TORONTO • In addition to transforming the moribund department store sector in Canada, Richard Baker’s vision for Hudson’s Bay Co. has long involved doing the same for Internet retail, and experts say buying Saks Inc. could help him achieve it.
In recent years the CEO has spoken of HBC’s burgeoning online business with the zeal of a cable executive who discovered he could bring 500 cable channels to a remote island of people who still operated their TVs with rabbit ears.
“Online retail is going to be a huge business for us,” he said last month. “Right now many, many products in Canada can only be bought online through TheBay.com, and that is an unbelievable advantage we have in Canada versus the U.S.
“In Canada, if you want a Ralph Lauren Polo shirt, for example, we are the only place you can buy that online. In the United States, you could buy that from 10 different department stores!”
That void in the market extends to luxury retail in Canada, he noted Monday in announcing the Saks deal.
“Right now, there is no luxury specialty store, or department store, in Canada that’s online.”
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Holt Renfrew does not sell merchandise on its website, but HBC’s deal with Saks may prompt the august Toronto-based fashion retailer, currently upgrading and expanding its stores in advance of Nordstrom’s entry into Canada next year, to reconsider e-commerce.
“There is a lack of exposure to certain brands in Canada, and the Saks deal gives Canadians more access to that iconic luxury brand,” said Rod Hart, general manager in parcel and e-commerce market development at Canada Post. “It is going to force some retailers to evaluate their online strategies and reach — I think they are going to have to. The American retailing industry has often provided a bit of a wake-up call in Canada and stirred up competition.”
Online sales account for 5.7% of overall retail spending in Canada compared with 8.4% in the U.S., according to a Forrester Research report last week, and while part of the reason for the lag may be a lack of compelling choices here relative to the U.S. market, the report also noted 68% of Canadians are still concerned about high shipping costs for online orders.
Right now, there is no luxury specialty store, or department store, in Canada that’s online
“The economics of shipping and transporting goods in Canada is challenging and when you look at the geography and it density relative to the U.S. and Europe, that is a reality,” said Mr. Hart. But he noted many retailers, and HBC in particular, have invested in integrating their digital and storefront businesses and are trying to find more creative solutions to address high shipping costs.
Jin Lee/BloombergA shopper holding a Saks shopping bag walks on Fifth Ave in New York.
Retailers are now leveraging more data that is relevant to their inventories and customer base, and adding options such as in-store pickup or using stores to fulfill online orders if they are in closer proximity to the customers and it makes more sense to ship.
That ties in directly to the online strategy at Saks, which was coveted by Mr. Baker not just for its fashion brands and real-estate potential, but for having a similar vision to HBC’s of a strong and growing “omni-channel” — the industry term for the integration of online and mobile retail commerce and marketing platforms with bricks and mortar stores.
Saks, whose online sales of US$500-million accounts for more than 15% of its overall revenue, has a much bigger direct-to-consumer business than that of Hudson’s Bay and Lord & Taylor, whose online sales currently account for 2% and 7% of their per-banner revenue, respectively. Online sales grew at HBC 33% to $31-million in the last quarter.
Saks, which already counts Canada as its biggest international online market, launched a four-year IT project in 2012 to develop an “any channel, any device, any time” shopping platform for consumers, and integrate its online and store inventory and merchandising systems.
At a retail conference last month in Chicago, Saks’ chief information officer Mike Rodgers said the company’s research last year revealed, contrary to prior assumptions that its top-spending loyalty card customers primarily shopped in bricks and mortar stores, that they in fact used multiple platforms to research and buy goods, including stores, online and mobile.
“The transformation to omni-channel is the central tenet of the Saks strategy,” said analyst Perry Caicco of CIBC.
But will Canadians buy any more merchandise when the retailers are merged? “We like the omni-channel opportunity,” Mr. Caicco added. “But we do not believe that any of these sub-channels will grow faster just by being together.”