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Shoppers wades into e-commerce with Beyond the Rack

Shoppers has put a big push on high-margin beauty products, which are tightly tied to the fashion world.

FERNANDO MORALES/THE GLOBE AND MAIL

Shoppers Drug Mart Corp. is making a fashion statement.

The country's largest drugstore chain is teaming with flash-sale fashion website Beyond the Rack to give Shoppers loyalty cardholders the chance to rack up more rewards. It's an important entry for Shoppers into the world of online shopping, as global rivals move quickly to gobble up market share.

"We see it as a first step to e-commerce," said Jim Noteboom, senior vice-president of business analytics and financial services at Shoppers, which is rolling out the new Optimum-Beyond the Rack site on Wednesday.

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Shoppers has already dipped its toes in cybershopping waters, launching an e-commerce site tied to its small upscale Murale beauty chain last year. But it faces competition from powerhouse retailers Wal-Mart Canada Corp. and Amazon.com, which are expanding their online beauty and consumer product stores.

Shoppers is betting that its partnership with Montreal-based Beyond the Rack, one of the largest online retailers, will help speed up its embrace of e-commerce. While pairing with a designer fashion specialist may seem an unlikely choice for a pharmacy chain, the two retailers draw a similar type of customer – mostly women who seek prominent brands, good value and convenience. Shoppers has put a big push on high-margin beauty products, which are tightly tied to the fashion world.

The move comes as Shoppers prepares to be acquired in a $12.4-billion deal by grocery giant Loblaw Cos. Ltd., also a latecomer to e-commerce. Three weeks ago, Loblaw introduced online shopping for its Joe Fresh line of fashions in Canada, but has yet to offer e-tailing for its main business.

"For any latecomer, especially a big retailer that is late to digital, they do have to move quickly," said Jim Okamura, managing partner of retail expert Okamura Consulting. "Any big retailer needs to provide that kind of choice to their customers."

He said an online designer fashion business is an unexpected partner for a drugstore retailer. But Shoppers' research found that its female customers value brand-name goods and good value – similar aspirations to those of people who shop at Beyond The Rack, Mr. Noteboom said.

Shoppers had been seeking more digital opportunities to cash in on the fast-growing online business, he said. Overall Canadian e-commerce sales are expected to pick up by 14.2 per cent to $24.25-billion this year, almost the same as last year's 14.3-per-cent gain and up from a 12-per-cent rise in 2011, according to researcher eMarketer.

While annual sales growth is expected to dip a little in each of the coming years, it will remain in the double digits and far outpace the single-digit sales increases anticipated at bricks-and-mortar stores, eMarketer data show.

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Yona Shtern, chief executive officer of Beyond The Rack, said the partnership with Shoppers could eventually lead to the two retailers working together on other initiatives. "It' a recipe for evolution," he said.

Many Beyond the Rack customers end up in Shoppers' stores to pick up their orders at the retailer's post office counters, he said.

Beyond the Rack, which expects to ring up $150-million in sales in 2013, has 9.5 million members, half of them in Canada, while Shoppers has 10 million Optimum reward cardholders. At the new Optimum-Beyond the Rack online site, customers will be offered products exclusively to them, allowing them to collect 10 Optimum points on every dollar spent. Customers will have seven days to decide on products, rather than the usual two days at the flash-sale's site.

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