Readying for a discount shakeup
Discount retailers Bargain Shop and Giant Tiger are revamping their offerings to take on fierce new competition from dollar stores and U.S. retailers.
A report in The Globe and Mail said that Bargain Shop, the heir to the Woolworth’s five-and-dime, will unveil a dramatic makeover on Friday changing its name to Mymark in cities and Red Apple in rural towns.
In urban areas, where bigger players dominate, it will ditch low-margin food and household consumables, to focus on higher-margin clothing and home goods.
Mymark's first six stores will include locations in Toronto and Welland, Ont., and will carry clothing produced mostly by Quebec-based apparel specialist Effigi, owned by Genuity and run by Claus.
In food Mymark and Red Apple are rolling out a colourful “candyworks” section Claus borrowed from some European retailers to help keep shoppers in the buying mood, he told the Globe.
“Let everybody else fight over food and consumables,” said Eric Claus, executive chairman of Bargain Shop’s parent, TBS Acquireco Inc. in the Globe. “We said, ‘We don’t need to be in that low-margin game.’ … It broadens our customer base and gives us the ability to compete.”
Meanwhile, 31 Red Apple stores have already opened, and they carry basic packaged foods, but not as much as Giant Tiger, which also stocks fresh produce.Bargain Shop is aiming for 290 stores with one-third of them to be Mymark and the rest Red Apple.
The competition between mass discounters like Wal-Mart Canada Corp. and Dollarama Inc. is expected to intensify as Target opens shop in Canada in the spring.
It's not surprising then that smaller chains feel the need to figure out how to compete, either by dropping offerings such as food, which may earn little profit but keep shoppers returning.
“Food and consumables, generally speaking, keep the customers coming back on a regular basis because we have to eat regularly,” said Rick Pennycooke, president of retail real estate adviser Lakeshore Group, in the article. “But I can see them feeling the pressure to do something because they will just get run over.”
Giant Tiger is also looking at its advantage over the larger players by focusing on its convenient, local discount destination and is investing in private-label fashions.
The Globe said industry experts estimate that clothing can generate gross profit margins of 40 per cent or more for discount retailers, compared with between 20 and 30 per cent in consumables.
Giant Tiger is also moving more to brand-name food and toys, along with its clothing and household products, partly to create a "treasure hunt" experience, said the Globe.
Andy Gross, its chief executive officer, said in the article that his company foresaw the shifting tides from Wal-Mart, Target and dollar stores about two years ago and has started to sharpen its offerings.
Giant Tiger is almost doubling its spending on store remodelings in the next 12 months, in response to its research that found that shoppers wanted more "predictable and less cluttered aisles" said the Globe. It has been reported the chain is looking to raise sales by about one-third to $2-billion from 250 stores, up from today’s 206.