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Retail Fraud Continues to Increase in Canada Amid Pandemic: Executive Study

By
Mario Toneguzzi
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A survey of risk and fraud executives at ecommerce and retail companies in Canada and the United States reveals that fraud continues to increase and most acutely affects mid to large-sized merchants.

The survey by LexisNexis Risk Solutions, a data science company based in Alpharetta, Georgia, is the 11th edition and for the first time has included Canada.

MID TO LARGE-SIZED BUSINESSES ARE THE MOST AFFECTED BY RETAIL FRAUD

The 2020 True Cost of Fraud – E-commerce and Retail study said the result of increased fraud volumes translates into a 7.3 percent increase in the cost of fraud year-over-year and the LexisNexis Fraud Multiplier shows that every $1 lost to fraud now costs companies an additional $3.36 compared to $3.13 in 2019 and $2.40 in 2016. This is an increase of $0.96 over five years. U.S. costs are significantly higher than the cost that Canadian retailers face per $1 lost to fraud at $2.87.

“Retailers and ecommerce merchants should be prepared for increased fraud attacks and costs for the foreseeable future,” said Kimberly Sutherland, Vice President, Fraud & Identity Management Strategy, LexisNexis Risk Solutions. “It is unclear how the COVID-19 pandemic will shape the purchasing landscape over the next few years, although we do know that fraudsters will continue to shift tactics quickly in response. The most effective way for businesses to fight fraud and protect their consumers is by performing a more complete assessment, combining physical and digital identity data of those making purchases.

“High fraud costs impact ecommerce merchants and retailers as sophisticated threats increase. A multi-layered strategy can protect retailers and ecommerce merchants throughout each buyer experience. Every transaction channel and type carry unique risks. Using different solutions to support fraud detection at various points in the consumer journey will strengthen overall defence.”

Chris Schnieper, Director, Fraud & Identity, LexisNexis Risk Solutions, said that over time what has been highly consistent is this notion of fraud certainly increasing.

“When we look at organizations that use a risk-based, multi-layered approach that can help reduce what we call the fraud multiplier — that total cost of fraud. It can help reduce that relative to their cohort peers in the study that do not utilize those same types of (approaches),” he said.

Schnieper said what is extremely interesting right now because of the COVID-19 pandemic is that over the last number of years there’s been a definite increase in a digital-first type of strategy in a number of industries such as retail and financial services. It drives a high level of convenience for consumers.

“COVID really drove that model to accelerate,” he said.

“The more people you have online the more fraudsters are going to try and take advantage of that.”

Kate Davis Green, Director, Fraud & Identity, LexisNexis Risk Solutions, said the fraud multiplier cost includes, in addition to the dollar amount lost, things like fees, interest, merchandise replacement and shipping, and redistribution.

“We highly recommend that organizations take a multi-layered approach to combating fraud,” she said.

“We’re talking about layering different types of fraud solutions in a workflow so that these different solutions can kind of benefit from one another and capitalize on the strengths of these solutions to make sure that we’re fighting fraud and fraudsters in the right way but also using risk appropriate friction to ensure that those trusted consumers pass through seamlessly.”

Key Findings and Trends from the study include:

  • Successful Fraud Attacks Increase: The average volume of monthly fraud attacks increased nine percent for U.S. retailers year-over-year while the average number of successful monthly fraud attempts increased 43 percent — 48 percent for mid to large retailers and 27 percent for smaller retailers. Attack volumes were already trending upward prior to the shutdown as mobile and online channels traditionally have higher fraud rates. Some of this growth is due to increased transaction volume due to the temporary closing of brick-and-mortar retailers during the pandemic;

  • Shutdown Spurs Increase in Fraud Costs: A comparative analysis of those surveyed showed that average monthly fraud attack volumes were significantly higher for specific retail segments who responded to the survey during the shutdown. Mid to large general merchandise retailers selling physical and digital goods had on average 70 percent more fraud attempts per month than those surveyed prior to the shutdown in March 2020. Businesses that continued operations during the pandemic who had higher mobile purchase transactions with in-store pick up experienced more fraud volume and coinciding higher fraud costs since these retailers had to rely on store employees for identity authentication rather than solutions designed to detect mobile fraud; and

  • Retailers Struggle to Keep Pace with Fraudsters: Retailers are finding it difficult to distinguish legitimate customers from malicious bots while balancing fraud prevention with risk-appropriate customer friction. This becomes even more complicated when purchases involve third-party, non-bank payment providers where transaction speed and volume are high and transparency into complex payment chains and end-customer profiles is low. Mid to large retailers selling digital goods are more challenged detecting and preventing fraud within these payment types. 58 percent of retailers selling digital goods say differentiating synthetic identities is a top verification challenge. Businesses new to mobile commerce contend with these issues more than businesses with more established fraud and risk mitigation solutions.

The Anatomy of Good Cannabis Retail Store Design

By
Retail Insider
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Interior of Choom store. Photo: Cutler
Interior of Choom store. Photo: Cutler

Since the Cannabis Act came into effect in Canada on October 17, 2018, pioneering brands have been opening unique new retail spaces across the country.

What started as a gold rush of brands racing to open retail locations to beat out the competition, has slowed to a game of strategy—as brands realize that it takes more than speed to stand out and stake a claim in this turbulent but exciting new industry. 

In a 2019 journal entry, Vancouver-based design firm Cutler explored three key challenges facing brands entering the Canadian cannabis retail market and how to overcome them. Fast forward a year, Cutler have more successful location openings in its portfolio, and a new set of insights. Below are Cutler’s key findings:

STAND OUT

As the first wave of retail cannabis settles, brands are finding themselves faced with a new challenge: how does one stand out in an industry filled with newcomers offering the same or similar products?

The solution? Showcase your brand and provide customers with a memorable retail experience.

SHOWCASE YOUR BRAND IDENTITY

Every brand has a unique story. If you want to stand out in the cannabis market, the design of your retail environment and merchandise must tell it. 

How do you achieve this? 

  • Have a clear brand presence throughout your store
  • Nail consistency

Cutler’s experience working with cannabis brands like Kiaro & Choom proves that a well-communicated brand can be the difference between a location’s success and failure. Interior elements such as signage, murals, feature walls, and millwork can all be used to reflect the meaning behind a brand; while inspiring customer interaction and establishing a divide between you and your competition.

Unique, consistent, and well-placed brand elements give customers something to connect with. If done well, that connection can be so impactful that it remains memorable long after they have left; building brand loyalty, and inciting repeat visits.

Interior of Kiaro store. Photo: Cutler
Interior of Kiaro store. Photo: Cutler

PROVIDE A QUALITY EXPERIENCE 

The need for meaningful connection is part of Cutler’s biology. A physical retail space presents a brand with an opportunity to facilitate that connection.

As the number of new retail cannabis locations swells, so does the competition. And more competition equals less market share. Providing customers with a good experience is the solution to this growing dilemma. Brands that provide customers with a good experience bring in 5.7 times more revenue than competitors that lag in the customer experience department. Customer experience can be defined by your customers’ perception of how you treat them. This perception affects their behaviour, drives feelings of connection and builds memories; which in turn drives their loyalty.

On a retail scale, a quality experience can be established in a number of ways. A few of which include:

  • Building in brand touchpoints that introduce and educate customers about your product lines; 
  • Having knowledgeable customer service staff who are focused on building relationships and creating a personalized experience;
  • And establishing a community around your brand by hosting special events that add value and showcase your expertise, while showing your appreciation for your customers.

Unfortunately, there isn’t one magic formula to creating a good customer experience. What works for some brands, may not for others. To know what will resonate with your customers, you need to get to know them. This means market research.

For Cutler, market research is a foundational component of its approach to retail space design. It ultimately helps influence the design not just of the retail environment, but the entire customer journey — from storefront to checkout. 

Once you know who your customers are, you can then design a personalized experience tailored to serve them.

With 73% of consumers saying that a good experience is key in influencing their brand loyalties, and loyal customers being five times more likely to purchase again (four times more likely to refer a friend to your brand), you can’t afford not to provide customers with a good experience in the retail cannabis industry.

PLAN FOR THE FUTURE 

As new technology and products are introduced, the Canadian cannabis industry will continue to evolve; and with that evolution will come a new set of challenges. To ensure that you’re ready for them, it is vital that your retail space is designed to be future-proofed. 

Building in moveable millwork components or interchangeable display systems are two great, budget-conscious ways that we like to future proof a space. Having the ability to rearrange your product displays gives you versatility; making it easy for you to pivot as customer needs change and the industry evolves. And with the total number of Canadian retail cannabis stores rising by 88% from March 2019 to July 2019 alone, you can bet that it will.

*Cutler recently partnered with Retail Insider as a sponsor for our Spacelist real estate page. Visit our real estate page to search for and upload commercial listings. For more information on Cutler and its design work, visit: www.cutlerdc.com

Canadian Retail Sales Become A Little Less Horrible in May

By
Ed Strapagiel
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Canadian retail sales are still plunging at record speed, according the latest numbers from Statistics Canada. In May 2020, total unadjusted retail sales declined 20.0% versus the same month a year ago. While that’s a horrible result, it’s actually an improvement over the phenomenal 31.3% year-over-year drop recorded in April. With more stores and shopping malls reopening, gradual improvement in the numbers is expected going forward, but it will take a while.

TOTAL RETAIL CHART

The above chart shows the plunge in the 3 month average (orange line) retail sales growth rate, the worst decline ever. For the 3 months ending May, retail sales fell 20.8% year-over-year. The underlying 12 month trend (green line) is now nose-diving in statistical sympathy.

 Not all retail sectors have been affected equally however.

 Food & Drug

The relatively staid Food & Drug sector is showing unprecedented retail sales increases, gaining 9.3% for the 3 months ending May versus a year ago. The underlying 12 month trend (green line in the chart) has been trending up since the start of the year.

FOOD & DRUG CHART

Supermarkets & other grocery stores seem to have cashed in the most from COVID-19, with retail sales up 18.1% year-over-year for the 3 months ending May. Convenience stores also did well, gaining 11.9%.

Retail sales at health and personal care stores however were down 4.8% for the 3 months ending May. Note that this category also includes cosmetics, beauty supplies and perfume stores, opticians, and other retailers which may have been required to close due to the pandemic.

Store Merchandise

Retail sales in the Store Merchandise sector continue to plunge, declining 19.4% for the 3 months ending May. The main factor here is store and shopping mall closures, which is now beginning to abate. There may be a modest surge in sales once everything is reopened as consumers catch up on some of the shopping they may have missed.

STORE MERCHANDISE CHART

General merchandise stores are doing relatively well, with retail sales actually up 2.3% for the 3 months ending May. As noted in last month’s report, this group includes combination stores like Costco and Walmart which are also major food retailers, as well as larger operators like Canadian Tire and Hudson’s Bay which may have more developed e-commerce capabilities and online presence to fall back on.

Clothing and clothing accessories stores however are being decimated, with retail sales down an incredible 69.2% for the 3 months ending May. Many of these non-essential businesses were forced to shut their doors due to the pandemic, and/or are located in shopping malls which were also closed.

Furniture & home furnishings stores have taken a major hit too. Their retail sales declined 43.8% for the 3 months ending May.

Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the “By The Numbers” table below are estimates based on previous trends.

There is absolutely nothing good to say about the Automotive & Related sector. Retail sales were down 43.0% for the 3 months ending May versus a year ago, including a 48.9% drop at new car dealers and a 36.5% decline at gasoline stations.

AUTOMOTIVE & RELATIVE CHART

Auto dealers are now gradually reopening and are also using sales tactics like customer appointments and online viewing to stimulate business. Going forward, retail sales should gradually improve.

Gasoline station retail sales may need more time to recover. They face a double whammy of low pump prices and people driving less, whether for work, shopping, vacation, or just to visit grandma

By The Numbers

Special Note: Statistics Canada revised historical data with the February 2019 release. Unadjusted monthly data were revised back to January 2018, while seasonally adjusted data were revised back to January 2015. Those keeping score should update their files. The analysis in this report is always based on unadjusted data.

CANADIAN RETAIL SALES BY TYPE OF STORE CHART

Canadian E-Commerce Sales

While there were major declines in location-based retail sales, StatsCan data shows a huge increase in e-commerce. In recent months, e-commerce retail sales were up more than double versus a year ago. This includes a 112.7% increase in May and a 123.6% gain in April. Although StatsCan does not directly provide the figures, estimates indicate e-commerce at bricks & mortar retailers grew more than those at pure play operators.

CANADIAN E-COMMERCE RETAIL SALES CHART

Overall, e-commerce represented about 4.5% of Canadian retail sales for the 12 months ending May 2020, including both pure play as well as brick & clicks stores. In May 2020 alone, e-commerce’s share of total retail was up to a record high of 9.5%. Note that Canadian consumers may also buy online from foreign websites which is not captured in these numbers.

Location based retail is the same as that in the preceding “By The Numbers” table. It’s what’s normally reported as Canadian retail sales. Except that it isn’t. Location based retail excludes another section called Non-Store Retailers (NAICS code 454), which includes electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce businesses are. For the 12 months ending May 2020, electronic shopping and mail-order houses had an estimated $16.9 billion in e-commerce sales.

But that’s not the only source of e-commerce, as (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending May 2020, this group had an estimated $10.3 billion in e-commerce sales. With electronic shopping and mail-order houses, there’s a grand total of $27.2 billion in e-commerce sales by Canadian operators. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include e-commerce purchases made by foreigners at Canadian operations.

For electronic shopping and mail-order houses, an estimated 8.5% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that 1.8% of their total sales are attributable to e-commerce.

In the final section of the above table, (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generated an estimated 62.3% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers’ share of e-commerce was 37.7%.

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.

This analysis is updated monthly as new numbers are published by Statistics Canada. If you would like notification from Linkedin of when an update becomes available (and you’ve read this far), please connect with Ed Strapagiel on LinkedIn.

Grocery Giant Empire Announces Massive 3-Year Growth Strategy Investment

By
Mario Toneguzzi
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EXTERIOR OF FARM BOY STORE IN HAMILTON. PHOTO: FARM BOY

Canadian grocery giant Empire Company Limited is launching an aggressive three-year growth strategy for core business expansion and ecommerce acceleration.

PROJECT HORIZON WILL INCLUDE A $2 BILLION CAPITAL INVESTMENT AND A THREE YEAR GROWTH STRATEGY

The initiative, Project Horizon, will include a more than $2 billion capital investment.

The company said its new three-year strategy will deliver an incremental $500 million in annualized EBITDA by the end of fiscal 2023. Building from the overwhelming success of Project Sunrise, Empire’s previous three-year strategy, the company is well positioned to accelerate a new ambitious growth plan, it added.

“Empire now has the team, the structure and the vision to achieve its sales and earnings potential,” said Michael Medline, President & CEO, Empire, in a statement. “Even though we exceeded our Project Sunrise savings target of $550 million, there is still substantial value to unlock through Project Horizon. As the retail landscape in Canada continues to react and shift, under the seismic waves caused by the pandemic, it is clear now, more than ever, that we must be able to serve customers where, when and how they want to shop. We will invest in our core store business to drive growth and will move much faster with Voilà customer fulfillment centres and a new, exciting store pick solution, using Ocado technology.”

Empire said it will accelerate investment in physical assets, through renovations and conversions, and store processes, communications, training, technology, and tools. Capital spend is expected to average approximately $700 million annually over the next three years, which includes approximately 20 new Farm Boy locations in Ontario and the conversion of approximately 30-35 conventional stores to FreshCo in Western Canada.

In fiscal 2021 capital spend is expected to be $650 - $675 million with approximately half of this investment in renovations and new stores. Empire will open approximately 10-15 FreshCo stores in Western Canada and expand the Farm Boy footprint by approximately eight stores in Ontario. It will also invest approximately 15 percent of its estimated spend on advanced analytics technology and other technology systems. Empire's total investment in Voilà for fiscal 2021, including its share of the investment in the Montreal CFC (Customer Fulfillment Centre), is approximately $65 million.

"It must be spending week by big retail in Canada. First Walmart now Empire. Are we going to hear from Metro and Loblaw this week too? I think Empire indeed has some strong opportunities to grow — specifically with the expansion of FreshCo in the West and Farm Boy in Ontario,” said Bruce Winder, author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail. Winder was referring to Walmart Canada’s $3.5 billion investment recently.

“I think they are playing the Ocado card well with further growth of markets to serve and the test and potential roll out of micro-fulfillment technology at select stores in smaller markets. They are definitely chasing grocery ecommerce aggressively which I think is the right move. Time will tell if Ocado will be their secret weapon to get to best-in-class in food delivery.

“The use of AI and other technology is a given and will be used by all grocers soon if not being used now so I think they will have a harder time differentiating themselves on this front. Personalization is expected and has been in operation for a while at Loblaw.”

EXTERIOR OF FRESHCO GROCERY STORE. PHOTO: FRESHCO

WILL COMPETITORS SUCH AS LOBLAW AND METRO FOLLOW SUIT?

Has Empire's plans considered a strong competitive response by Loblaw and Metro? Two strong grocers who have proven to be innovative and agile.

“They will not sit by and watch Empire take market share from them. Then you have Walmart and Costco breathing down the big three's neck and gaining traction over the last few years. Don't forget, Amazon is getting stronger by the day too. They can only get bigger and will capture share as well,” added Winder. “More and more the reality may be that spending big is required just to maintain market share and protect margins as much as possible.”

Gary Newbury, a retail supply chain strategist and serial transformation executive, said Empire has pressed the button on the next Three-Year sprint Project Horizon.

“This will see a series of internal changes with a continued focus on cost efficiencies. Empire will continue to roll out its piloted GTA-based Ocado CFC, or a store-based picking approach for catchment areas that are not covered by its ultimate plan to install 4 CFCs across Canada - one is already advancing in Boucherville, due to go live 2022. This would suggest online ordering for places ‘out in the sticks’ may not be able to place an online order for a few years. This is a strategy to lose customers to more nimble competitors already fully engaged in ecomm. In fact, I have been advocating Sobeys need a store picking solution and for this to be in position during 2019, and then migrate consumers to the full blown Voila service once it has demonstrated to consumers it has mastery of their online orders.

“I can’t help concluding, this shopping list of new initiatives has been hurried along after Walmart Canada’s significant investment ($3.5B) in addressing their developing omnichannel consumer. Empire needs to focus on accelerating the launch of its online proposition with some speed to build loyalty, before the customer acquisition costs rocket and they are in direct battle with Walmart, Loblaws, Costco or Metro Inc.”

Having no ecomm presence during the pandemic — even a basic “click and collect” — will have hurt Empire undoubtedly, with some consumers wanting groceries without needing to visit the shelves, said Newbury.

“This alone demonstrates the performance gap of digital transformation here in Canada which is not isolated to just the grocery category,” he said.

“One of the challenges of taking a grocery brand online is the ability of consumers to sit at home and split their baskets to use their shopping dollars wisely. Building loyalty by consistent order fulfilment performance at the household (on time and in full) is one way of mitigating the risk of split baskets. However, being late to the gate risks being seen as an ‘also ran’ rather than a leader in the field.”

VOILA BY SOBEYS HOME DELIVERY. PHOTO: SOBEYS

Sylvain Charlebois, Professor, Food Distribution and Policy, Faculties of Management and Agriculture, Dalhousie University, said Project Horizon covers a lot of ground, but it points to how Empire’s leadership is maturing well with Medline at the helm.

“While Project Sunrise was all about cost cutting, Project Horizon sets a clear path for growth with clear objectives. I see three main ones. First, network design. I’m expecting its network of stores to change significantly. The market is overstored and the focus will be more on discount stores, post-COVID. Many closures and conversions will occur,” he said.

“Secondly, the private label strategy at Sobeys needs work. To increase margins, Sobeys needs to do a better a job at deploying some key products and engage with merchants more effectively. And finally, ecommerce. With Voilà, Sobeys has set a new benchmark in Canada, and it needs to keep that way by going national, as soon as possible. Other grocers will respond aggressively.”

Empire said it is accelerating its plans for the remaining two Voilà ecommerce CFCs – for a total of four CFCs across Canada – and introducing Ocado's proven store pick solution. This store pick solution will serve customers in areas where the CFCs will not deliver, or are not yet built, and will begin in Nova Scotia at the end of the summer, before expanding and moving West. Ocado's store pick solution is live and successful in various cities across the world.

It also said it will grow the company’s private label portfolio.

Empire said it will cover approximately 75 percent of Canadian households representing approximately 90 percent of Canadians' spend.

Vancouver-Based ‘White Spot Triple O’s’ Expanding Eastward in Canada

By
Mario Toneguzzi
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EXTERIOR OF TRIPLE O’S RESTAURANT. PHOTO: TRIPLE O’S

White Spot Hospitality continues to expand its Triple O’s quick-serve restaurant concept with a recent opening in the Calgary market and plans to expand the unique offering to Ontario.

“We’ve had great success with our full-service restaurants and the highest sales mix, the most popular items at our Whitespots today, are our Triple O’s burgers, fries, and shakes,” said Triple O’s and White Spot President, Warren Erhart. “The base of our menu.”

“We often thought we could create a concept that would bring the products closer to the guests through a quick-service environment that would be very successful. And it’s proven to be that way. We opened our first one at Rogers Arena in Vancouver and then B.C. Ferries and a lot of sort of unique points of distribution.

“The success really is that it’s a limited menu. It’s the same high-quality products we have at White Spot but this one’s all about burgers, fries and shakes. By using the same recipes that we have, our Triple O’s sauce is really a unique burger offering, the quality you can taste in the products.”

He said the uniqueness of the brand includes hand-scooped milkshakes, fresh-cut fries, and the burger sauce.

The White Spot restaurant chain began in 1928. The Triple O’s concept was created in 1997. White Spot currently has 64 full-service restaurants in British Columbia and Alberta. There are 70 Triple O’s locations in B.C., Alberta, and Asia. Of those, 65 are located in Canada and five in Hong Kong.

In Canada, there is one in Edmonton at the Royal Alexandra Hospital, the recently opened Calgary location at Chevron On the Run at Dufferin Boulevard S.E., and the rest of Triple O’s is in B.C.

The name Triple “O” is derived from the “OOO” abbreviation used by car hops back in the days when drive-ins were popular. The carhops would circle the words hamburger, relish and mayonnaise when taking an order for the trademark burger.

Erhart said the ingredients in its Triple “O” Sauce remain a closely-guarded secret.

TRIPLE O’S HAS PLANS TO OPEN 12 NEW LOCATIONS IN THE NEXT 12 MONTHS

“Right now we’ve got the 70 locations. We’re going to have 12 more in 12 months. We’ve got five more in British Columbia opening up, three in the Alberta market, and four in Ontario that we all plan to have within the next 12 months,” said Erhart.

“So really quite an aggressive growth plan, entering new markets. We are going to be planning some more growth and we have got plans, not quite ready to announce, in a second Calgary location. We’re looking at Lacombe (Alberta) and also one in an Edmonton site. Those are sort of our Alberta plans over the next year.

“In British Columbia, a number of locations here as well throughout the province. But also entering the Ontario market in February of next year. So we’ve got sites already in Vaughan and in Mississauga already lined up for February and March opening for next year.”

Triple O’s are located at various places such as Chevron gas stations, free-standing restaurants, sports arenas, and on university and college campuses.

White Spot Hospitality has been recognized with the platinum status designation as one of Canada’s Best Managed Companies, one of Canada’s top 150 iconic brands as awarded by Interbrand Canada, awarded a gold medal for excellence in franchising by the Canadian Franchise Association and as one of BC’s Most Loved Brands as recognized by Ipsos.

Retail Pulse Check: July 22, 2020

By
Retail Insider
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Retail Pulse Check

Webinar Recording is now available for On Demand Viewing! Click here to register and watch the unedited discussion between Craig Patterson and Stephen O’Keefe.

This week on Retail Pulse Check, industry experts Craig Patterson and Stephen O’Keefe discuss Walmart’s recent multi-billion dollar investment into its Canadian operations, how the ‘defund the police’ movement could impact Canadian retail, and the intricacies of navigating the mask mandate that has been implemented in certain parts of the country. 

The conversation also focused on retail’s accelerated movement towards ecommerce in the wake of COVID-19 and how this could drastically alter Canada’s physical retail landscape. Darryl Julott from Digital Main Street joined Patterson and O’Keefe briefly to talk about the various DMS programs available for retailers struggling to leverage themselves in the digital world.

Speaker Details:

Craig Patterson, Founder, Editor-In-Chief @Retail Insider

Craig Patterson is the founder and Editor-in-Chief of Canada’s most-read online retail industry news publication, Retail Insider. He is also a Director at the University of Alberta School of Retailing, as well as a research consultant at Retail Council of Canada. Craig has studied the Canadian retail landscape for over 25 years, and has also been involved with strategy pertaining to urban revitalization in several cities, as well as retail and shopping centre-related design. He is an industry consultant who also gives retail tours and and is a public speaker. He is a graduate of the University of Alberta and holds a Bachelor of Commerce degree and Bachelor of Laws degree.

Stephen O’Keefe, Founder @Bottom Line Matters

Stephen O’Keefe is a 30 year veteran of the retail industry having worked with major brands such as Sears, Hudson’s Bay, and Walmart where he was Vice President of Loss Prevention and Risk Management. He founded Bottom Line Matters as a source for retailers of all sizes to draw upon his experience and expertise and deal with what matters – maximizing their bottom line. Stephen clients have included major retailers, BIAs, vendors as well as the Industry Association itself. He was awarded the Lifetime Achievement Award for his work with the retail loss prevention community, sharing best practice to combat shrinkage and advocating for legislative changes to support retail business.

Pandora Jewellery Launches First-in-Canada Concept Store in Montreal [Photos]

By
Craig Patterson
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NEW PANDORA FACADE IN MONTREAL EATON CENTRE. PHOTO: PANDORA

Danish jewellery brand Pandora has launched its first new concept store in Canada at the Montreal Eaton Centre in downtown Montreal. The store will act as a prototype with innovations that could be rolled out into other stores depending on customer feedback.

THE NEW STORE’S INITIAL CONCEPT WAS ‘TOUCH AND FEEL’ WHICH HAS BEEN IMPACTED BY COVID-19 GUIDELINES

The Montreal Pandora store opened on Friday of last week on the street level of the Montreal Eaton Centre, replacing a former location nearby at Place Montreal Trust. The new Pandora store features a refreshed design as well as new elements with a focus on customization and personalization.

That includes a ‘charm bar’ where shoppers can mix and match bracelets and charms. The intended format prior to COVID-19 was a ‘touch and feel’ concept though at the moment sales associates assist with product behind glass for sanitation purposes.

An in-store ‘treasure table’ features new products as well as best sellers and core collections — Pandora partners to create unique limited edition designs which have become highly covetable with fans of the brand. The new Montreal store also features a ‘gifting wall’ housing a curated selection of gifts sorted by profiles and special occasions such as birthdays, anniversaries, gratitude and other themes.

Sustainability is also a focus for the new Montreal store, featuring lighting designed to reduce energy consumption by at least 20% compared to other Pandora stores. The store’s design itself is modern and inviting, acting as a showpiece within the Montreal Eaton Centre in a retail space next to a Uniqlo flagship store which is set to open in several months.

It’s only the third new concept store for Pandora in North America, according to the company’s North American president Sid Keswani — other updated Pandora concept stores include a unit launched last year near New York City at Westfield Garden State Plaza in New Jersey, as well as a new store earlier this year at Westfield Galleria is Roseville California, near Sacramento.

PHOTO: MAXIME FRECHETTE

PANDORA’S REBRAND HAS TAKEN A CUSTOMER-CENTRIC ROUTE

After some struggles, Pandora began a rebrand last year with a focus on being customer-centric. Mr. Keswani explained that the relaunch’s focus includes “passion, people and places”. Besides the new components for personalization, digital elements were used to make the retail space more compelling.

The company’s footprint is massive with a presence in more than 100 countries on six continents. That includes more than 2,700 Pandora stores globally and nearly 7,800 points of sale. Pandora operates 23 corporate stores in Canada as well as an e-commerce site, and the company also has 55 franchised stores and about 100 shop-in-stores in this country.

Pandora’s fan base is extensive and stores often see lineups around Mother’s Day, Christmas and other holidays. Collaborations with Harry Potter and Disney have also proven to be very popular with some items being limited edition. This year marks Pandora’s 20th anniversary and on the 20th day of each month the brand is re-introducing one charm from its archives.

The average Pandora shopper owns between five and six charms according to Mr. Keswani — customers will add to their collection periodically. To diversify the product offerings, Pandora also features matching collectables including rings, bracelets and pendants.

INTERIOR OF NEW PANDORA STORE. PHOTO:MAXIME FRECHETTE

Philanthropy is also part of Pandora’s ethos and recently, the company partnered with Unicef to help children during COVID-19. Locally, Pandora recently donated proceeds from sales to nurses helping with the pandemic.

Pandora’s personalization strategy addresses a trend seen particularly in younger generations such as ‘Gen Z’ which is becoming accustomed to unique products. Other jewellers also jumped on the bandwagon though Pandora will have one less competitor in 2020 after Links of London recently shuttered its global operations. We reported in years past how Links of London had introduced engraving and customization into its Canadian stores and before its demise, Links had planned to open stores across the country.

The Montreal Eaton Centre, which recently saw its Time Out food hall reopen following a closure due to COVID-19, is nearing completion with a full renovation as well as exciting new retailers having been added. That includes a Decathlon sporting goods store which opened last year as well as a renovated Sephora flagship store. A Uniqlo store, said to be the largest in Canada, is currently under construction and will open in the fall. The Montreal Eaton Centre, owned by landlord Ivanhoé Cambridge, saw a $200 million overhaul that involved joining the Complex Les Ailes retail centre with a smaller Montreal Eaton Centre on a site once occupied by a one million square foot Eaton’s department store. Retail Insider profiled the centre extensively in an article last year.

Pandemic Accelerating Need for Rapid Change in Canadian Retail: Study

By
Mario Toneguzzi
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The huge impact of the COVID-19 pandemic on the retail sector will spur rapid change, driving a radical rethink of the customer journey, particularly looking at the rising influence of urban Generation Z consumers, according to the latest PwC Canada’s 2020 Consumer Insights Survey.

The report said retailers will need to focus on several key shifts in setting out their long-term strategies. Retailers will need to pay attention to Gen Z, who’s shopping habits will shape buying behaviour. They are 25 percent more likely to shop online, and those that go into a store to shop will do so if they can justify the trip.

Also, 40 percent look at a shopping trip as a source of fun and are more likely to want additional services. As more organizations settle into new ways of working, including remote working over the longer term, e-commerce is expected to increase and retailers will need to put more effort into their online and in store experiences, said the PwC report.

“Retailers should determine where and in what circumstances it makes sense to have a physical store and where they need to repurpose their store format and size to respond to consumer shifts and preferences,” added PwC. “In the grocery category, for example, some larger stores may adapt certain spaces for micro-fulfillment of e-commerce orders to support express pickup or delivery. By rethinking the role of the store, investing in seamless digital solutions and offering the right product mix, retailers can position themselves to win in this new environment.”

COVID-19 HAS ACCELERATED THE RETAIL SHIFTS THAT PREVIOUSLY WERE HAPPENING SLOWLY

Anita McOuat, Partner and National Leader – Technology, Media & Telecom (TMT) and Consumer Markets with PwC, said COVID-19 has really accelerated many of the shifts that retailers have already been undertaking in recent years. It’s just put the pressure on retailers to adapt their product mix and operations to this new environment a lot faster than they might have planned.

“We’re seeing the impact of COVID-19 on retail really varying by category. For instance, food would be different than clothing. And we’re really seeing a difference in the way that Generation Z consumers are shopping . . . Retailers in general need to think about the investments they’re making today and really look for that Gen Z cohort as the crystal ball of what will be the consumer of the future.”

GEN Z WILL FORM THE FUTURE OF THE RETAIL SECTOR

Gen Z is the group that followed Millennials and today are typically between the ages of 18 and 22. They will be the shoppers and consumers that form the basis of the retail sector in the coming years as their earning power grows throughout their careers.

“This is a group that is 25 percent more likely to shop online compared to the Boomers. And those that go into the store to shop will only go if they can justify the trip to themselves,” sais McOuat. “So we asked them, what would make you go into a physical store? And overwhelmingly it’s for an experiential reason or a social reason. Really, if it’s going to be fun I will go to the store. Can I put it on Instagram? Is it a fun place to go with friends?

“And the other thing that was really a stark generational difference is the interest in personal shopping services. Gen Z shoppers are much more interested than Boomers in personal shopping. We saw the greatest difference there.”

Before the pandemic, consumer confidence was healthy, with significantly more Canadian respondents (34 percent) saying they expect to spend more in the next 12 months than those looking to decrease their spending (20 percent). But as confidence lags amid ongoing economic uncertainty, we can expect consumers to be more careful with their spending as the lockdown eases, suggesting they’ll gravitate towards products or services that they judge as providing superior value, said the PwC report.

McOuat said retailers in the future will have to think about whether they can repurpose their stores to provide that fun and personal experience that Gen Z shoppers will be demanding. Can the stores be repurposed to become a fulfillment centre for their online channels? That could mean keeping the real estate of certain stores but turning them into a smaller warehouse essentially. Or perhaps turning part of the store into a fulfillment centre?

She said retailers will consider whether they can put services into their stores so that people have a reason to come in beyond just getting the physical, tangible product. They’re coming in because there’s service.

“Some of the (changes in the future) require large investments in operations and supply chain, behind the scenes. And those investments are often three year or five or 10 year shifts. So retailers really cannot start soon enough if they have not started already to make those shifts because the Gen Z cohort will be the primary spenders in five or 10 years,” said McOuat. “So you won’t be ready if you’re not investing now.”

TAURI Thermo-Tablet / Kiosk in Canada – Pre-Screening Staff/Customers/Visitors

By
Retail Insider
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exc-5f1787bcc9031f13d51d056d

Toronto – July 21, 2020: As an authorized dealer of innovative AV technology solutions CP-Stoneman Inc. are pleased to introduce the TAURI™ programmable temperature tablet with integrated (on-board) ReAX™ control system features permitting integration with third party building technologies (Wi-Fi, Enterprise Networks, Video Security, AV, etc.).

With the ongoing unprecedented challenges as a result of the COVID-19 pandemic, we will need to invest in innovative solutions and operational procedures to safeguard all of us. In recent days, it became clearer that local governments are mandating through various bylaws and regulations in wearing of face masks, pre-screening staff and visitors daily to reduce the spread of COVID-19. We are charged with continued safe distancing and controlled public gatherings. This too will become a new “normal” as we move forward to a “return to business/work” society.

To address these complex and challenging issues of our time, CP-Stoneman Inc. recommends the TAURI™, a best in class infrared temperature sensor/detector providing the first layer of protection for your facility and business operation. Surprisingly very simple to set-up and operate, Wi-Fi & Bluetooth enabled with extensive features to integrate with building access/security systems and external video displays and other building systems. The TAURI™ Tablet is available in Three (3) sizes, along with various mounting orientations (tabletop, wall, floor stand). YES. Tauri includes Mask/Face detection and gesture recognition to alert entry point monitoring.

Tarek Marroushi, VP at CP-Stoneman Inc. stated “We believe TAURI will be the must have and default programmable temperature check tablet solution that addresses COVID-19 issues in public spaces and facilities”.

About CP-Stoneman Inc (CPSI). Located in the GTA, CPSI is an integrator – solution provider specializing in innovative and engineered Audio-Visual communications systems for public transit systems, healthcare facilities and institutional facilities. Visit www.cp-stoneman.com

About TAURI™ & ReAX™. TAURI™ is an innovative series of programmable infrared temperature-sensing tablets from Aurora Multimedia (Morganville, NJ) an AV technology manufacture in collaboration with Glory Star (Hong Kong) a global tablet manufacturer with offices in Switzerland, USA, China and Hong Kong. ReAX™ is an AV/Media Control platform developed by Aurora Multimedia for Commercial and Residential AV Integration. Visit www.auroramultimedia.com.

Canadian Fashion Retailer ‘Mendocino’ to Permanently Shut Stores Amid Insolvency

By
Craig Patterson
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MENDOCINO STORE AT SQUARE ONE SHOPPING CENTRE. PHOTO: OXFORD PROPERTIES

Toronto-based women’s fashion retailer Mendocino says that it will shut most or all of its stores amid insolvency. The company’s 20+ units, operating under Mendocino and M Boutique banners, are located in Southern Ontario, primarily in the Greater Toronto Area.

MENDOCINO TO SHUT MOST OF ITS STORES AMID INSOLVENCY

Publication Insolvency Insider reported that the insolvent Mendocino filed a Notice of Intention pursuant to the Bankruptcy and Insolvency Act to restructure the business. A filing document by KSV Advisory Inc. notes that Mendocino is not bankrupt at this point although some or all of the company’s stores will be closing as the retailer focuses on selling online.

Mendocino was founded by husband-wife team Jan Kaplan and Norma Caron in 1987. The multi-brand retailer carries a range of popular brands focusing on a mid to upper-mid price-point. About a decade ago Mendocino launched the M Boutique concept which features a fast-fashion offering at a lower price point. The M Boutique website notes that the retailer focuses on “lifestyle” while “empowering women, embracing your curves and a shared love for all things fashion.” In-store stylists are part of the mix.

The Mendocino website states that its stores are closed due to COVID-19, though the M Boutique website is operational. Using a web archive, we were able to access the Mendocino website which noted five Mendocino-branded stores as of January of this year. That includes units at 2526 Yonge Street in Toronto, Bayview Village in Toronto, CF Sherway Gardens in Toronto, Square One in Mississauga, and 283 Lakeshore Road East in Oakville. Mendocino had other stores in the past including at CF Toronto Eaton Centre, a large unit in the 2016 expansion wing at Toronto’s Yorkdale Shopping Centre which closed in 2017, as well as a store at The Colonnade at 131 Bloor Street West in Toronto which was replaced by Escada in 2013, among others.

M BOUTIQUE AT SQAURE ONE SHOPPING CENTRE. PHOTO: OXFORD PROPERTIES

The lower-priced M Boutique concept has considerably more stores in Ontario, including in Toronto: on Queen Street West, Queen Street East in Toronto’s Beaches area, 2526 Yonge Street, CF Shops at Don Mills, Yorkdale, CF Fairview, CF Sherway Gardens, and Scarborough Town Centre. Other Ontario stores include Square One in Mississauga, Vaughan Mills near Toronto, Oshawa Centre in Oshawa, Mapleview Centre in Burlington, CF Masonville in London, and CF Lime Ridge in Hamilton. Other units presumed to have closed permanently include First Canadian Place in Toronto, CF Toronto Eaton Centre, the Holt Renfrew Centre in Toronto, Upper Canada Mall in Newmarket, Bloor West Village in Toronto, Yonge-Eglinton Centre in Toronto, and Promenade in Thornhill.

Mendocino filed its Notice of Intention last week noting, “At present, creditors are not required to file a proof of claim. The Trustee will provide you with further information and a proof of claim form, if necessary, at a later date.”

Documents obtained by Retail Insider show that Mendocino has debts of $5,783,300.49. The one secured creditor for the debt is the Toronto Dominion Bank which is owed $2,693,726.64.

Other unsecured creditors range from vendors to landlords to even cleaning companies and the Workplace Safety and Insurance Board (WSIB). The WSIB alone is owed over $10,000 according to disclosure documents. American Express Canada is owed over $300,000 and the US division of American Express is owed over $393,000.

Vendors owed money include Levi Strauss Canada with more than $300,000 outstanding, Bestseller Canada (which itself filed for bankruptcy protection this year) being owed more than $141,000, Citizens of Humanity owed about $25,000, and Dex Bros being owed nearly $12,000, among others. Getting future deliveries could be a challenge for Mendocino if credit insurance is an issue particularly at this time.

HIGH RENTS ARE PARTLY TO BLAME FOR MENDOCINO’S FINANCIAL CHALLENGES

Several major landlords are also owed money by Mendocino for outstanding lease payments — it’s clear that high rents are partly to blame for the retailer’s financial challenges.

Mendocino owes Cadillac Fairview more than a million dollars in rents according to documents. That includes almost $243,500 for space at CF Toronto Eaton Centre, almost $330,000 at CF Sherway Gardens in Toronto, more than $108,700 at CF Fairview Mall in Toronto, over $51,000 at CF Shops at Don Mills, over $85,500 at CF Markville near Toronto, nearly $132,000 at CF Masonville Place in London, and nearly $87,000 owing for the space at CF Lime Ridge in Hamilton.

Oxford Properties is another landlord owed substantial money by Mendocino. That includes nearly $273,000 outstanding for real estate at Toronto’s Yorkdale Shopping Centre, over $136,000 for space at Scarborough Town Centre in Toronto, nearly $85,500 owing for rent at Upper Canada Mall in Newmarket, and more than $71,500 owing at Hillcrest Mall in Richmond Hill.

Various other landlords are also owed money according to Mendocino’s filings. That includes to landlord Ivanhoé Cambridge which is owed over $111,000 for unpaid rents at Vaughan Mills near Toronto as well as nearly $84,500 at Mapleview Centre in Burlington. Brookfield is owed over $72,000 for outstanding rents at Toronto’s First Canadian Place. RioCan is owed about $86,000 in rents for its midtown Toronto shopping centre. The landlord for the Promenade in Thornhill is owed almost $69,000.

Mendocino’s business model will transform substantially as part of its restructuring in an effort to remain a going concern. The company was said to be struggling financially before the COVID-19 store shutdowns which accelerated the restructuring process. “As a result of challenges resulting from the pandemic, the Company recently made the very difficult decision to discontinue all or substantially all of their stores and focus on an e-commerce model.” The company went on to note that “The protection resulting from filing the NOI will provide the stability required in order to advance and execute the Company’s restructuring plan.”

Closing all of its stores would likely be a bad move for Mendocino, especially if it plans to rely on web sales to keep the company going. Last year the International Council of Shopping Centres published a report noting a ‘halo effect’ where physical stores help substantially drive online sales while offering consumers both channels. Having no stores could pose a challenge for future operations, particularly if home delivery would be required for customer purchases. Some have said that Canada may be over-saturated with women’s fashion retailers and despite challenges to many, some will continue to operate stores in Canada while offering some of the same brands as those carried by Mendocino.

A landlord Retail Insider spoke to on Monday said that more retail chains in Canada will be announcing significant store closures in the weeks and months to come. Rents, staffing and other costs have resulted in challenging finances for many businesses in Canada that were particularly hit hard by the March 2020 COVID-19 store closures. It remains to be seen if consumers will come back to stores over the summer and into the fall. Some landlords are reporting encouraging sales numbers for some retailers which is good news — while foot traffic is down in many places, those who are venturing out are often buying as opposed to browsing. At the same time, online shopping has exploded in Canada and the trend is expected to continue indefinitely as many are spending more time at home to prevent becoming infected.

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