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In the driver’s seat

By Chris Atchison | January 17, 2012
In the driver’s seat
Marco Marrone

CFO Marco Marrone and the management team at Canadian Tire are continuing to strengthen the iconic retail brand. With the recent acquisition of the Forzani Group, a renewed focus on the quality and consistency of the in-store experience, and the introduction of new products to their traditional inventory, Canadian Tire is well positioned to retain its leadership role in the Canadian markets.

It’s a retailer’s dream: winning generations of customers both through the ubiquity of its stores and the iconic place it holds in those shoppers’ hearts and minds. Too bad Canadian Tire’s competitors from south of the border, such as Wal-Mart and Target (set to open its first Canadian store in 2013), don’t seem to care. Canadian Tire’s historic triangle logo hasn’t dissuaded these competitors from coming to the opportunity-laden Canadian retail market.

Canadian Tire Executive Vice-President of Finance and Chief Financial Officer Marco Marrone is highly attuned to the challenges that lie ahead as more U.S. retailers penetrate the Canadian market and threaten Canadian Tire’s historic presence. Add to that the headaches caused by the confidence-shaking economic uncertainty that has reshaped spending habits across the retail world.

“We have a great asset in our brand, but the danger is you sit on your behind and ride that asset into the ground,” Marrone cautions.

But Marrone and the rest of the senior management team don’t rest on their laurels. Long before Target announced its big push, management had initiated measures to sustain their leadership in the Canadian market. They determined where competitive threats would lie and found new ways to leverage their thousands of exclusive products, while presenting them in innovative new ways. Consumers, research found, are attracted to stores that are not only stocked with unique products, but also offer a uniquely positive in-store experience.

Consistency of that experience, Marrone explains, was an area where the management team highlighted potential weaknesses – not entirely surprising given the nationwide network of dealer-operated stores, which vary in both size, concept and (urban, suburban and rural) setting. One in-store experience focus was the tire department. For decades, tire shoppers, who often knew little about the product, selected their brand of vulcanized rubber from choices listed on a wall. But in the past year, computerized kiosks have guided shoppers through the tire-buying process, based on driving preferences and needs. The retailer also shifted away from a marketing focus on its private-label tires to offering more national brands. As a result, automotive department performance has taken a u-turn from eight quarters of negative growth to four quarters on the positive side of the financial ledger.

Canadian Tire also spent time working with its dealers to standardize best practices on everything from training to inventory management. For instance, sometimes customer- maddening empty store shelves weren’t a result of supply or distribution problems, but poor stock management. Marrone explains, “Part of the solution involves technology, but the store also has to change processes and the way they manage their warehouse and product on the floor. It’s an investment the dealer has to make... and that takes time.”

It’s on the real estate front that massive real-estate holder Canadian Tire has one of its strongest competitive advantages. It has the financial flexibility to purchase land, develop an entire complex and, when necessary, lease space to third-party retail tenants to subsidize development costs, especially in expensive markets such as Vancouver where land or properties are difficult or expensive to acquire. The Forzani Group acquisition last year gave Canadian Tire a healthy inventory of shopping mall locations to complement the firm’s portfolio of mostly stand-alone stores. “We’re looking at whether we can take markets where we’ve underpenetrated and increase our square footage, and also test a super-brand concept or a larger-format store. It’s about looking at opportunities for further growth.”

Competing while protecting a beloved brand, Marrone concedes, requires a delicate balance of experimentation and preservation. “The danger is trying to be all things to all people; but there’s a core set of categories we’re excellent at,” he points out. He and the management team are still open to new ideas, and that’s the reason Canadian Tire has been testing convenience-food sales – think frozen foods, dry goods and dairy products – at select stores for the past two years. Marrone understood the skepticism about the idea at first, but research shows that many customers are happy to buy a loaf of bread alongside a litre of motor oil, if it saves them time and hassle. The major-appliance category is another new area where Marrone thinks Canadian Tire could gain market share in the future.

Marrone knows it will take the same steady hand to guide the company through the disruptive change set to shift this country’s retail marketplace. “Consumers relate to the triangle [logo], but we have to take advantage of it and build on it so they see the change and innovation we’re implementing,” he says. “It’s about us innovating, figuring out how to provide offers that our consumers will respond to, and making our stores destinations.”

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