Canadian Tire: Giant in a sprawling country

Canadian Tire: Giant in a sprawling country

Few retailers in any country so dominate their basic merchandise categories like Canadian Tire of Canada. Its closest competitor is the Canadian division of Home Depot.

A sample of Canadian Tire´s new look
for its larger stores

In the beginning, there were only 23,700 cars in Canada in 1913, but by 1922, the number jumps to 210,333 in Ontario alone. That year, two brothers, John W. and Alfred J. Billes, with a combined savings of $1,800, buy Hamilton Tire and Garage Ltd. in Toronto’s east end. The brothers stock a small range of repair parts for the two most popular car makes, tires, batteries, and a home-made brand of anti-freeze – at a time when Toronto’s 40,000 cars are being accepted as transportation. A big part of their early earnings come from renting out parking spaces in their heated garage – a necessity in those days if a car was to start on a cold morning.

In 1927, Canadian Tire Corporation, Limited is officially incorporated. “We chose Canadian Tire,” A. J. Billes later recalled, “because it sounded big”. From across the country, people began writing to the store, looking for automotive parts that are hard to come by in more isolated areas. In 1928, to serve this market, the brothers produced their first catalogue featuring tire values on one side, and a handy road map of Ontario on the back.

In 1934, Canadian Tire opened its first official associate store in Hamilton, Ontario-serving as a catalyst for the development of a nationwide network of dealer operated Canadian Tire Associate Stores.

Today there are more than 390 Canadian Tire Associate Dealers operating over 430 Associate Stores. Nine out of ten adult Canadians shop at Canadian Tire at least twice a year and 40% of Canadians shop at Canadian Tire every week.

Canadian Tire is the largest national retailer of products in the following categories -tires, gardening supplies, outdoor barbecues and coolers, household tools, hockey equipment, bikes and helmets, basketball equipment, fishing gear and camping supplies. It also ranks number one in seven of eight measures of customer satisfaction

With 2001 sales of more than US$5.4billion, Canadian Tire is comparatively about as large as Home Depot is in the United States, since Canada’s economy is generally considered to be about one-tenth that of the US. Today, its annual catalogue is distributed to almost 9-million households in English and French.

Annual growth

In all, this Canadian giant operates 1,000 stores of different types, but the core of its business remains its 452 company-owned and franchised hardlines outlets selling tires, auto supplies and a full range of DIY products. Canadian Tire is currently on a roll. New-format stores are generating larger average sales per transaction and are running at an annualised rate of $14.8 million during the first quarter. Traditional stores averaged annualised sales of $8.3 million.

Part of its current strategy involves the company making a determined effort to increase its household penetration by catering more to females. Its new Kitchen Place department (pictured) expands its assortments of housewares, cleaning supplies and gets it into the fringes of gifts.

Kitchen Place is the new format designed to attract women and better compete with housewares specialty retailers

Claiming to offer three specialty stores under one roof (Automotive, Sports and Leisure and Home Products), it is clear that the firm intends to soften its image with its Kitchen Place formatted department. The company positions itself midway between discounters and specialty stores, and it classifies Home Depot as a specialty store in hardlines.

Another element of its strategy is to “out-assort” the discounters and offer better merchandising, and to offer better locations and greater shopping convenience than specialty retailers that must rely on dense populations and high traffic locations which might require a longer drive to be reached by many consumers

Reg McLay vice-president of home and leisure products, explains, “We offer some of the look and ambience of specialty stores, but with the pricing strategy of discounters.”

In fact, company officials say that 90% of Canadians live within 15 minutes of a Canadian Tire store. Its franchised Associate stores are located to serve 85% of the country’s population. Given the huge size of the country and the relatively small population, this is an enormous marketing advantage. Depot, for example, has confined its Canadian store openings to major metropolitan areas and immediate surrounding suburbs.

Captive spending

The company follows a clear-cut plan of seeking to capture customer sales in whatever way customers want to spend. For example, its website is one of the top five sites in Canada. It opens its own specialty stores to capture higher sales in related categories – ie. Part Source for auto parts and supplies; Mark’s Work Wearhouse for work and casual clothes and Canadian Tire Petroleum for gas sales. There are more than 30 Parts Stores, 200+ gas stations and 300+ clothing stores.

This picture shows the broad assortments and attractive merchandising of basic hardware, tools, etc.

It ties all three types of stores together by offering inter-chain discounts for regular customers. Among other advantages it offers is Canadian Tire (CT) “Money”, a highly successful customer loyalty reward program. By introducing its own CT-branded credit card in 2000, customers can now earn Canadian Tire Money on the card electronically

Last year, the company’s sales increased 6.9%, with comp-store sales up 2.2%. The pace quickened this year, with comp-store gains of 5.8% and total sales gains of 9.4% in the first quarter. Total sales in this year’s first quarter were $1.24 billion, putting it on target to exceed $6 billion this year. In a tough retail climate, the company’s earnings increased 5.5% the first quarter.

How does the company entice customers into its stores? Obviously, convenient locations are one reason. Another is a heavy advertising program. Canadian Tire is one of Canada’s largest advertisers. Its annual catalog offers a wide assortment of merchandise and encourages customer visits.

It also sends out weekly flyers, which are distributed to more than 10 million households. With a 90% readership, they are reputed to be the most widely read advertising flyers and catalogues in the country. According to McLay, there will be only two kinds of large, successful retailers in the future – high performance global players, such as Wal*Mart and Carrefour, and national champions, such as Canadian Tire.