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Zellers will have Uphill Battle to be Successful and Drive Profits for HBC: Expert [Interview]

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Canadian retail expert Bruce Winder believes it’s going to be a tough challenge for Zellers as the brand resurrects itself with the opening this spring of 25 stores within Hudson’s Bay locations.

“Obviously Zellers has a warm place in the hearts of Canadians as it relates to sentimental value and nostalgia. It naturally creates a lot of buzz in the media and on social media,” said Winder, author of RETAIL Before, During & After COVID-19 and president of Bruce Winder Retail.

Bruce Winder

“But when you really look at the situation, though, I think it’s going to be a real steep uphill climb for Zellers to do any meaningful business just based on the situation at hand where they’re going to go into different Bay stores and there’s just a lot of headwinds in terms of seeing this make a major impact in Canada.”

Winder, who worked for Zellers for almost two years as general merchandise manager for seasonal, said many Canadians know the brand because many children used to go to the restaurants with their parents when they were kids. 

“Now those kids are adults and they’re sort of at the prime age to start spending on products . . . But the question is what’s your perception of them. There’s a reason why Zellers went away in the first place. So I’m sure some people have a really heartfelt, warm heartfelt, memory of the company and there’s others who think well you know what they didn’t do a great job versus Walmart or other folks so that’s why they left,” said Winder.

ZELLERS’ FORMER MASCOT “ZEDDY” PHOTO: VIA CTV NEWS BC

The last Zellers stores in Canada were closed in recent years.

Reports indicate the new Zellers stores will be opening in smaller formats and likely not include restaurants. Zellers shop-in-stores will include a mix of urban and suburban locations spanning between 8,000 and 10,000 square feet — much smaller than the typical standalone Zellers stores that Canadians knew from the past which were on average 94,000 square feet. 

“I understand why they’re doing it because they already have the space in Hudson’s Bay locations. Many of the stores have too much square footage already so they have a lot of dead space. So I understand why they’re looking to put them in Hudson’s Bay stores for that reason. To save on costs,” said Winder.

“But I honestly think that the real estate strategy doesn’t make any sense because people who go to Hudson’s Bay aren’t really people who would shop at a Zellers. If they’re appealing to the discount consumer, we have to see what their price points are and their assortment. But if they’re appealing to the discount consumers similar to the way Zellers was, that’s a different real estate strategy altogether. That’s more sort of second tier malls where the real estate’s cheaper but also where the demographic is different.

“Hudson’s Bay tends to be in malls where some of the demographics are a little higher income. There’s a bit of a mismatch there from my perspective.”

Image: Zellers

When asked if this concept is going to work, Winder replied: “It depends on how you define what success is. There’s a lot of things here going on. Is success successfully defending our trademark so that we can tell the courts that the Quebec family who allegedly filed for our trademark has no business having it because we’re using it? Is that success? If that’s success then maybe it’s a good strategy.

“If success is having meaningful sales and profit contribution to HBC, I don’t think that’s going to work because if they’re targeting sort of a value price point, you know how it works in retail, the more you buy the cheaper your price, and if you only have 25 stores and a few categories you’re not going to get the best pricing out there versus Dollarama, Dollar Tree, Walmart, any of those folks. So they’re going to beat you every day on price. Or you match them and make zero money and lose money. So I don’t think it’s going to be an economic success.

“If it’s a trademark blockade success then maybe that’s good. Is it using dead real estate to do something? Maybe. But I really don’t think it’s going to be a big contributor to sales or earnings for HBC.”

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training.

1 COMMENT

  1. Zellers left Canada as a discounter, to make it back in any way, they need some front door exposure, not buried in empty space of Bay stores. Baker received almost 2 billion dollars from Target and cashed in big on a business that was heading downward, notwithstanding the attack of Walmart. Baker has sold off more assets, as the years have gone by, his business is Real Estate and let’s not forget that.

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