Hudson’s Bay is expanding its iconic Zellers brand across Canada, increasing the store’s footprint in cities across the country.
With the launch of its first e-commerce site and 25 shop-in-shop locations nationally within Hudson’s Bay stores, the brand will now be opening a series of pop-up boutiques within Bay stores.
The company said it intends to open larger footprint stores in some or all of those same locations. The first pop-up will launch at Hudson’s Bay’s flagship Queen Street store in June, with up to an additional 20 pop-ups expected to open in August. These pop-ups will effectively measure customer response in each market to determine the best fits for the Zellers store experience.
“We have always said that we will listen to Canadians, and they will tell us where to grow,” said Sophia Hwang-Judiesch, President, Hudson’s Bay, in a news release. “With these pop-ups, our expansion strategy will be fueled by the interest and feedback from our customers across the country.”
Zellers stores are 8,000 to 10,000 square feet. The updated pop-up size has not been determined just yet, and may differ by location.
HBC, the holding company of investments and businesses that include Hudson’s Bay and Zellers, as well as Saks Fifth Avenue and Saks Off Fifth, also announced that it has raised $240 million of additional liquidity to further invest in and grow its operating businesses. With an immense opportunity for growth in its retail markets, HBC said it recognizes that this capital will strengthen the company’s strategic position while also taking advantage of the opportunities being created as other retailers exit the Canadian market.
“As we diversify our consumer offerings, we are strongly positioned to expand on the retail experience customers have come to expect from Hudson’s Bay, Saks Fifth Avenue, Saks Off Fifth and now Zellers,” said Richard Baker, Governor, Executive Chairman and CEO of HBC, in a statement. “With this incremental liquidity, we will strengthen our businesses and build upon the great foundation we have established.”
The core product line at Zellers in Canada is the Anko brand, developed for Kmart Australia. The Anko brand is now wholesaling in retailers globally with Zellers being the first to carry it outside of its home country.
Bruce Winder, author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail, said he is surprised that HBC has decided to expand the revised Zellers format so quickly after launch and that some stores will receive a larger footprint than the initial pop ups.
“Based on the late March launch date, the company must have been impressed with results to date. I thought they would have waited longer to make this decision as I fear the initial interest from customers may not reflect typical performance once the pomp and circumstance dies down,” said Winder, who worked in the past for Zellers for almost two years as general merchandise manager for seasonal.
“Maybe when one looks at incremental sales versus incremental cost to run the operation they have a low break even point and can leverage existing fixed cost on stores and distribution. Also, perhaps HBC wants to take advantage of the current and future economic downturn to expand its value offering. Certainly we have seen a flight to value based on rising interest rates and sticky inflation, especially in food.
“The capital raise will help the company put its best foot forward and perhaps spend more money advertising the brand refresh. I hope the rollout is a success as Canada needs more competition especially within this segment.”
George Minakakis, CEO, Inception Retail Group, and author of The New Bricks & Mortar: Future Proofing Retail, wondered if HBC saw an uptick in sales so early in the initial Zellers launch to justify this expansion.
“Certainly, one would hope so. This fast-paced shift comes with risks. Unless, of course, there is no other choice for the brand. I, too, would be compelled to alter my offering if I led a mid-market department store brand struggling with economic, consumer and digital competitive forces. Hudson Bay’s expanding footprint of Zellers is also an admission that things have changed in the Canadian retail landscape, as so many retailers know,” he said.
“There is also the harsh reality that more than half of Canadians are balancing on a financial tightrope, living precariously from paycheque to paycheque. This is the grim portrait of our ‘new’ middle class. And nothing more negatively impacts a consumer’s confidence than high prices and debt. To lure these budget-conscious shoppers back to brick-and-mortar stores, all retailers need more than nostalgia and lower prices. They will also require an enticing kaleidoscope of assortments and pricing that doesn’t cause heart palpitations when customers receive their credit card bills. Not to forget an exhilarating shopping experience so compelling it’s unforgettable.
“So, is Zellers that charm for HBC? This co-branding between Zellers and HBC is a strategy; however, could this damage HBC further? It might. My experience has been when I enter the department store on my left is Zellers, and on my right is HBC. That’s confusing. I am still skeptical on two fronts. The first is that nostalgia is a long-term strategy. Yet I will contradict myself here by saying that it could be helpful in sending a message that HBC is priced for all consumers. The second level of my skepticism is when a retailer tries to be all things to all consumers. It has seldom worked well and could alienate their base customers.
“Nevertheless, this isn’t the Hudson Bay of old nor our grandparents’ retail world. It could be a brilliant revival strategy. And then there is the legal issue over the Zellers trademark, for which HBC has a strong case.”
Liza Amlani, Principal and Founder of the Retail Strategy Group and The Merchant Life, said the Zellers expansion strategy is smart and she’s happy to see that Sophia Hwang-Judiesch’s team is testing the market with pop-up stores.
“Expanding too quickly without learning what resonates with the consumer would have been a mistake. The true test will be analyzing the Zellers success through inventory turns, full-price sales and gross margin. With more consumers tightening their spending, the lower priced product mix could be exactly what Canadians need,” she said.
“Further, if you take a deeper dive into the product mix, the assortment strategy has a focus on baby, furniture and bath which are essentials at a competitive price point. As a former merchant, I am happy to see a relevant product mix that feels like a Target 2.0 but saves us the effort in cross-border shopping. In light of the Zellers expansion, it would be important for The Bay to invest in store planning and product-obsessed brand ambassadors. These are the missing links that could save this iconic retailer.”
Michael Kehoe, Broker of Record at Fairfield Commercial Real Estate Inc. said the expansion of the Zellers brand by Hudson’s Bay is a strategic and measured program that is being driven by consumer demand.
“The fact that capital has been raised lends credibility to the venture and its likely success. The proposed larger footprint stores are a result of the recent successful test-drive / pop-up store-within-a-store launch in several Canadian markets along with e-commerce that has been supporting the Zellers brand,” he said. “The scale of the next round of large format pop-ups, 20 in all, to be open just in time for the important back to school selling period is a welcome addition to the value end of the Canadian retail spectrum. This will serve the Canadian consumer in specific markets very well during these challenging economic times and beyond.”
