Canadian Tire’s baffling strategy to sell you everything

It breaks every marketing rule, but it’s paying off

So wrong that it's right

Photograph by Colin O’Connor

So wrong that it's right
Colin O'Connor/Maclean's

The Canadian Tire store on Yonge Street at Davenport Road in downtown Toronto—a few blocks from where brothers John and Alfred Billes opened their first store in 1922, and the location that became the main Canadian Tire store in 1937 (complete with roller-skating stock boys)—is not a very welcoming place these days. Prospective shoppers are greeted by a queue of frazzled-looking customers clutching humidifiers and extension cords at the service counter. They must then negotiate a pair of waist-high turnstiles before browsing aisle after cluttered aisle of merchandise as varied as Canada’s seasons: kitchen utensils, vacuum cleaners, caulking guns, drill bits and sprinkler attachments. Upstairs there’s hockey gear, camp stoves, some toys and cans of tennis balls. Downstairs, auto parts, oil-slicked service bays and, finally, a wall of all-season tires.

Newer stores, located in towns and cities across the country, are brighter and more airy, but largely house the same eclectic inventory—none of it particularly cheap and none of it terribly aspirational either. Customer service, meanwhile, varies wildly from store to store, the result of the company’s independent—and bureaucratic—dealer ownership model.

It all seems like a recipe for retail disaster, particularly as an army of well-oiled U.S. big box chains—Wal-Mart, Home Depot and soon Target—continue their relentless march north of the border. Yet somehow, Canadian Tire remains standing, earning profits of $453 million on $10.3 billion in retail sales last year, which was up three per cent from a year earlier (Canadian Tire Corporation Ltd. also makes money through a banking operation, Canadian Tire Financial Services). “People have been calling for Canadian Tire to fold under the pressure of new competitors for 20 years, and it hasn’t happened yet,” says Jim Danahy, the chief executive of CustomerLAB, a retail consulting firm. “They seem to have a unique relationship with their customers.”

What’s the secret? Retail experts say it’s a mixture of familiarity and convenience coupled with a methodical approach. “It’s bad in theory and great in practice,” Danahy says half-jokingly. “I don’t think any business school could design the Canadian Tire model.” Of course, that doesn’t mean the road ahead is bare and dry. After years of grappling with flat sales and a questionable effort to try to attract more women to its stores, CEO Stephen Wetmore, a former Bell executive, is taking steps to refocus the 89-year-old chain on auto parts, tools, home supplies and sporting goods as competition mounts. “We’ve done our research and we know where we would like to be,” he said during a recent investor conference in Toronto. Just don’t confuse that with the promise of a sexy shopping experience.

Under Wetmore’s guidance, change has been coming fast and furious at Canadian Tire’s 487 stores (at least by the company’s notoriously glacial standards). Earlier this month, the company relaunched its online store after executives pulled the plug on a previous attempt in 2009—an experiment that Wetmore recently described as ill-conceived. “We had set it up to be home delivery, but we didn’t isolate it to the products that made sense,” he said. “You’re not going to deliver a canoe online to someone’s home without incurring a lot of cost.” So what will Canadian Tire be selling on its website this time around? “A selection of over 7,000 tires and wheels,” according to Wetmore. But they will have to be picked up at Canadian Tire stores, where many will presumably also be installed. It turns out that Canadians are increasingly buying their tires online through U.S.-based websites that have them shipped to local mechanics. Wetmore said the company was “frightened” to discover that “tens of millions of dollars” were flowing to these online outfits. Other products will be added to the website later.

It’s all part of a renewed emphasis on Canadian Tire’s automotive roots, as surveys show its reputation among consumers in the category slipping well behind competitors. Beginning this month, Canadian Tire is also planning to open a handful of automotive concept stores that will feature drive-in reception areas, express oil and lube services and auto detailing. Canadian Tire also owns 87 specialty automotive PartSource stores.

Tweaks are coming to other departments, too. Just last week, Canadian Tire said it would start offering its customers home installation services for garage door openers, which is to be followed by central vacuum installations and heating and cooling systems. And, earlier this year, Canadian Tire said it would begin selling major appliances like refrigerators, washers and dryers alongside its usual selection of toasters and coffee makers. It’s a $3-billion-a-year market in Canada that’s currently dominated by the big home improvement chains like Lowe’s and Home Depot. It’s not yet clear, however, whether Canadian Tire, with a rather limited inventory and a staff that aren’t generally known for their customer service, will be able to convince its customers to cart away such big-ticket items.

But that may be beside the point. “They’re not making a lot of money on these appliances,” Danahy says. “They’re simply hoping to give you one more reason to come in.”

By far, the biggest move this year was Canadian Tire’s $771-million purchase of sports retailer Forzani Group Ltd., which solidified the company’s position in the sporting goods market while giving it a pipeline to a younger demographic of Canadians who are more likely to shop at malls. The company continues to function as a stand-alone operation, running Sport Chek, Sport Mart and Athletes World stores.

Yet even with all of the bold moves, some say Canadian Tire is bound to be hurt when “cheap chic” retailer Target arrives next year. The chain bought 220 Zellers stores, many of which it plans to convert into Target locations. “Where Canadian Tire is at risk is that they are often very close to a Zellers,” says Mark Satov, the founder of Toronto’s Satov Consultants. “And they still have quite a selection of small appliances, housewares and cleaning products”—categories where Target excels. Wetmore, however, has said that Canadian Tire, which posted a five per cent increase in sales in the second quarter of this year, is confident in its lineup of household products. “What Canadian Tire has to do [better] is awareness,” he said. “We lead the market in many categories, and yet the average Canadian is not as well aware of our leading position in the market as we would like.”

But making Canadian Tire “top of mind” for consumers for things other than automotive, tools or sporting goods has never been a straightforward proposition, as evidenced by those old 1980s commercials that reminded Canadians, “There is a lot more to Canadian Tire than just tires.” “It’s always part of the challenge when you’ve got the word ‘tire’ built into your name,” acknowledges Duncan Reith, the senior vice-president of merchandising for Canadian Tire retail. “But we’ve made progress over the years. If you look at the balance between men and women, it’s now pretty much even.”

At the same time, Canadian Tire needs to be careful it doesn’t stray too far from its bread and butter. Danahy says that means being a store where Canadians can buy the items on their household to-do lists. “Their customers did not accept them as a major home decor player,” Danahy says. “They accept them as good for paint, good for small appliances, the most basic of lamps and cheap furniture.” He likens Canadian Tire’s business model to a drugstore’s, with its racks of impulse purchase items, but for dads. They go in to buy a doorknob and walk out with a new winter driving mat and a pair of shears. He also argues that Canadian Tire has managed to find a sweet spot in the do-it-yourself market that exists just below Home Depot (where you might go if you’re refinishing the bathroom) and the local hardware store. “They are a DIY retailer, but for very small day projects,” Danahy says. “Instead of building the deck, Canadian Tire is going to sell you the high-pressure washer to clean the deck.”

If it sounds like a chain that’s trying to appeal to everybody simultaneously—usually a bad business strategy—that’s because it is. “We’ve built a unique proposition at Canadian Tire that is not only unique in Canada, but is unique in the world,” Reith says. “All Canadians visit our store at least once a year.”

Canadian Tire will need to stay on its toes as its territory is further invaded by big U.S. retailers. But despite its sometimes ungainly appearance, there’s no reason to think the inverted orange triangle and green maple leaf will disappear from the Canadian landscape anytime soon. It may never be a chic proposition. But neither is weatherproofing windows or fixing a clogged toilet.