This story was updated March 1 @ 16:30 EST
In the past few years, Facebook has become one of Canadian Tire’s top two advertising channels, along with Google. That may seem surprising for a company that dutifully delivered its flyers to Canadian doorsteps for the better part of a century. In exchange for its eagerness to test Facebook’s newest ad products, the Tire now gets an early crack at the social media giant’s ripest user metrics. At the beginning of last year, for example, Facebook officials revealed a useful fact: Users spend, on average, seven seconds watching the videos on their Facebook feeds, and two-thirds don’t bother turning on the sound.
“We looked at that,” recounts Duncan Fulton, Canadian Tire’s senior vice-president of corporate affairs, “and we figured we needed to create seven-second silent movies.”
Two frantic months later, Canadian Tire’s marketing team had cranked out 50 seven-second spots—with no sound—and also 50 more traditional social media ads for contrast. When they ran a side-by-side comparison, Fulton notes, the company realized the average sell-through rate with the Facebook micro-ads was 50% higher. “You need what’s called ‘thumb-stopping creative,’” muses Fulton, who also serves as chief marketing officer for the Mark’s and FGL Sports subsidiaries.
Five years ago, it’s safe to say, Canadian Tire’s marketing teams would have been utterly flummoxed by Facebook’s intel. But the company isn’t quite the lumbering, tread-worn merchandiser it once was. Yes, those jam-packed stores still dot the landscape. But, that Facebook story is merely one little piece of the jigsaw puzzle that now makes up the Tire’s ambitious push into the brave new—well, O.K., newish—world of digital-and mobile-savvy retailing.
Canadian Tire execs and watchers alike agree the chain, Canada’s last major hard-goods mass merchandiser, arrived late to the bricks-and-clicks game, or “omnichannel” retailing, the buzzword now in vogue with retail consultants. But since 2013, the company has spent hundreds of millions of dollars upping its technology game, with investments in everything from massive back-end logistics systems to in-store digital wizardry to sophisticated data mining. The business has also been experimenting furiously, deploying novel merchandising techniques, such as vehicle test-drive simulators and wayfinding apps, in selected stores. “These innovations have significantly increased the rate of sales closures,” observes retail consultant John Williams.
“Admittedly,” Fulton says, “we’re not great at [data] yet.” But according to the Tire’s consumer surveys—6,000 respondents canvassed each and every month—loyal customers want the chain to get in the digital game as soon as possible. Consequently, Canadian Tire’s brand custodians must now ensure the company is known as innovation driven, or at least tech-friendly.
“The innovation journey is core to the strength of our brand,” Fulton stresses. Indeed, the Tire’s execs talk about that “innovation journey” a lot. And then they talk about talking about it, which also seems to be part of the brand strategy.
On a recent January morning, the maestro of all this disruptive fervour sits in a bright meeting room on the 18th floor of Canadian Tire’s corporate headquarters, contemplating the grey-blah streets of North Toronto below.
Chief executive officer Michael Medline, like all the merchandisers who have held the top job before him, knows that Canadian Tire’s fortunes rise and fall on the mercurial whims of Canada’s weather. Snow brings sales of winter tires, shovels, salt, wiper blades, antifreeze and all manner of outdoor and sports gear—enough, in fact, that a mild winter, like this one, means the company’s seasonal profits have a way of melting away.
“In the winter, we like cold and snow, and in the summer, we like hot and humid,” Medline says. “But,” he hastens to add, “we’re getting pretty good at taking the weather out of the business.”
A chatty and matter-of-fact executive who professes a geeky curiosity about technology, Medline comes across more like an easygoing family doctor than someone steering a $12.5-billion organization that’s long claimed to have an outpost within 15 minutes of every Canadian.
He knows, crucially, what it’s like to get run over by the future. As Medline said in a speech at the Empire Club of Canada last fall, “Playing catch-up will get you crushed.”
Medline moved from the forest products industry to Canadian Tire in the early 2000s and made a quick impression by landing the Mark’s acquisition. He cycled through several C-suite positions, including a stint overseeing the company’s all-important automotive and dealer-relations portfolios. Medline wound up negotiating the Tire’s $770-million acquisition of the Calgary-based Forzani Group (Sport Chek) in 2011. Three years later, Medline succeeded longtime CEO Stephen Wetmore.
In some important ways, Medline inherited the innovation mandate that Wetmore began. In 2013, the board approved a $300-million spend on crucial back-end systems, to be housed at a scalable data centre in Winnipeg. The infrastructure would allow Canadian Tire and its divisions to compete in a new environment that includes automated digital marketing, extensive data mining, integrated inventory systems that allow consumers to find out if an item is in stock at a particular store, mobile payments and, maybe someday, a full-service ecommerce offering that permits consumers to have items delivered. “If we hadn’t done that,” says Medline of the large data centre in Winnipeg, “we’d be behind the eight ball or building on sand.”
To oversee that project, in 2012 Wetmore recruited Eugene Roman, who’d run Bell Canada’s IT division. Roman’s group, in turn, brought on more than 200 digital technology staff for a string of innovation labs across Canada (more hires are planned). To hear Medline wax digital about the cultural change is to be reminded of that moment you switched from a flip phone to a smartphone. “You wouldn’t believe how much content we have flowing through this company,” he says.
Fulton describes an application the company is working on—a promotional deal with broadcasters that allows Canadian Tire to embed seasonally appropriate deals—e.g. “It’s raining, so here’s some rain gear”—along with ecommerce functionality within those channels’ social media feeds and websites. Consumers can make a purchase without leaving the stream.
Anyone who aspires to play competitively in the retail space these days needs to be able to talk the language of omnichannel merchandising—the notion that the various manifestations of a company’s online or mobile presence can be pressed into service to create a more engaging, or at least tolerable, in-store experience. “It’s a pretty hot topic in the retail business,” observes Arnaud Van de Voorde, vice-president of digital at Jackman Reinvents, a Toronto retail consultancy. But, he adds, “there is no one answer for the recipe for success.”
Now firms, including Canadian Tire, are experimenting with using RFID readers located in stores, a vaguely creepy technology that can discreetly scan what’s in a customer’s cart and then use that data (e.g., someone who buys Brand A’s blender, but also Brand B’s bowls) to generate personalized promotional notifications. As Suthamie Poologasingham, J.C. Williams’ senior adviser for digital and omnichannel, says, the goal is to understand each customer better.
That sounds great in theory, but all the sunny stories can be paired with grim tales of failed execution. The U.S. sports-apparel retailer Finish Line endured a $32-million revenue plunge in the fourth quarter of 2015 when a new logistics system disrupted the flow of goods into the stores. The firm announced it would shutter 150 locations, posted a hefty loss and fired the CEO. It was a “disastrous experiment in omnichannel,” Van de Voorde says. “It’s a high-stakes game.”
Medline’s view is that Canadian Tire has got to throw everything at the wall and see what sticks. (The phrase used internally is “top-down, hurry-up offence.”) He recalls a meeting with his senior executive team four days after he took the helm. “I felt we were terribly lagging in our customer-facing innovation,” he recalls. “That day, I burned the boats.” Weekly Sport Chek flyers—Fulton now refers to them as the “crack cocaine” of retailing—were among the first practices to go up in smoke.
When Roman came on, he set up an R&D operation in Waterloo, Ont., at Communitech, an accelerator with lots of tech start-ups. Rex Lee, the Tire’s vice-president of digital technology and advanced analytics, says Canadian Tire’s labs (a second was added at Communitech, and there are now others in Winnipeg and Calgary) are staffed by interdisciplinary teams consisting of behavioural scientists, game and virtual-reality developers, and statisticians. “This digital garage is where we can shape and model new ideas and bring them to fruition,” Lee says.
Some of those R&D projects are modest exercises in digital brand extension—for example, a new Canadian Tire social media app called Catch, which will allow anglers to post pictures, record locations where they have fished and, hopefully, mention equipment that is for sale at Canadian Tire.
Others are much more ambitious. After migrating the fabled Canadian Tire money to its app, the company loaded up its mobile interface with all sorts of features, including store-level inventory checks, ecommerce capabilities and links to a lot of granular product information. (The app doesn’t garner good user ratings, as Medline’s team well knows.) Half of all customers under 50, notes Fulton, use a mobile device or tablet for purchases or to check product information.
The firm’s integrated merchandising and online teams have also figured out some smart ways of scraping user data that accumulates on the website. After relaunching Sport Chek’s site last year, for example, the web teams monitored popular search terms. The top phrase in the first three weeks running: “FlipBelts.” “None of us here knew what the hell a FlipBelt was,” Fulton says. After discovering that runners use these accessories to store keys and cash, Canadian Tire’s purchasing team hustled to source some popular models and get them into inventory.
In terms of in-store innovations, the company made a big splash last year by launching and then heavily hyping two stores—a massive 140,000-square-foot Canadian Tire in south Edmonton and a Sport Chek in midtown Toronto—that came fully loaded with all manner of screens, simulators and other forms of digital eye candy, including interactive video walls, window shopping using glass screens that display products, and community boards that give customers access to local sports clinics, league registrations and fitness classes. (Five other Sport Chek locations now have these features; they should hit the rest of the chain by 2017.)
During our interview, Medline shows off one new application on a 96-inch screen—an interactive patio builder that relies on gaming-style 3D graphics, with the option to use an Oculus VR viewfinder. Consumers can feed in the dimensions of their deck and then furnish it from a menu of items with a drag-and-drop interface that allows them to do a walk-through of the chosen arrangement—first-person virtual lounging, so to speak. Unlike spatially challenged consumers or those who didn’t bother measuring before they left the house, the program won’t let shoppers jam in more stuff than their deck can hold. Canadian Tire has a similar program for garage storage, as well as in-store simulators for test driving tires, golf clubs and running shoes.
The presence of this kind of in-store technology, says Darren Gunn, the associate dealer tagged to run that flagship Edmonton store, isn’t gimmicky. “It’s more like table stakes.” Though he declines to offer specifics, Gunn claims the store, which opened last summer and had no fewer than 400 screens arrayed around the floor, has “far exceeded [his] expectations” in terms of sales and customer feedback. (The company declined “for competitive reasons” to reveal when it plans to equip other outlets with such gadgetry, but the reality for the chain is that its dealers, who own their stores, have a long history of resisting new, and potentially costly, merchandising ideas from head office.)
Part of the gamification of today’s vast and disorienting retail environments, Medline says some of these innovations deliver very practical solutions: For smaller locations, they allow consumers to have an engaging shopping trip even if not all the items are available in-store. He also says the patio and garage-storage simulators prevent the problem of irritated customers who bite off more than they can chew.
Looking further out, Medline mentions the pages on the websites for hockey sticks: just rows of tiny images, which he hates. Why not, he muses, create a tool—either online or in-store—that allows customers to enter their skill levels and preferences, and then use that data to generate not only selections but also personalized video messages from NHL stars, like Steven Stamkos?
Yet today’s cool feature can quickly become tomorrow’s cheese. Fulton has a small, but telling example: Not long ago, Sport Chek posted a short video on its YouTube channel showing Stamkos firing pucks at flying drones. He manages to pick off a couple, and you get to see what that’s like from the drones’ perspective. The video’s been viewed almost 600,000 times since it was posted in mid-September, with the associated bump in subscribers to Sport Chek’s channel.
But, when the company tried the same shtick a month later with Raptors star Kyle Lowry hurling basketballs at drones in a gym, YouTubians responded with derision—exactly what a brand-driven company doesn’t want in a branding exercise. “This one is dumb,” complained one commenter. “A puck is much smaller and requires way more accuracy than a basketball.” Says Fulton: “People were saying, ‘Why are you destroying drones?’ There’s no science to that.’”
Ultimately, Canadian Tire’s much-hyped innovation journey is trudging toward a day of reckoning with ecommerce, which, for all of the company’s cutting-edge positioning, remains a source of ambivalence, as it does for many large retailers with giant footprints. “Is our ecommerce strategy where I would like it to be?” Medline asks. “Absolutely not. We still have a ways to go.”
That the mass-merchandise retail sector didn’t collapse in the face of the Amazon revolution attests to the fact that many consumers still like to shop in person, that some products aren’t well-suited to online purchases and that shipping is often a hassle. Many chains, including Canadian Tire, ship ecommerce purchases to a local store because, for customers, it’s more convenient than retrieving a parcel that was returned to the post office when the consumer wasn’t at home to sign for it.
At present, Sport Chek and Mark’s both offer standard ecommerce—you can have goods delivered or pick them up, and you can also see what’s in stock. Canadian Tire, with its dealer network, is a work in progress. Medline and Fulton know they must figure out how to balance consumer expectations—everyone wants free shipping and rapid delivery—with an offering that doesn’t inadvertently undermine the chain’s core business. But, Fulton insists, “it is inevitable that Canadian Tire is going to ship to home.”
“Every single day we’re here,” Medline adds about Tire’s innovation gambit, “we have to talk about this out loud—and publicly.” Kind of like the weather.
This article originally appeared at CanadianBusiness.com.
