If only Canadian Tire were a little closer to chaos, Stephen Wetmore would be a happy man.
Not chaos itself, the CEO quickly qualifies, but just on the brink of it. Because Wetmore is convinced of the virtues of near-anarchy: The more tasks you have to deal with, the more productive you are-an unconventional notion that comes from the 2001 business book Surfing the Edge of Chaos. A corporation, the authors posit, is no different from an organism: Adapt to your hostile environment or succumb to the equilibrium and die.
You would never guess that the mild-mannered Wetmore would be such a fan of turbulence, judging from his tidy perch on the 18th floor of Canadian Tire's headquarters, a drab, 1970s-era high-rise overlooking Yonge Street in Toronto. Wetmore's corner office is almost gleefully banal, as though the whole thing were ripped out of a Grand & Toy catalogue.
When Wetmore moved into this office more than two years ago, he found an iconic but lumbering giant that he'd be the first to describe as lethargic, its lack of dynamism and creativity seeping from the Corp's HQ down to all 485 dealerships across the country. "There is a state here of planning yourself to death," he says, his arm resting on the table, thumb and index finger gently tapping. "'I'll get back to you in a week or three weeks. I'll have four committee meetings and plan it forever.'"
That is not, he believes, the way to fire up Canadian Tire's 57,000 employees at a time when this country's last domestically owned department store chain is about to be beset by Target, which will open 105 stores across the country by 2013. In fact, ever since Walmart and Home Depot crossed the border in the 1990s, Canadian Tire has struggled to maintain primacy in its natural habitat. It remains a pre-eminent national brand, with 2010 sales of $10.3 billion (up 3% from the previous year), 1,200 stores and gas bars nationwide, the PartSource automotive chain, and 383 Mark's Work Wearhouse stores-Canada's No. 1 menswear retailer. It even owns a chartered bank that has issued five million Canadian Tire credit cards. But Wetmore believes the retailer has grown complacent-the company needs to get out of the meeting rooms and go primal.
And so he is undertaking a dizzying array of initiatives: slashing bureaucracy at head office, retrofitting dozens of stores, renegotiating the tricky agreement it has had with store dealers for almost 80 years, jump-starting its automotive business-the list goes on. And just to keep Canadian Tire's rivals on their toes, Wetmore announced in May that the retailer would pay $771 million to acquire Calgary-based Forzani Group, a complicated agglomeration of 12 sports-and-apparel banners, with a mix of corporate-owned and franchised outlets.
Along with all this is a rebranding campaign that has moved the company away from its more female-driven ethos of the past decade and started it on the road to being the authority on all things Canadian. The new ads are an attempt to speak directly to the quiet defiance inside us all. Canadians are so weather-hardened, one spot implies, that we don't mind barbecuing in the rain. We actually kinda like it. The slogan: "Bring It On."
That could just as well be the mission statement for the Wetmore era. "If you're taking 14 months from the time you come in and show us a new product to the time you put it on the shelf, that's too long," Wetmore says. "We're up against the best companies in the world."
Or, as the company's senior vice-president of marketing, Rob Shields, puts it: "We're the underdog."
When Wetmore took over the top job in January, 2009-Canadian Tire's third CEO in nine years-analysts questioned whether he was the right pick. Like his predecessor, Tom Gauld, he was not a retail guy. An accountant by training, the New Brunswick native spent 10 years in the health-care sector before landing at Bell Aliant, the Halifax-based phone company that he is credited with turning into a regional powerhouse.
But Wetmore had served on the Canadian Tire board since 2003. So when Gauld announced he was retiring from the chief executive post, his fellow directors turned to one of their own. Wetmore had left Bell Aliant at the end of 2008 (reportedly because he lost out on the top job at parent company BCE Inc., to George Cope), and he was familiar with the guts of Canadian Tire and understood the many challenges the retailer faced.
Wetmore says his biggest contribution to the company so far is a culture of urgency. Recalling one of his first big initiatives, for instance, he was horrified to learn that the team he'd put together had spent its first six meetings just coming up with a name for the project. "When you hear that, as the CEO, your stomach goes into a knot, because that's the way the organization operates," he says, taking a deep breath. "And you start to wonder why-why is this happening? And then you go out and realize that your competitor has an app for paint and you can download it on your mobile device and it's been out there for a year and a half. And you go, 'Whoa, we missed the boat or what.'"
Part of the problem is a sprawling, Kremlin-style bureaucracy within head office. Wetmore's first major undertaking was to streamline management in automotive. When he arrived, auto-related divisions such as PartSource, petroleum and roadside assistance all reported to different managers. Wetmore brought them under a single roof. Now, the guy in charge of tires is four, not six, reports from the top boss. "I now know the category business manager," says Wetmore. "The CEO would never have known that before. I get to work with him and ask him what he's doing."
Wetmore has also dedicated a lot of energy to bringing up the standard of Canadian Tire's other core categories: hardware and sporting goods-putting the testosterone back into the brand, as he put it early in his tenure. Under Gauld and his predecessor, Wayne Sales, the shopping experience had tipped toward women, with Debbie Travis paint, scented candles and fully furnished bathroom displays. The cult of storage swallowed up 50% more floor space than it had previously. At the same time, the chain had strayed from the holy trinity of Canadian Tire's man-cave religion. "There was a very specific focus in the format to raise the profile of what are sometimes called female-friendly categories that women are more interested in," Wetmore told an investor conference last year. "But I think we made too many compromises in order to achieve that."
Reviving Canadian Tire's image as an automotive force was Wetmore's first job. Many of the auto-parts depots, scrapped years ago, have reappeared, making it easier for customers to get what they need on the spot, instead of having to wait for days. Tires used to be hung up so high, you almost needed field glasses to read their specs. Now, new stores display them at eye level, and management has been pushing other dealers to lower their displays, too. There is a greater variety of rim sizes, and a tire selector tool that helps you match your car with the tire it needs. You can even order tires online.
Even so, Wetmore's much-heralded plan has yet to yield big results in stores. Sales-per-square foot inched up $3 versus the previous year, to $370. During the same period, gross operating revenue rose only 1.2%, to $5.6 billion.
The deal with Forzani is crucial to Wetmore's effort to revive Canadian Tire's reputation as the go-to sports retailer.
For months, rumours have floated that U.S. retailer Dick's Sporting Goods, which has 300-plus stores south of the border, was expanding to Canada. The Forzani deal-$26.50 in cash per share-was a pre-emptive strike that will plug a gaping demographic hole for Canadian Tire. Its average shopper is middle-aged, which means that kids on the prowl for a North Face jacket or Columbia boots don't go anywhere near the place. "Forzani is over 70% into apparel and footwear, so they really get into the 18-to-35 age group," Wetmore says.
He won't discuss how Canadian Tire will absorb Forzani-the nation's only sports-centric chain, which also includes the golf-geared Nevada Bob's, Athletes World and Atmosphere. (It also comes with a seasoned team of retail execs, including long-time CEO Bob Sartor.) Wetmore hints that Forzani's plan to consolidate brands is still on the table. "They have talked for a year or two about banner rationalization, which is, I guess, how they say it," says Wetmore. "That means taking 12 banners and bringing that down to a much smaller number. And, in so doing, you place your bet on two or three or four brands and you say this is how we're going to build this business-under this superbrand, if you will. That doesn't necessarily mean that those banners will disappear. What they've done is take Nevada Bob's and put it inside Sport Chek. I think that's a very clever move."
So, will that ever happen at Canadian Tire stores? Wetmore says no-just as Mark's Work Wearhouse stores have remained a separate entity, so will Forzani's many brands. He also stresses that the deal won't cannibalize Canadian Tire's sales. "There is a very small overlap," says Wetmore. "We've taken a look over the past years where Sport Chek has opened up stores next to existing Canadian Tire stores, and it's had a 0.4% or 0.5% effect on business."
Wetmore has just spearheaded one of the largest retail acquisitions in recent Canadian history. But he is less confident about his favourite shopping experiences: Which stores excite him? An uncomfortable silence follows, before Wetmore replies, "Canadian Tire."
That simply can't be. Because a quality shopping experience is not what "Crappy Tire" is known for. First, there's its Soviet appreciation for customer service, a well-ridden hobby horse on the popular canadiantiresucks.net website. But more important, a simple survey of local stores reveals stunning inconsistencies in presentation.
The relatively new dealership near Toronto's Dundas Square, for example, is a marvel of navigability and airiness, with well-informed staff and furniture displays worthy of high-end specialty stores. A few subway stops to the north is the confused realm of the Yonge and Davenport store, where pressing the customer button sets off a page for a service person-who never arrives. In the lead-up to the May 2-4 weekend-which should be a bonanza for dealers-several stores in the Greater Toronto Area were still featuring the same tired mix of batteries, chips and book bins in the centre aisle, with nary a barbecue or lawn chair in sight. Another store was more in sync with the season, featuring a bike rack outside, with stacks of lawn fertilizer and weed whackers near the entrance, and little garden vignettes complete with BBQs.
No question the retail side of Canadian Tire has drifted. At the beginning of the past decade, 70% of overall operating profit came from its retail arm. Nowadays, it's just over 50% (financial services, meanwhile, now generates 30%).
Enter Dunnhumby, a London-based company that specializes in so-called forensic retail analysis, and that has worked with such brands as Coca-Cola, Nestlé and Procter & Gamble. In essence, it helps retailers collect information on customers' buying habits-through loyalty programs and the like-to figure out how to get them to buy more. Its key client, U.K.-based Tesco, has tripled in size since it started working with the shop in 1995; its Tesco Clubcard, the brainchild of Dunnhumby's two founders, has 15 million members.
Long before Dunnhumby came on the scene, Canadian Tire gleaned customer information from its credit card use. Now Canadian Tire is putting in place a modern, card-based loyalty program that will allow it to collect even more customer data. But the idea of ditching its 50-year-old Canadian Tire money-along with Sandy McTire, the currency's thrifty ambassador-is reportedly facing some resistance from inside.
In the meantime, Suzi Morris-a British transplant who has consulted for Tesco and Monoprix, the French supermarket chain-is one of three Dunnhumby-ites assigned to the Corp full-time, helping to refine Canadian Tire's layout. "One of the first things that struck me about the stores was the difference between their concepts and layouts," says Morris, whose official title is vice-president of client solutions.
She spends a lot of her time poring over sales data and wandering the aisles, trying to determine why certain products sell and others don't. "It's noisy to change things overnight," Morris says, but her work is paying off. In automotive, diesel products have traditionally been grouped with oils, but they were getting lost in the crowd of other performance fluids. Once Canadian Tire shifted diesel products to a stand-alone section, they started to fly. The Dunnhumby team has also identified products that are important to Canadian Tire's core shoppers-cleaning products, air fresheners-and made sure they're stocked in every store.
With Dunnhumby's help, Wetmore is beginning a store-by-store retrofit, transforming them into "smart stores"-making the layout more navigable and customer-friendly. The dozens of new features include seasonal displays up front, customer help buttons and help desks, and increased staffing in the sporting goods and recreation departments. In the automotive section, the new smart stores have waiting areas with flat-screen TVs and Internet access, even groceries.
So far, 103 out of 485 retrofits have been completed, and the company is forecasting 60 more this year.
The trouble with making over Canadian Tire is that every detail must first be approved by its network of 485 dealers.
Unlike more traditional franchise models, each dealer owns his own store, inventory and fixed assets, paying rent and a percentage of sales to head office. But dealers can filibuster decisions made by Canadian Tire executives, which makes reforming the system-and keeping dealers onside-Wetmore's most crucial challenge. "Being able to react to your best customers requires agility and a decision-making process that is really not designed in our existing arrangements with our dealers, and they, too, recognize that," Wetmore says. "If you can build a level of trust in your relationship, then I think the next step is to say, 'Let's go after this.'"
The dealer system was established by Canadian Tire's founding Billes brothers, in 1934. Their hope was that leaving some key decisions to franchisees would lead to a more entrepreneurial spirit. Dealers knew best how to organize their stores, stock their shelves and hire the most effective employees to serve the local clientele, or so the thinking went.
Seventy-five years later, it is a strained partnership that is governed by 31 committees and a 300-page contract that lays out every detail. No possible scenario is too mundane or minute for inclusion in this tome: how to transfer inventory during an ownership transition; who is responsible for late or damaged deliveries; what happens when an in-store air conditioner breaks; and on and on. Though management would not reveal the details of its particular laws, the prevailing theme is that everything is a negotiation, right down to who will pay for the high-speed Internet hookup for Canadian Tire's new e-kiosks.
There are times when the contract has direct implications for customers. While the Corp is responsible for buying all goods stocked in stores, the dealer determines how many of each item they want to order. (Dealers also have leeway when it comes to pricing-head office sets a ceiling, but they're free to undercut it.) But every store has its own quirks-a reality that can put the contract's interests ahead of all else.
Say a dealer who owns a store in downtown Montreal or Vancouver wants to stock pillows, which he's convinced will be big sellers with nearby apartment dwellers. Because the Corp doesn't buy pillows, the dealer has to file an application to sell them. The process can take months; often the dealer just doesn't bother.
Understandably, there has been civil unrest. At one point, almost 25 years ago, relations became so inimical that the dealers tried to purchase the entire company from A.J. Billes's three children, who had a controlling interest in the company. And just a few years ago, Tom Gauld told a room full of dealers that they were Canadian Tire's biggest problem.
Wetmore's tone has been much more conciliatory. The two sides shouldn't have to quibble over minor details, he says, especially when they have so many bigger issues to confront. "We should minimize the time we spend checking up on each other and maximize the time we spend together," Wetmore told the crowd that gathered for the company's annual dealer conference, which drew a record 445 dealers this past April. He sounded part-megachurch leader, part-Churchill, drawing hallelujah-like refrains of "Bring it on" from the audience as he talked about the looming retail invasion from the south. His presentation ended with a video set to clanging music: little smiley-faced soldiers from Target, Walmart and Home Depot jumping off Juno Beach-style landing craft onto Canadian shores, only to be driven back by a vast army of red triangles.
With Wetmore in the process of renegotiating the agreement that governs the HQ-dealer relationship, the crowd's enthusiastic reception is a good sign.
Edmonton dealer Gerry Feist, who supports Wetmore's initiatives, seems to capture the zeitgeist among dealers. "We had some challenges," says Feist, whose store is cited as one of the chain's top performers. "You couldn't put your finger on it. We just didn't see innovative things happening."
That has changed under Wetmore. Feist raves about the new openness between head-office buyers and dealers, and the return of the auto-parts depot and emphasis on automotive-which he calls the "cornerstone of our business." "Everyone is energized about what's going on," says Feist. "It's fantastic."
Innovation is even on display at the convention, which features a product show spread across 175,000 square feet. In years past, dealers would put in their orders in principle at the event, and then follow up with HQ to make an actual purchase. This year, Canadian Tire loaned iPads to store buyers so they could get their orders rolling on the spot. It sounds basic enough, but the new process saves dealers weeks in delivery time.
Dale Derbyshire, who owns a store in the boundless sprawl of Barrie, north of Toronto, is also psyched up about the company's return to automotive, its attention to supply-chain issues, and redoubled focus on the customer experience. Mind you, his dad is a Canadian Tire dealer; so is his brother. Right off the bat, he'll tell you how loyal he is to the company: "You know what they say about me-when I get cut, I bleed triangles."
On his street, Mapleview Drive, he competes with Rona, Costco and Walmart. A Lowe's Home Improvement is a few lights away. A Best Buy will anchor a mall down the road. And across the way, a Target is scheduled to replace a Zellers by 2013. He says he doesn't mind the competition: It just brings more shoppers to the area. He doesn't have much choice. "You think, is it ever going to end?" he says, laughing. "No, it's not going to end."