get things cooking.”
I agree with Jonathon. Perhaps we’d call this a “proof of concept pilot.” All it really shows is that the organization can actually operate these two stores given the existing or available infrastructure and internal resource commitment. As has been noted, the marketplace is such a diverse environment that 2 stores cannot effectively test the validity of a chain-wide roll out.
Having said that, let’s look at the fundamental driver for this initiative…and it’s the same one which motivated Target and Walmart. People shop more often for food than for durable goods. Period. If consumers can be influenced to change their shopping pattern at all, and add one more trip per month (or week) to Canadian Tire, then this program will be extremely valuable.
The question, “what will they learn from a two store test?” brings up some interesting questions about retail testing practices in general. Too often, retailers think testing an idea in 2 stores can tell them whether a program works or not economically. Not true. 2 stores isn’t nearly enough to overcome the “noise” in retail and to demonstrate the true impact of the program, that is, what the sales lift, margin lift, and ROI attributable to adding groceries to this format–including any halo and cannibalization effects on the rest of the store–is.
At APT, we call this type of activity a “trial.” What they could they learn in a 2 store trial is:
– whether they can logistically/operationally handle selling food in these stores;
– some information on whether customers/employees say they like the offering;
– whether the sales of the new items are so low that the economics couldn’t possibly pay out (very unlikely).
Learning the ROI of the program, as well as what types of stores perform best with grocery, will then require moving to an actual test with more stores (typically 15 to 30 for this type of test).
Canadian Tire seems like a fascinating retailer. I have never been to one, but my Canadian friends seem to always be talking about it and always have a reason for going there. Canadian Tire is surely getting more traffic and more frequency than a “tire store” would be expected to experience. Clearly Canadian Tire has built a brand that transcends “Tire.” It is that branding that opens multiple retailing opportunities.
From the article, I would hardly assume that they are going to be the next big grocery chain in Canada. The groceries they are bringing in are of limited assortment and not illogical extensions of soft drinks and snacks. So far it sounds like a C-store assortment more than a Loblaw’s assortment. If so, my bet is they are successful.
But, what also strikes me as interesting is that Canadian Tire has had some success in holding off the Walmart invasion. Could their long-term plan in fact be to measure up against Walmart? Certainly, a challenging objective if they are. But, let’s not get carried away with where they are going. They are simply using a domino principal in growing their business. That is “what can we sell to our current customers?” and “can we bring a bit more traffic by expanding our offerings?” The drug chains in the U.S. have followed the exact same strategy, with bread, milk, cereal and frozen pizza…and don’t forget the ice cream!
One bridge too far!!!
Assuming the marketing and merchandising aspects are solved, what killed Loblaw’s was the supply chain. Groceries and general merchandise are totally different animals. One needs to build almost a second supply chain to handle that. I am not sure either if CT dealers (store operators) will be too keen in carrying this low margin, high volume stuff.
I doubt Canadian Tire will learn much from a two-store test. The sample size is just too small.
My suspicion of what they’d learn from a broader test is that they need to stay out of the grocery business. The Dealers, or franchisees, know nothing about grocery and are not the best merchants when it comes to turning dating stock effectively.
Mark Foote, former head of retail at CTC once told me, “If you don’t eat it or wear it, we sell it.” I think these days are now over. Interestingly, Mark later spent some time at Loblaws trying to sell groceries, and now someone from Loblaws is at CTC trying to sell groceries. They should leave the grocery business to the grocers and Walmart.
This marks an incredible addition to the market. Not only will you be able to buy auto parts, home goods, tools, guns, sports equipment and sod, but now the addition of fruits and vegetables and milk and of course a steak to cook on that new grill you just bought.
Will this be the right kick that CT needs to stay competitive, or should the mantra of “do what you know” take precedent? Perhaps growth that large really isn’t needed for a market as small as that in which CT operates. How will this play out in other markets like Toronto? Niagara Falls? Or Edmonton?
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When we look at how far Shopper’s Drug Mart has come in selling refrigerated and pantry staples here, Canadian Tire’s move is a little easier to understand. Quick “fill-in trips” to supplement the weekly stock-up are another area of incremental growth across retail channels, as shoppers become more purposed in their approach. Whether a Canadian Tire location can mirror a local Shopper’s Drug Mart as a milk and bread “quick stop” will be interesting to watch. As always, retail execution will tell the story.
Obviously, everyone is trying to sell food to increase traffic for their other offerings. The key here is, does food in this environment fit its target market? Also, will food dilute its current positioning?
There is a difference between limited food offerings for contractors and candy offerings at Halloween in Home Depot and a full assortment of groceries at a tire store.
As a regular shopper at Canadian Tire, I truly believe this will be a total disaster. Not because Canadian Tire doesn’t know how to merchandise, or because people won’t want to buy groceries from the same place they buy tires. It will fail because the vast majority of shoppers at Canadian Tire are men–blue collar trades people and handymen.
These men are looking for tires, tools, hardware, and plumbing fixtures. Not macaroni, broccoli and milk.
I give Canadian Tire points for trying. But in the end, the saying “stay with what you know” will be used a lot.
Club stores in the U.S. keep a lot of distance, in real terms but also psychologically, that separates where they sells food from where they sell tires.
Interesting time to launch into grocery. Still, CT gets high marks from me for still looking for new ways to grow. They’ll definitely face operational and competitive challenges, but CT also has a track record of innovative thinking and branching out into other consumer categories like financial services. I also like their recent small-market/rural-market format which combines both a CT and Mark’s Work Wearhouse.
Moving slowly with the grocery rollout is a positive that will give CT time to examine the operation and rethink where necessary. What would make me feel more positive is if CT had a differentiation strategy. Differentiating the CT grocery biz from competitors will be necessary if this test is to succeed.
Canadian Tire is an iconic brand here in Canada. They’re a lot more than just tires. Perhaps no other retailer in Canada has responded so successfully to the Walmart arrival years ago.
Having said that, I’m struggling to see this working much beyond the grocery assortment they already carry. I can’t envision my fellow Canadians warming up to the notion of buying perishable food products there. But, Canadian Tire has achieved such a deep penetration into the market, and has a remarkable shopping frequency with its customers, they just may pull it off. I just wouldn’t bet on this one.
Menards tried this in their home improvement stores in the Midwest. I don’t think any grocers lost sleep over it. Canadian Tire is just kicking the tires on this and I don’t think we will ever be having more discussion about it.
As hard as it is to successfully sell groceries, I will be very surprised if they do well at it. We have companies in this country that haven’t been able to learn how to sell groceries. Look at Target and Kmart for example. While it is not hard to sell dry goods and canned goods, the perishable departments are a real challenge that often separates the men from the boys.
Most on RetailWire (as well as the Toronto Star and Globe and Mail story discussion threads) were pretty negative on this piece. My take is below–but basically my thinking is that Canadian Tire doesn’t really act before being relatively sure of the outcome. Traditionally they have been a risk averse company so the format expansion to include grocery is either a well-thought-out strategy or a shift to be a more risk-taking company. To me, the former rationale is the more likely.
According to market data, 9 out of 10 adult Canadians shop at Canadian Tire stores at least twice a year, while some 40 percent stop in on a weekly basis. Add to this the fact that 85 percent of the country lives within a 15 minute drive and it is clear why they want to alter the Canadian Tire format in an effort to grab a share of the customer’s grocery wallet.
But will these drivers (and don’t forget the company’s wildly popular loyalty/frequent shopper rewards program where a percentage of each purchase is returned in “Canadian Tire money”) be enough to convert the brand’s traditional hardware, garden center, seasonal, and automotive department buyers into regular grocery shoppers? As pointed out on this discussion thread, we’ve all seen the one-stop-shop recipe fail before, but I’d argue that few have had the luxury of a fiercely loyal Canadian Tire customer base to “get things cooking.”
I agree with Jonathon. Perhaps we’d call this a “proof of concept pilot.” All it really shows is that the organization can actually operate these two stores given the existing or available infrastructure and internal resource commitment. As has been noted, the marketplace is such a diverse environment that 2 stores cannot effectively test the validity of a chain-wide roll out.
Having said that, let’s look at the fundamental driver for this initiative…and it’s the same one which motivated Target and Walmart. People shop more often for food than for durable goods. Period. If consumers can be influenced to change their shopping pattern at all, and add one more trip per month (or week) to Canadian Tire, then this program will be extremely valuable.
The question, “what will they learn from a two store test?” brings up some interesting questions about retail testing practices in general. Too often, retailers think testing an idea in 2 stores can tell them whether a program works or not economically. Not true. 2 stores isn’t nearly enough to overcome the “noise” in retail and to demonstrate the true impact of the program, that is, what the sales lift, margin lift, and ROI attributable to adding groceries to this format–including any halo and cannibalization effects on the rest of the store–is.
At APT, we call this type of activity a “trial.” What they could they learn in a 2 store trial is:
– whether they can logistically/operationally handle selling food in these stores;
– some information on whether customers/employees say they like the offering;
– whether the sales of the new items are so low that the economics couldn’t possibly pay out (very unlikely).
Learning the ROI of the program, as well as what types of stores perform best with grocery, will then require moving to an actual test with more stores (typically 15 to 30 for this type of test).
Canadian Tire seems like a fascinating retailer. I have never been to one, but my Canadian friends seem to always be talking about it and always have a reason for going there. Canadian Tire is surely getting more traffic and more frequency than a “tire store” would be expected to experience. Clearly Canadian Tire has built a brand that transcends “Tire.” It is that branding that opens multiple retailing opportunities.
From the article, I would hardly assume that they are going to be the next big grocery chain in Canada. The groceries they are bringing in are of limited assortment and not illogical extensions of soft drinks and snacks. So far it sounds like a C-store assortment more than a Loblaw’s assortment. If so, my bet is they are successful.
But, what also strikes me as interesting is that Canadian Tire has had some success in holding off the Walmart invasion. Could their long-term plan in fact be to measure up against Walmart? Certainly, a challenging objective if they are. But, let’s not get carried away with where they are going. They are simply using a domino principal in growing their business. That is “what can we sell to our current customers?” and “can we bring a bit more traffic by expanding our offerings?” The drug chains in the U.S. have followed the exact same strategy, with bread, milk, cereal and frozen pizza…and don’t forget the ice cream!
One bridge too far!!!
Assuming the marketing and merchandising aspects are solved, what killed Loblaw’s was the supply chain. Groceries and general merchandise are totally different animals. One needs to build almost a second supply chain to handle that. I am not sure either if CT dealers (store operators) will be too keen in carrying this low margin, high volume stuff.
I doubt Canadian Tire will learn much from a two-store test. The sample size is just too small.
My suspicion of what they’d learn from a broader test is that they need to stay out of the grocery business. The Dealers, or franchisees, know nothing about grocery and are not the best merchants when it comes to turning dating stock effectively.
Mark Foote, former head of retail at CTC once told me, “If you don’t eat it or wear it, we sell it.” I think these days are now over. Interestingly, Mark later spent some time at Loblaws trying to sell groceries, and now someone from Loblaws is at CTC trying to sell groceries. They should leave the grocery business to the grocers and Walmart.
This marks an incredible addition to the market. Not only will you be able to buy auto parts, home goods, tools, guns, sports equipment and sod, but now the addition of fruits and vegetables and milk and of course a steak to cook on that new grill you just bought.
Will this be the right kick that CT needs to stay competitive, or should the mantra of “do what you know” take precedent? Perhaps growth that large really isn’t needed for a market as small as that in which CT operates. How will this play out in other markets like Toronto? Niagara Falls? Or Edmonton?