Mark discussed the fall of HBC with Richard Cloutier, emphasizing the importance of providing a strong in-store experience – something that Hudson’s Bay fails to do in their oversized retail spaces.
Transcript
Richard Cloutier [00:00:00] The department store chain dates back to 1670. It has not announced plans to close any locations, but a lot of people within the industry are saying 80 stores, the least profitable ones will have to go. Mark Satov is a business strategy advisor, joining us live on 680 CJOB. Mark, do you agree with the prevailing wisdom that some of those 80 will ultimately have to close?
Mark Satov [00:00:29] Some? I want to start by asking you a question if you don’t mind. I didn’t have time to do a survey before this interview, but I’d like to at least survey you. Are you surprised? Is anybody surprised that this is where we’re at?
Richard [00:00:42] No, I’m not surprised by this at all because every time I call you to bring you on, something else that we went to 25 and 30 years ago was either in creditor protection or shutting down. But I do think – and I do shop at The Bay – I still think that there is a role and a place for places like The Bay. You know, it had a downtown store. It closed. Nobody, you know Everybody said ‘well, yeah it was about time, the pandemic’ but then you’ve got pretty active traffic at these two other stores, but given the fact that more people still, despite the tariff war, are on Amazon or going to Walmart, yeah, no, I’m not surprised by this.
Mark [00:01:27] I mean, the thing is that, you know, as I said probably every time that we’ve talked about another brick and mortar retailer going down is that there is still a place for brick and mortar, but you have to try very hard. And I’m sorry, if you go into a Bay, and I do go to The Bay, there are a few categories like housewares and, you know – I just bought a new house and sheets and towels and they have great selection there and great deals. But in the other stuff, they don’t. The actual answer for them would be, not to cut the number of stores, but to shrink every single store and to use fewer square feet and actually focus on the categories where they have a winning chance, and for heaven’s sake put some customer experience in because you walk through these cavernous giant stores that have not been renovated since you and I were children which, you know, was many many years ago and there’s no staff because they can’t afford the staff. And so when you do find somebody, like I say, you know, I buy sheets and towels there, they’re lovely and they’re very attentive and they know their stuff. But they can’t do that in the clothing sections. And you know, you look at their sales per square feet, and we did look recently. I think the last reported sales per square foot of The Hudson’s Bay before they went private was like a hundred and eighty-nine dollars, you know the rent at Yorkdale in Toronto is a hundred dollars a square foot, right? And so it’s like they just have not been trying hard. And by the way it’s the same thing as Sears. Sears was a lackluster retailer they got bought by a financier. This person was not a retailer, was not interested in retailing, Richard Baker has made plenty of money on Hudson’s Bay, you know he bought it, he sold Zellers for as much as he bought the whole thing for. He’s actually doing just fine. The issue is he was never interested in retail and he’d ever tried hard, so of course it’s gonna go. I think this news is five years later than I originally thought it would be.
Richard [00:03:28] Well, let me contrast here, because at Polo Park, one of our two big malls here in Winnipeg, on one side you have The Bay and you’ve painted it very accurately. And on the other side, a renovated section that used to have a Sears, there’s a Zara there. Zara is always packed and there’s a vibe there. The Bay? Do we have the sound effect of crickets?
Mark [00:03:53] Yeah, I mean, like, but like – Zara. Go to Aritzia. Go to Lulu, go to Goose. Now, a lot of these have higher end stuff, but by the way, there was a time where The Bay was trying to go higher end, you know, I remember 8 or 10 years ago they were introducing The Room and other things. That’s the thing is that people look at this and if they’re not educated in retail, they say, oh well, you can never make money in-store, but it’s just not true. At Yorkdale, again, I’m from Toronto, so I don’t have all the numbers for the Winnipeg malls. Yorkdale’s sales per square foot is $2 ,400 across their retailers. Canada Goose does $1 ,600 a square foot. You can make money on that.
Richard [00:04:39] What would it be in Winnipeg?
Mark [00:04:43] Well Yorkdale is one of the top most productive malls in North America, it’s in the top five. But you probably have a mall or two that’s you know fifteen hundred bucks a square foot and you can you can make money on that because even if you’re paying a hundred, a hundred and fifty for rent and you do, you know, you do a thousand bucks and you have 10% for staff and half on margin, you’ve made money, right? If you just do the quick math. But at 300 bucks, there’s, you know… And by the way, they also, they also don’t manage their pricing very well. You go in to buy sheets and towels and it’s like “discount” and “Bay Day” and this, and by the time you go through, it’s like 70% off and it’s like, well, there’s no margin left. So I don’t know what to tell you. I think this is a long time coming and I would say they deserve it, but I also think that they planned it. And I think some manufacturers are going to get screwed. I think Cadillac Fairview, I’m not sure if they’re ever going to get their 165 million bucks. I think they’re going to get their space back and, like Sears, they leased a lot of space back in the day for very low rent. And so if they find an alternative use for the space. That for the mall owners is, I’ll say, payment enough, but that’s hard today because they have so much space.
Richard [00:06:03] Mark, appreciate the time. Thanks so very much. Drop us a line next time you’re in Winnipeg. I’ll buy you, uh, well, are you a Tim Hortons, a Starbucks or even fancier than that type of coffee guy?
Mark [00:06:17] Don’t get me started on Tim Hortons. Maybe that’s a subject for another day.
Richard [00:06:21] Mark Satov, business strategy advisor, joining us here live on 680 CJOB.