Reference no: EM133339664

Assignment:

Cases 10 Hudson's Bay Company | From Fur to Fendi

After 300 years, Canada's oldest retailer knows a thing or two about change. Older than the country it serves, Hudson's Bay Company (HBC) has remained a landmark institution in Canada, navigating its way from rural outposts to over 480 locations and nearly 66,000 associates located in every province. Known best for its flagship department store Hudson's Bay (formerly The Bay), HBC also operates Saks Fifth Avenue, Saks Off Fifth, U.S. retail chain Lord & Taylor, and Germany's GALERIA Kaufhof.

Despite its long and glorious past, all is not well at Canada's historic company. Leadership changes, increased competition, a fragmenting retail market, and plummeting sales have plagued HBC well into the new millennium. Will HBC be able to successfully weather the seas of change or will it sink into history?

History

Two centuries before confederation, a pair of European explorers discovered a wealth of fur in the interior of Canada accessible by an inland sea, Hudson Bay. In 1670, with permission from the King of England, trading began and HBC traded goods and furs in a few forts and posts around James Bay and Hudson Bay throughout the next century. Later, competition forced HBC to expand into Canada's interior and a string of outposts grew up along river networks that would eventually become the modern cities of Winnipeg, Calgary, and Edmonton.

By the end of the 19th century, changing tastes caused the fur trade to lose importance, while western settlements and the gold rush introduced new clientele to HBC-ones who paid in cash, not fur. Trading posts gave way to sales shops with a greater selection of goods, transforming HBC into a modern retail organization. During this time, HBC also started selling homesteads to newly arrived settlers, eventually diversifying into a full-scale commercial property holding and development organization. Shipping and natural resources, particularly oil and gas, were important sidelines.

Challenges

The company has continued to navigate its way through the wake of a weakened economy, changing consumer tastes, and intense competition. The popularity of big-box stores, such as Walmart, Old Navy, and Future Shop, changed consumer behaviour away from department store shopping, forcing The Bay to compete on selection of merchandise and price.

Early in 2001, it tried to reinvent itself with a more fashionable image for The Bay and reduced the focus on steep discounts. The economy, and frustrated customers, forced it to abandon the move and return to its value-based focus. To try to remain competitive with other low-cost retailers, HBC diversified, although unsuccessfully, through Designer Depot/Style Depot, which operated from 2004 to 2008. After remaining a Canadian company for over 330 years, HBC was bought in 2006 by U.S. financier Jerry Zucker. He sought to revive the firm by focusing on improving operations and customer satisfaction. In 2008, after Zucker's death, HBC was bought by U.S. private equity firm NRDC Equity Partners, which also owned the U.S. department store chain Lord & Taylor. NRDC's strategy was once again to revitalize HBC with better brands and better service.

Under NRDC's leadership, The Bay quickly focused on re- attracting customers by dropping over 60 percent of its former brands and re-launching "The Room," a plush VIP suite at one of its Toronto locations, with high-end designers such as Armani, Ungaro, and Chanel. Despite the economic downturn in 2008 and while other organizations were laying off workers, The Bay was in the black. Another coup for HBC was becoming the official clothing outfitter for the Canadian Olympic team. The $100-million deal made HBC the clothing provider for the 2006, 2008, 2010, and 2012 games. The HBC apparel for the 2010 Winter Olympics in Vancouver was extremely popular, and new customers and those who hadn't shopped at The Bay in years flocked back to snap up hoodies, coats, hats, and the iconic red mittens as fast as the merchandise could be put on the shelves. HBC's Olympic sponsorship was renewed through 2020.

Moving Forward

As HBC continues its reinvention, CEO Richard Baker has spearheaded a number of initiatives to make the retailer the country's top seller of women's shoes, along with introducing more British-based "cheap-chic" Topshop store-within-stores. In January 2016, HBC announced it would acquire online flash sales site the Gilt Groupe for $250 million (U.S.). According to HBC spokesperson Jerry Storch, "The two most rapidly growing areas in retail today are Internet and off-price. We think this is a marriage made in heaven." The company hoped the deal would contribute $500 million to HBC's fiscal year. Just a few months later, HBC announced that it would open up to 20 Hudson's Bay and Saks Off Fifth stores in the Netherlands-the first Hudson's Bay stores outside of Canada.

Question:

Further Research: Are there other successful chains in the world that Hudson's Bay could learn from by examining their innovative strategic path? If so, which ones, and why? What online competitors should Hudson's Bay keep an eye on? Is the shopping model changing? Are they changing fast enough?