Canadian Tire Corp. Ltd. rolled out e-commerce home deliveries nationwide this fall but isn’t rushing to match rivals with free shipping promotions – for now.
The company, which posted better-than-expected third-quarter results on Thursday, views free shipping as just one more tool in its pricing arsenal to lure shoppers, chief financial officer Dean McCann said.
“I certainly don’t get wound up about whether shipping is free or not,” Mr. McCann told an analyst conference call. “It really comes down to what is the end price of the product for the customer – are we delivering great value or not. History shows we’re pretty good at that.”
After having abandoned e-commerce in 2009, Canadian Tire gradually brought it back beginning in 2011, but focused on customers picking up their orders in stores. Now that the retailer has introduced home deliveries across the country, it is wagering that e-commerce, along with an array of other initiatives, will help fight off global giants such as Amazon.com Inc. and Walmart Inc.
At the same time, Toronto-based Canadian Tire is bolstering its private-label offerings, a new rewards program and improved analytics and digital tools to better track customer preferences.
Having completed its nationwide roll out of e-commerce deliveries last month, Canadian Tire is intent on marrying its digital and in-store efforts so customers can research goods and make purchases however they wish, online or in bricks-and-mortar outlets or both.
But while the retailer offers free e-commerce order pickups at its stores, it charges from $4.99 to about $80 for shipping, based on location and the size and weight of packages.
Asked whether Canadian Tire would match Amazon’s promotion of free shipping, Mr. McCann said he’s not wedded to the idea but suggested he hasn’t ruled it out either.
“Shipping is just another tool, in terms of how you price the product,” he said. “It plays very well into, if you will, our model.”
Canadian Tire continues to beef up its e-commerce pickup program, last month introducing robotic five-metre-tall “towers” at five of its stores that act as massive vending machines to spit out packages and speed up the process. Its executives say the 500 Canadian Tire stores serve as convenient pickup depots; customers tend to spend more once they’re in a store.
Greg Hicks, president of Canadian Tire’s retail division, said that in Ottawa, where deliveries launched about a year ago, e-commerce customers still tend to choose pickups more than deliveries.
Still, some industry observers say Canadian Tire should make bolder moves in e-commerce.
Kaan Yigit, president of Solutions Research Group, said delivery prices based on parcels' weight and size make sense but “if the consumer has to think long and hard about how much that might be, it’s a deterrent to use, however small or justified the amounts.”
He said Amazon’s free shipping for paid Prime subscription members “takes one layer or hesitation out of the equation.”
Even so, Canadian Tire’s latest initiatives are paying off. The company, which carries everything from automotive parts to kitchen appliances, said its sales at existing stores, a key retail measure, rose 2.5 per cent in the quarter, beating analysts' average estimate of 1.6 per cent.
Overall third-quarter profit rose to $231.3-million or $3.16 a share from $198.5-million or $2.59 a share a year earlier. Revenue climbed to $3.63-billion from $3.27-billion. Excluding one-time items, Canadian Tire earned $3.47 a share, topping analysts' average estimate of $2.85, according to Thomson Reuters Eikon.
Peter Sklar, retail analyst at BMO Nesbitt Burns, said that, while the results were robust, they were helped by accounting adjustments for allowances and receivable recoveries in Canadian Tire’s financial services business. As well, the retailer shipped more goods to warehouses than had been anticipated and enjoyed strong credit card growth, he said.
Investors seemed pleased. Canadian Tire’s class A shares surged almost 11 per cent Thursday to $166.10 on the Toronto Stock Exchange.