Consumers Go for Bad Idea and Buy Food in Tire Stores
In a story/discussion back in October 2008, RetailWire looked
at Canadian Tire’s plans to test food sales at two stores in Ottawa. In a poll
on the site, respondents were asked, “How difficult is it for a retailer not
in the food business to succeed at selling groceries?” Three out of four respondents
said it was very or somewhat difficult for a merchant new to the business to
succeed.
It appears as though Canadian Tire is beating the RetailWire poll’s
odds as the chain has expanded food sales to nine “Smart” format stores and
reports consumers up north have no problem buying food from the same place
they buy home improvement products and tires.
Mike
Arnett, president of Canadian Tire Retail, told the Financial Post
that the chain has seen a difference between what people say in market research
and how they behave in stores.
"Typically people will say, ‘No, I don’t think
that’s a very good idea’, " he said. "When they see it, it’s different."
"Food,
interestingly enough, is the most-shopped category in the store in the stores
that have food," Mr. Arnett told the Financial Post, "because
everybody needs food; not everybody needs plumbing on a given trip."
The major
advantage to adding food to the mix is it creates more frequent shopping trips
to Canadian Tire’s stores and they often buy general merchandise items, as
well.
While the test has been a success, with Smart stores achieving significant
sales increases, Canadian Tire has not decided whether to roll out food to
its 479 stores.
Discussion Questions: What challenges will Canadian Tire
face if it significantly ramps up its food operations to offer groceries
in all its 479 stores? What will it need to do if it wants to become a grocery
powerhouse in Canada?
First of all, let’s look at a non-food retailer who crept into the food business. What was their name…er…oh, yes…Wal-Mart.
Secondly, they don’t need to try to become a grocery powerhouse–they only need to make a profit selling grocery items. Profitability is, after all, the first step to “powerhouseness.”
The name Canadian Tire is really deceiving but they can’t change it. It’s got huge equity in the retail world. CT sells much more than tires. In fact, their tire business has become a smaller portion of the overall product mix. While food seems a little off-planet for what they carry, I can see the convenience factor coming into play. I heard that the tests went very well in the Ottawa area. I spoke to a few friends that live up in our Capital and their reaction was more of interest than surprise.
Canadian Tire is not a tire store. It is a mass merchandiser. They carry many different categories and while most are hard durable goods, I can see a small food section fitting in nicely in the new format.
What food are we talking about here? Full line grocery, convenience items? They can do it. It’s just a matter of having the right mix.
I was in Office Max the other day and this guy is wheeling a cart full of snacks, coffee, and candy. I’d say that was taking a piece of business from the local supermarket.
There is no question they can effectively sell groceries–even full-line supermarkets offerings. The name is no longer accurate, however, their customers know that, so it may not be that much of an issue. Should they maybe evolve to “Canadian Tires and More!”???
What CT is really offering here is convenience–a foregone stop at another retailer. With aggregate demand down, this trend should continue to grow as retailers search for new categories (like food) which improve their productivity and increase visit frequency. One criteria for success is the proximity of retailers specializing in the category. In the case of CT, it seems unlikely that food would be be successful if there is a full-line grocer next door. Beyond that, it’s simply a matter of replacing non-productive categories.
Hello, general store.
This really isn’t about CT looking to become a grocery powerhouse. It’s more about driving up average sales, while at the same time increasing frequency of shops. The ‘big guys’ continue to look to expand their offerings to become more of a one-stop shop. Shoppers Drug Mart, another outstanding Canadian retailer, continues to push the product assortment as well as a means to grab a larger share of the consumers wallet.
Keeping the assortment right, and the dealer/owners onside, will be the key to ongoing success. Shouldn’t be a problem for them at all.
Did we ask the same questions when Wal-Mart started building grocery aisles?
Since we are revisiting comments of October ’08, let me repeat mine. They seem to be as relevant….
Canadian Tire seems like a fascinating retailer. I have never been to one, but my Canadian friends seem to always be talking about it and always have a reason for going there. Canadian Tire is surely getting more traffic and more frequency than a “tire store” would be expected to experience. Clearly Canadian Tire has built a brand that transcends “Tire.” It is that branding that opens multiple retailing opportunities.
From the article, I would hardly assume that they are going to be the next big grocery chain in Canada. The groceries they are bringing in are of limited assortment and not illogical extensions of soft drinks and snacks. So far it sounds like a C-store assortment more than a Loblaws assortment. If so, my bet is they are successful.
But, what also strikes me as interesting is that Canadian Tire has had some success in holding off the Wal-Mart invasion. Could their long-term plan in fact be to measure up against Wal-Mart? Certainly, a challenging objective if they are. But, let’s not get carried away with where they are going. They are simply using a domino principal in growing their business. That is “what can we sell to our current customers?” And, “can we bring a bit more traffic by expanding our offerings?” The drug chains in the U.S. have followed the exact same strategy, with bread, milk, cereal and frozen pizza…and don’t forget the ice cream!
Remember when the concept of convenience foods at gas stations was a radical idea? Perhaps not now, but it was at one time.
Today, convenience foods can be purchased in a wide variety of formats. What is important to the consumer is that it is convenient, represents a reasonable value (with price and all the other components that constitute value), presented in a clean format, etc. This proliferation of convenience food competitors is what has driven the convenience store industry to continue to adapt and find new products and services that it can provide.
Of course, a customer’s needs might be “presumed” to be related to the defined mission of the store – “tire store” sells tires. Well, the tire store better sell tires, but that in no way defines the needs of their customers. I’m calling for retailers to STOP defining themselves by what they sell, and instead focus on the needs of whoever is coming into the store. Anything short of this is make-believe shopper focus. Notice this line:
“… a difference between what people say in market research and how they behave in stores.” This should be emblazoned on every retailers brain. This problem is so deep because retailers themselves are under a false belief about what they themselves do when they shop in stores. I KNOW how shoppers shop in stores, and have measured millions of shopping trips on a second by second, foot by foot basis – and have yet to find a person who describes how they shop as actually coming anywhere close to how typical shoppers actually shop! This self misperception trumps actual measurement nearly every time. And why not? Everyone else you know believes the same falsehoods. No one sitting around the table is going dispute your perspective on the shared “essential” elements.
Now, back to the scientific reason that Canadian Tire should sell groceries in their stores – and maybe you should too. Maslow’s hierarchy of needs was defined in psychological terms. And retailers ought not to ignore them. But the same hierarchical approach to needs can be applied to physical needs – you know, like the merchandise that might be sold in a store.
Physically, the number one need is air. But other than attending to the quality of the air in their establishment, there is not a big market for air. But the number two need is water, as in a beverage. If you’ve got people coming in the door, chances are many of those people are going to need something to drink – now and to take away with them. Hence, every single retailer needs a beverage strategy!
The third need is for food. You can live a few weeks without replenishment, but it is usual to replenish nearly as often as with water. Bottom line: if you are not attending to the food and beverage needs of your customers, then you are relying on someone else to do it. Tsk, tsk!
Beyond food – lower on the hierarchy – you have clothing, transportation (Canadian Tire), shelter and a blizzard of other products and services. But don’t forget to ALWAYS offer a beverage, and a little something to eat to go with it can build a massive convenience store industry – to go along with that gas fill-up.
These are the basic principles. But, as usual, success or failure lies in the execution. Don’t expect to win if you aren’t playing the game.
What seems to be happening is the evolution of a retail business. I have faith in the marketplace as well as a major Canadian retailer to meet the needs of their customers. If not, they will retreat to their core strength of merchandising — the full circle of retail theory in practice.
As most shoppers decreased the number of store trips over the last 2 years, bringing them back is the challenge. Simplifying the number of purchase stops with a quick food pick up for staples can increase CT traffic.
Challenge, yes, but selling food can work with right selection and focus on freshness. Shoppers Drug Mart here has been increasing/changing the number of food SKUs, including frozen items, and is showing good results.
It’s all about simplifying the shopping experience – CT could pull this one off.
Fascinating! We work on food concepts across verticals, but this has got to be one of the most far-reaching success stories we’ve heard in terms of permission from consumers. Of course, the story has us in the dark in terms of food categories they’re stocking and the definition of what “success” look like to CT . . . but what it does prove is that if CT can do it, almost ANYONE can potentially sell some sort of consumables if they take a stab at it.
So, biggest message to retailers? Try it!! (I’m thinking the Abercrombie Bakery would be dynamite!) Also . . . Walmart was mentioned a few times above, and rightfully so, but what would it mean to them, the largest grocer, if everyone and their sister started selling food? Interesting thought. Another interesting thought: American Culture — food and electronic devices are all we buy now . . . what does that say about us?? For another post.