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I500: Canadian Tire rolls out new focus on innovation

In 2013, Canadian Tire goes digital.

(Photo: Galit Rodan)

(Photo: Galit Rodan)

Stroll into the new Sport Chek in Toronto’s upscale Yonge and Eglinton neighbourhood and you’ll come face to face with what looks like the future of retail. Wall-sized, interactive screens display design options that customers can use to create a custom pair of Nikes. A treadmill nearby can diagnose a runner’s gait and help her choose the right shoes. The Adidas “virtual footwear wall” is a shoe geek’s tech dream: made up of three 55-inch touch screens, it allows users to scroll through shoe options by style or even by naming a favourite soccer player.

The store’s 140 digital screens and kiosks bring the search and personalization aspects of the web together with the touch and feel of bricks and mortar. It’s called a “digital retail lab,” and it’s brought to you by … surprise! Canadian Tire.

Innovation isn’t usually top of mind when it comes to the iconic retailer. The brand conjures images of many things: Motomaster and Sandy McTire; your first basketball or hockey skates; that bearded guy from those ubiquitous commercials. But innovation? The company doesn’t even offer online shopping, having shut down its e-commerce site in 2009 due to low productivity.

That could be about to change. With its 2011 acquisition of the Forzani Group’s stable of sports brands, led by Sport Chek, Canadian Tire has become the biggest sports retailer in Canada: in the fourth quarter of 2012, the company’s annual revenues were up 10% to $11.42 billion from $10.38 billion after the first full-year of Forzani Group (FGL) results. It now has the heft to keep up with consumers as they move up the sports-gear food chain, and the company is using Sport Chek as the laboratory for digital innovations that will eventually flow through the rest of its retail operations.


CEO Stephen Wetmore knows this is essential if the retailer, which was founded in 1922, is going to last another 90 years. Canadian Tire is up against the formidable likes of Walmart, Target and the expansion of Amazon online: “We had to put Canadian Tire on offence,” Wetmore says. “We did not want to play defence with competition increasing, a softer economy, a more cautious consumer—you have to be on offence all the time.”

The aggressive stance is a new strategy for a company that Jim Danahy, CEO of retail consultancy CustomerLAB, describes as “terrible in theory and somehow successful in practice.” But it explains why the company acquired FGL and why last summer Wetmore hired Eugene Roman as the company’s chief technology officer. Wetmore lured the tech veteran away from Waterloo, Ont., software firm OpenText by giving him a mandate to innovate and telling him that Canadian Tire wasn’t interested in best practices, but “next digital practices.” It may sound a bit like your uncle who’s never owned a computer talking about Google Glass, but so far the company has been true to its word.

Over the past five years, the company has done some major IT renovations in its automotive infrastructure system and within the guts of its merchandising and pricing systems. Wetmore was happy with how his IT department handled it all but knew he needed someone with vision who could lead the company, not just help it keep up.

Roman headed up the tech behind the Sport Chek lab, telling The Wall Street Journal, “We believe if we change the shopping experience into an entertaining experience, an engaging experience, we will do better. It’s shopper-tainment, and I believe it’s the future of retail.”

More digital advancements are on the way, including the scheduled fall opening of a new cloud computing centre and “app factory” in Winnipeg that will enhance back-end operations and “turbo-charge” customers’ interactions with Canadian Tire online, according to Roman. In March, he announced the company was teaming up with Waterloo’s startup incubator Communitech, which helps companies and recent graduates develop technology business ventures. Five Canadian Tire employees will set up shop within Communitech permanently to experiment with new digital products for both its online properties and retail locations.

Wetmore sees the arrangement as a cost-effective route to the cutting edge. “We said, let’s stay on the leading edge of app development and creativity because new companies are starting all the time that have an edge on you because of technology.”

At the company’s spring dealer convention in Toronto, it announced plans to have 5,000 tablet devices in stores for customers to find information and products, as well as arming employees with handheld devices to help them find products.

Meanwhile, it’s also set the stage to get back into e-commerce by third quarter this year. The foundation of its new sales platform is its slick new online catalog featuring videos, product information and how-to tips; it will soon add a social networking component for customers to comment on products, as well as upload pictures and videos.



AGE: 60
APPOINTED: January 2009
PAY: $6.97 million ($1.25 million salary, plus incentives)
STRATEGY: Wetmore began by strengthening the company’s roots in tires and automotive and is now boosting Canadian Tire’s sports and recreation presence, while investing significantly in technology.
BIGGEST ACHIEVEMENT: Clearing out the clutter to be more competitive. With a new dealer contract, Wetmore has cut out significant portions of bureaucracy that gave the company a long-standing reputation for moving at a glacial pace.
GREATEST OBSTACLE: Translating all of the new technology and other retail improvements to the bottom line.

Since last year, the company has also been testing a new customer rewards strategy with ambitions to adapt its iconic paper “money” to a loyalty card or key fob. Wetmore says this is paving the way toward a loyalty app that uses location-based technology to alert store managers when their best customers walk in the door.

Ultimately, the company aims to lead Canadian retail with its digital strategy and execution, while still embodying that same comfortable familiarity the brand has built up over the past century. Wetmore compares it to a modern tall ship.

“You get on board one of these things and go below deck and it’s all electronic, state-of-the-art,” he says. “That thing is a floating piece of tech gear with an old tall ship façade on it. That’s what you have to do. Take your brand and keep that image, but inside it’s wickedly complicated and technologically advanced.”

Beyond all the tech talk, the company is also playing with a variety of retail concepts to boost its bricks-and-mortar offering beyond its traditional big-box suburban stores. It has already begun rolling out specialized “pro shops” focusing on outdoor sports and gear for camping, fishing and hunting in select stores that offer a bigger selection of higher-end goods in those categories. The company says it plans to test stand-alone pro shops in 2014 and will start rolling out smaller, express-style Canadian Tire outlets in urban areas this summer. Wetmore says that even though 90% of Canadians are within a 12-minute drive of a Canadian Tire, these new stores will serve as fill-in outlets in high-demand areas.

In a February note to clients, CIBC analyst Mark Petrie said “the company will need to successfully open at least five in order to match the contribution of a solid [large-format] store. So, worth doing, but not going to move the needle for a year.” (In its fourth-quarter 2012, revenue at stores operating under the Canadian Tire banner was up 1% to $3.16 billion from $3.12 billion.)

As soon as talk about Canadian Tire and innovation starts, however, it’s hard not to notice the gigantic elephant standing in the room. The company’s relationship with dealers (store owners) has not always been smooth when it came to implementing change. The company has a reputation for moving at a snail’s pace, but both head office and its store owners realize that has to change in order to compete. So in April, after two years of negotiations, they signed a new 11-year agreement that both sides say positions the company for success.

Wetmore says they’ve removed a lot of the procedural red tape that held up the speed of progress in an effort to make the relationship more streamlined and agile.

In the past, when a product line was under review, it would take 14 months to make a decision after evaluating cost structure, quality and capability, then run through the dealer approval process. Now Wetmore says they have it down to under 10 months and are working to get it quicker.

But the CEO says the biggest benefit of the new deal was rebuilding the trust between the organization and the dealers, which had eroded over the years. “You’d have an argument over here, disagreements over there and end up losing sight of the customer,” he says.

National Bank analyst Vishal Shreedhar cautions those who have called the Canadian Tire dealer model unwieldy. “The reality is that Canadian Tire, through waves of new competition, has succeeded,” he says, pointing out that the dealer structure may complicate things for head office, but it “may also provide an advantage that a corporate store manager at a Walmart or Target doesn’t have.” As owner-operators, Canadian Tire dealers have a stake in the business and are likely to be more entrepreneurial—and more familiar with local communities.

Another advantage the company may have over its American counterparts is its homegrown roots. Last fall it launched a new advertising tag line dubbing itself “Canada’s store,” and in January the company announced a new eight-year deal as a premier national partner of the Canadian Olympic Team, as well as six other amateur sport partnerships that it says represents the largest commitment to amateur sport of its kind in Canada.

Wetmore says that the success of the FGL acquisition, combined with developments like the new dealer contract and the Sport Chek lab, have given the company a new-found swagger. “What we’re saying is we’re ready to play,” he says. “We’re not worried about going up against some of the biggest companies in the world at all.”