'What's going on at HBC?': Bringing Zellers back from the dead is going to be tricky

Hudson Bay Co.'s (HBC) announcement that it is reviving value retailer Zellers generated a lot of attention, with Canadians reminiscing about the in-store diner, Zeddy the mascot, and the no-nonsense ethos.

Retail experts are scratching their heads over HBC's strategy and wondering if executives behind the struggling department store can turn around the fortunes of the store.

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Lisa Hutcheson wanted to know what was happening at HBC.

Indeed, what is going on at HBC?

The company has spent the past 10 years trying to cope with a changing retail environment.

HBC's owners took the company private in March 2020 so they could change direction without having to answer to shareholders. The fall in adjusted earnings before interest, taxes, depreciation and amortization was worse than the year before.

Since it went private, the company has made a number of changes. HBC split the Saks brand into two entities, one focused on e- commerce and the other on physical stores, in March of 2021. Last August, HBC carried out a similar split.

HBC launched a direct competitor to Amazon.com called Marketplace a few weeks after the Saks division. The Toronto Star reported in June that it planned to offer same-day delivery.

It has collaborated with WeWork Inc. to use unused retail space.

HBC has added a number of individual brands to its stores. Some Hudson's Bay locations will soon have Mountain Equipment Co. shops.

The announcement was made by the Zellers. A new website dedicated to the value brand is on the way, along with a presence in Hudson's Bay stores.

HBC said in a press release that they will deliver a digital-first shopping journey that taps into the nostalgia of the brand Canadians know and love while introducing a refreshed identity and a unique and exciting product for families at everyday value.

HBC wouldn't allow anyone to be available for an interview.

Hutcheson said that the changes show a lack of focus and direction on HBC's part.

She said she didn't know what their strategy was. It is very murky in my mind who they are trying to cater to.

Tailwinds

Bruce Winder has a few theories as to why HBC would bring back the store. Having a brand that offers discounted or cheaper goods could help bring in more revenue from customers who are too price sensitive to shop at The Bay.

HBC has state-of-the-art automated warehouses that make the plan simpler to execute.

The nostalgia card is included.

They got a lot of things last week, one of which was a huge discussion online about the nostalgia of the Zellers brand. They have made a buzz. If that was the goal, they created it, it worked, but you can't always translate a buzz into an ongoing business

You can’t always translate a buzz into an ongoing business

Bruce Winder

It is possible that the company is reviving the brand to help win a court case against a Quebec family who began using the Zellers name after HBC let the trademark expire.

Headwinds

Bringing back Zellers won't be easy.

Yu Ma said that HBC faces the same inflationary environment as consumers. The price of inputs has gone up. Supply chains are still jammed, the cost of fuel has gone up, and there is excess demand for goods, all putting upward pressure on prices.

Ma doesn't know if it's a good time to start a big business because the supply chain is disorganized.

The competitors that forced it off the field have gained a stronger foothold in Canada.

Winder said that there are already some very strong discounters in Canada. There isn't much room for them to get in there. Awareness does not get you so far.

The risk that HBC could ruin Canadians' nostalgia for the brand is likely to be underestimated.

Hutcheson said that customers are not going to get in an e- commerce or digital format.

HBC has a target customer that is different from a typical Zellers shopper.

You don't go to a mall with a Bay in it for the people who are struggling. You are not going to the bay. Winder said that it's a major difference. They decided to jam a round peg into a square hole to see if they could make it work.

The email is bbbharti@postmedia.