Zellers reboot creates buzz, while raising questions about what HBC is trying to achieve
At Zellers, the lowest price is no longer the law.
Hudson’s Bay Co. rebooted the discount brand as a special section in a dozen of its The Bay department stores in March, including at the Scarborough Town Centre (STC) mall in Toronto.
It was sunny outside on a Sunday afternoon, three days after relaunch. The queues that formed for the opening on March 23 had dispersed, and the much hyped food truck was gone after selling out of throwback menu items within hours despite a downpour.
Still, the excitement from opening day had mostly carried over. Curious shoppers crowded the upstairs corner the Bay, where staff had created the Zellers pop-up, buzzing about the revived brand. But not everyone was cheery.
“Mom, I want this Princess Jasmine Barbie,” a girl of about four or five years shouted at her mom, who was one aisle over, peering at the toys her two sons were looking at.
The woman stepped over and examined the display of Disney-branded princess dolls, each $16.99 for an 11-inch figurine.
“No. I’ll get that for you at Walmart,” she said over her shoulder. “It’s way cheaper.”
The girl asked two more times, but the mom kept saying it’s cheaper at the big box retailer. Minutes later, the family walked out of Zellers, through a display of furniture with West Elm-looking couches on sale for $3,000, down the escalators to the first floor level of luxury women’s makeup stalls, and out into the mall, no Zellers purchases in tow.
‘Interesting,’ but something missing
Retail strategist Lisa Hutcheson was at the STC Zellers on opening day. The relaunch impressed her, as a marching band led keeners who lined up ahead of time through the Bay and up the escalator to explore Zellers’ “well-merchandised” displays, which featured a “good” and “interesting” product assortment, she said.
“There was lots of things I liked,” Hutcheson said. “And lots of things that I sort of scratched my head at.”
Hutcheson said she found it jarring to see the sprawling brick-and-mortar Zellers stores from her memory reduced to a 10,000-square-foot, store-within-a-store concept. Also puzzling, she said, was an apparent laxness to restocking hot-selling items, such as Zellers-branded clothing, and inconspicuous checkouts.
“There were lots of people making purchases too, but there wasn’t a designated point of sale,” Hutcheson said. “Maybe they weren’t estimating that many purchases.”
Ultimately, she’s unsure whether HBC’s resuscitated discount brand will hold its own against a new array of retailers that has taken over the value segment, including Dollarama Inc., Walmart Inc. and TJX Companies Inc.’s HomeSense and Marshalls brands.
“I think it’s a short-term strategy,” Hutcheson said of HBC’s decision to revive Zellers after a 10-year hiatus. “I would call the relaunch a success. I just don’t know — is it three months? Is it six months? What’s the next step because I think keeping it as just this department isn’t sustainable.”
‘Zellers is a value retailer’
HBC announced last summer it was bringing back the beloved Canadian brand. Canadians lit up social media with their memories of Zellers, such as the restaurant food and the Zeddy Wheel ride, named after the Zellers mascot that HBC “gave up for adoption” in 2012 to an Ontario-based social organization amid the liquidation. On social media, the brand often posts that Zeddy will make a return, though more detail isn’t available.
Same for much else related to the new Zellers. HBC, which went private in 2020, has kept hush on a lot surrounding the relaunch, particularly around why it would bring back a banner that shuttered due to poor sales, choked out by big retailers from south of the border.
“Zellers is a value retailer, filling a gap in the Canadian marketplace,” a spokesperson said by email. “Canadians will tell us how to grow. We are being thoughtful in where and how we open, with a scalable approach that allows us to listen to customers, test and learn, and build accordingly.”
In March, Report on Business magazine published a feature on HBC in which the company’s president, Sophia Hwang-Judiesch, said that winning over younger Canadians was her top priority. Regarding Zellers, she stressed the revamp would offer “Target-esque” products with branding that emphasized “value at a phenomenal price.”
Prior to going private, HBC was struggling. In each of the five years before going private, net income was in the red, according to Bloomberg data. The company’s reputation among Canadians in that period was stagnant and remains stagnant, said Lisa Covens, vice-president at Leger Marketing Inc., a research and analysis firm that published its annual rankings of Canada’s most reputable brands on April 5.
“I don’t think they’ve ever been a star,” Covens said of HBC, which has consistently landed a spot in the 50-69 range over the years. This year’s survey found that a third of participants “didn’t know (HBC) well enough” to offer an opinion on the company, said Leger senior research director Shanze Khan.
“Zellers might actually help them with that,” Khan said. “It might get (HBC) a different demographic.”
It might also help with sales at time inflation, higher interest rates and worries about a recession have squeezed household consumption. That’s a good environment for discounters such as Dollarama, which reported at the end of March that sales surged 20 per cent in its latest quarter compared with the year-earlier period. The Montreal-based company also scored well in Leger’s brand survey.
But it’s been a while since value shoppers have been on the Bay’s radar. The company’s product assortment targets affluent shoppers with a focus on millennials, said Bruce Winder, a retail analyst and author who was a Zellers merchandise manager at HBC’s head office in Brampton, Ont, between 2009 and 2011. The pop-ups at the Bay stores might attract a new audience, but Winder said there was reason to wonder what happens when the nostalgia buzz wears off.
‘Are they going to come back?’
“I’m not convinced nostalgia is a business. I think it’s a good PR campaign,” said Winder. “People are going to go there to check it out, but once they’re done checking it out, are they going to come back? That’s the million dollar question.”
When marketing the relaunch, HBC leaned heavily on the nostalgia some Canadians have for the old standalone stores. In January, the company released an Instagram poll that invited users to vote on which classic menu items they’d want to order from a fleet of food trucks on opening day, a nod to the Zellers Family Restaurant eateries in the old stores.
HBC said it would keep the trucks around if there was enough demand. One associate wearing a Bay uniform on March 26 at STC said that people waited in line for hours on opening day, soaking in the rain, to order a hot chicken sandwich or one of the other classic dishes before they sold out in a matter of a few hours.
Hutcheson and Winder said Zellers’ relaunch appears to have been a success overall, but Hutcheson said she gets the impression that the pop-ups are either a test or temporary.
At the STC Bay, there was hardly any signage prompting customers arriving on the first floor to visit the new pop-up section on the second floor, where aisles of value-priced wares were sandwiched between higher-end furniture and a Calvin Klein lingerie section.
There was signage on the second floor, of course, but the majority of the signs were made of paper or vinyl, suggesting HBC didn’t put much money behind the reveal, Hutcheson said.
Rose Nakpil, a 68-year-old Torontonian who visited the STC location, couldn’t find the till and wondered aloud where she should go to purchase a $20, twin-sized blanket for when her daughter comes to visit this month.
Nakpil remembers going to Zellers with her now-adult daughter to source discounts before finishing the outing with a quick bite at the diner. She said she thought the relaunch was “nice,” but she’s not sure if it will be worth the effort to hop on the subway for a 20- or 30-minute trip from her home in midtown all the way to the one Toronto location open in the city’s east end.
“When the kids come over maybe we’ll be coming a little bit more, but it depends,” Nakpil said.
The new Zellers also offers a handful of sleek, modern looking furniture pieces, but Nakpil said at $89 for a rattan corner shelf that’s mainly made out of metal and what appears to be plyboard, she’d prefer to go to Ikea, owned by Ingka Holding BV of the Netherlands.
Zellers to reopen with 25 locations in 2023: Here's the list of stores
Is HBC's Zellers revival doomed to fail? Experts say it will be tricky
HBC didn’t respond directly to questions about why it decided to revive Zellers, instead saying that the company is “resetting the expectations” of what is “value retail” through its selection of products and exclusive items, plus an e-commerce site from which “nearly everyone in Canada” can order.
The company could be trying to squeeze more value out of Bay department stores, which have been losing much-needed foot traffic, Winder said. But he added that a Zellers shopper is different from a Bay shopper; the former has less disposable income, the latter has more. For a decade now, HBC has been focused on customers who had more money to spend and it’s confusing why after all that time the company would swing back to trying to be something for everyone, Winder said.
“We don’t have (HBC’s) real objectives,” he said. “From the outside, this all looks a little silly.”
• Email: bbharti@postmedia.com | Twitter: biancabharti
