Zellers

Zellers, Inc.

Type	Discount department store
Industry	Retail
Founded	1931
Headquarters	Brampton, Ontario
Number of locations	272
Products	Clothing, grocery, footwear, bedding, furniture, jewelry, beauty products, electronics, toys, sports equipments, appliances, and housewares.
Owner(s)	NRDC Equity Partners
Employees	35,000
Parent	Hudson's Bay Company
Website	www.zellers.com

Zellers Inc. is Canada's second-largest chain of mass merchandise discount stores, with locations in communities across Canada. A subsidiary of the Hudson's Bay Company (HBC), it has 272 locations across the country.

In 2011, Target Corporation acquired the leaseholds of 189 Zellers stores (including locations being resold to other retailers) as the chain prepares to expand into Canada in 2013 and 2014. HBC will continue to operate these locations until at least early 2012, at which point they will close for renovations, with individual closing dates varying by location. Target is not buying the Zellers chain, and HBC is reviewing options for the remaining 84 Zellers locations.

History

Early years

The company was founded in 1931 by Walter P. Zeller as "stores for thrifty Canadians". The chain began with the purchase of the fourteen Canadian locations of American retailer Schulte-United, all of which were in Southern Ontario. Almost immediately, Zellers initiated an aggressive expansion strategy. Within 25 years, Zellers operated sixty stores and employed 3,000 people. In 1952, in a move to expand into Atlantic Canada, it acquired the Federal Stores chain of variety stores, adding more than 12 new Zellers locations.

Acquisition by W.T. Grant Company

During this period of expansion, Zellers concluded a deal with W. T. Grant, a similar chain of American mass merchandise department stores. This arrangement allowed W.T. Grant to purchase 10% of Zellers shares, and eventually a 51% ownership in 1959. In exchange, the Grant Company made available to Zellers its experience in merchandising, real estate, store development, and general administration. Zellers employees were sent to Grant stores and head office for training and the two companies made common buying trips to the Orient. In the 1950s, the chain again began opening new locations, and in 1956 opened its first self-serve location at the Norgate shopping centre in Saint-Laurent, Quebec. Stores opened in 1960 employed many new innovations, including the first in-store restaurant, the first auto centre, and the first suburban location. In 1975, Zellers changed to the current logo.

By 1976, Zellers had grown to a chain of 155 stores, with annual sales of $407 million.

Acquisition of Fields

Although Zellers was prospering, W.T. Grant was facing intense competition in the United States, and was forced to withdraw entirely from its Canadian operations. In 1976, Zellers management and shareholders were presented with an offer from Fields, a clothing retailer based in Vancouver, British Columbia, to purchase a 50.1% stake in the company for $32,675,000. Zellers shareholders, unhappy with the idea of Zellers becoming a subsidiary of Fields, reversed the takeover, and purchased Fields and its hardware store division, Marshall Wells. This sale added 70 Fields stores and 162 franchised Marshall Wells stores to the company. Fields President and founder, Joseph Segal, was appointed as President of Zellers.

Merger with Hudson's Bay Company

In June 1978, Zellers presented a bid to acquire 100% ownership of the Hudson's Bay Company. HBC management, recognizing Zellers' profitability and the potential to enter a new retail segment, decided to purchase Zellers instead. Zellers and Fields, operating in very different retail segments than HBC, were kept intact, and established as separate divisions of the company. HBC acquired full ownership of Zellers and Fields in 1981, and Marshall Wells, in 1982. By 1985, HBC had sold Marshall Wells for $20 million, because it was not relevant to its department store business.

Further acquisitions

In 1990, HBC acquired the 51 stores of the Towers/Bonimart chain from the Oshawa Group, and converted most of them to Zellers outlets, including its flagship location in Toronto. Zellers advertisements at the time featured both the Towers mascot "Sparky", and the Zellers mascot "Zeddy", walking arm-in-arm. During this period, Zellers had the popular and well-known slogan "the lowest price is the law".

In 1993, HBC purchased the assets of the bankrupt Woodward's chain, including 21 store locations. These were converted into both Zellers and the Bay stores, and greatly expanded the Company's presence in Western Canada. In 1998, Hudson's Bay Company acquired Kmart's Canadian division, and merged it with the Zellers division to create a larger combined chain under the Zellers name. Many Kmart locations were closed while some sites became full Zellers outlets. Zellers also took over Kmart's Canadian head office in Brampton, Ontario.

On February 28, 2006, Zellers was taken private when South Carolina businessman Jerry Zucker finalized a takeover bid for the Hudson's Bay Company. Following Zucker's death in 2008, HBC (including Zellers) came under the ownership of a New York-based company, NRDC Equity Partners, the owner of the Lord & Taylor.

A Zellers in Hamilton, Ontario, that will become a Walmart after the takeover by Target Corporation

Sale of leases to Target

Main article: Target Canada

On January 13, 2011 it was announced that Target Corporation of the United States will purchase the lease agreements of up to 220 Zellers stores for C$1.825 billion. Under the agreement, Zellers will initially sublease the properties and continue to operate them as Zellers locations until at least January 2012, and at latest the end of March 2013. After the Zellers stores at these locations close, Target will renovate 100-150 of them. Target will then reopen the stores under the Target banner during 2013 and 2014. The remaining acquired sites will be transferred to other retailers.

Of the maximum 220 locations, 105 to be transferred to Target were identified in late May 2011, and another lot of 84 locations in late September 2011, bringing the total number of Zellers stores acquired by Target to 189. Of these 189 stores, an estimate of 125-135 stores will be converted into Target stores, 39 others will be resold to Walmart Canada, and the remaining 15-25 leases will either be sold to other retailers or returned to the landlords who own the sites. On July 2011, HBC announced the closing of a Zellers store in Dorval, Quebec effective for January 2012 and although it is scheduled to be replaced by a Walmart, it is not part of the 39 Zellers stores acquired by Walmart Canada from Target Canada.

The remaining 84 Zellers stores (or 83, if excluding the Dorval location), unaffected by the transaction, will continue to operate under the Zellers banner until the HBC makes a decision about the future of the chain. Almost all these stores are either situated in towns or small cities, located in shopping centres with less than 30 tenants, or unionized. The four Zellers Select stores are among these 84 outlets.

Current operations

A Zellers store in Moncton.

Zellers Select logo.

Zellers operates stores from St. John's, Newfoundland and Labrador, to Prince Rupert, British Columbia, and employs over 35,000 people. The average store size is 94,000 square feet (8,700 m²). "Zellers Select" stores are designed for smaller markets with populations under 25,000, with stores averaging 45,000 square feet (4,200 m²).

Almost every Zellers location in the English-speaking provinces features a pharmacy and an in-store restaurant, the 1950s themed "Zellers Family Diner". Most locations in Quebec don't have a pharmacy, but practically all stores have a restaurant (known in the province as "Restaurant familial Zellers").

Newer Zellers locations are typically larger than 100,000 square feet (9,290 m²), and also feature a hair salon, refrigerated groceries, major appliances, mattresses, and expanded electronics and cosmetics departments. Multi-level stores are gradually being equipped with a new, state-of-the-art shopping cart system known as the "Cartveyor", which is designed to transport shopping carts between floors next to a standard escalator.

In the past several years, Zellers has made a notable push to drive sales through use of exclusive, private label merchandise. In a strategy similar to that used by Target Stores, Zellers sells Big Star, Cherokee, Sportek, "Stuff by Duff", Homestyles, Hunt Club, Midtown, Nest by House & Home, Wabasso "Design Ideas", Alfred Sung Home, Truly, MarketSquare, Beaumark, Home Studio, and many other labels that can only be found in their stores in Canada. Private brands now represent over 30% of Zellers sales.

"The Neighbourhood Market" is Zellers' expanded section of grocery items that goes beyond dry snacks and other food. Frozen and dairy aisles, including ice cream, and frozen pizza, have been added. In these stores, the food assortment has been expanded by 50%. Whenever a new store is built, or an old one renovated, Zellers will make Neighbourhood Market part of it. With a new prototype underway for Zellers, the new Neighbourhood Market will feature a full grocery department including fresh produce and baked goods. This is seen in the newly renovated Winnipeg stores. The company is expected to continue renovating old stores and building new stores with this new format in 2011.

In late 2008, under the new direction of Mark Foote, Zellers rolled out the new Every Day Priced Strategy under the title 'Saving You More'. Products identified with a 'We've Checked the Price' bubble and/or signs are priced similarly (usually the same) as at their major competitor in the marketplace (i.e., Wal-Mart). Zellers' focus with this program and other 'Pricing Programs' such as Price-Cut (monthly price reductions) and Save This Week (Weekly Sale Items), as well with its new focus on Price Matching Canadian retailers on identical items, should improve its pricing message to the consumer.

In July 2010, Zellers unveiled its new format/look stores in five Winnipeg stores, with two more to open late 2010 and early 2011. One store opened on the lower floor of the downtown Winnipeg Bay store making it the first Bay/Zellers hybrid store in the HBC family of stores.

Starting at the beginning of November 2010, a pilot project will be launched at certain Zellers stores. This new pilot project now allows customers can now trade-in their video games in-store to receive in-store credit in the Electronics department. The project was expected to be launched in the first week of November 2010 in:

• Mississauga (four stores)
• Brampton (four stores)
• Lindsay
• Peterborough

Zellers shares a loyalty program, HBC Rewards, with the Bay and Home Outfitters. Customers can collect these points for free every time they shop at an HBC store. Customers can earn double points and even collect points when they shop outside of HBC with an HBC MasterCard issued by Capital One. Customers can redeem points immediately in stores for Hbc Gift Cards and other special promotions which are found at www.hbcrewards.com. Every 80,000 points equals $10 in the store.

Criticism

Customer service

On January 6, 2012, CBC Marketplace announced that Zellers received the title of "Canada's Worst Customer Service" as a department store, based on a survey conducted by CBC with the Léger Marketing research firm in eight metropolitan areas. The retailer refused to be interviewed by Marketplace host Erica Johnson regarding its ranking, providing her with a written statement instead. Zellers also did not offer a refund to the mystery shopper who bought a used coffeemaker that was presented as new, and attempted to return the product after the advertised 30 day return period. Zellers instead offered the customer an exchange or store credit. Zellers Customer Service did not respond to this customer's Twitter message seeking satisfactory resolution.

Advertising

Zellers ran a "Festive Finale" advertising campaign in late 2011. Zeddy was also used as a mascot to advertise the retailer's toy selection.

Festive Finale

The Festive Finale campaign was used to advertise Zellers' last Christmas and holiday season sale in December 2011. There is a website called ZellersFacebook.ca which allows customers to vote for their favourite coupon and musical genre. While Zellers recommends that customers have a Facebook account and "Like" the company, both of these steps are completely optional. It is also possible to record a radio commercial for Zellers' "Moonlight Madness" sale by using a computer microphone and reading the site's teleprompter.

Zellers has social networking service accounts on Facebook, Twitter and YouTube. The company has been criticized for paying YouTube to promote one of its "Festive Finale" advertisement videos in the "Trending Videos" section of the site. YouTube failed to warn visitors that the video was an advertisement.

Zellers created a stir during the Boxing Week sales event when it issued a coupon on Facebook allowing customers to get any one item (with some exceptions), including sale items, for 50% off by presenting the coupon and giving the codeword 'Cucumber'. Initially, people flocked to the sale thanks to 'deal websites' such as RedFlagDeals.com, but Zellers apparently became overwhelmed by the response and refused to accept the coupon as worded in their stores, changing it to regular priced items only. The backlash reached national media and became a public relations nightmare for the company.

Zeddy

Zeddy is a teddy bear mascot used by Zellers all over Canada. He was first used in the mid-1980s as an advertising campaign, and then rose to his popularity by the early 1990s. The main purpose of Zeddy was to advertise Toyland, the toy section in Zellers stores. Zellers would provide a stuffed Zeddy bear for any child who had a birthday party sponsored by Zellers. There would also be a Zellers employee in a giant Zeddy costume hosting the party. Lineup toys of Zeddy were also created.

Many stores feature a "Zeddy Wheel" ride, which accommodates one young child on a miniature ferris wheel-type ride. The ride costs $1 and plays carnival music when in use. When no one is riding the wheel, Zeddy says on a regular basis: "Come ride with me! All aboard the Zeddy Wheel!" in an attempt to attract customers. Despite Zeddy being withdrawn as Zellers' mascot as of August 2005, the Zeddy Wheel remained in operation at stores featuring it, and the voice track was unchanged as of November 2011. Some wheels removed the big Zeddy sticker in favour of multiple, small generic stickers.

Zeddy remains used as a baby brand for products such as diapers, as well as baby bath products.

During the "Festive Finale" campaign in 2011, Zeddy was reintroduced in weekly flyers for Zellers' Toyland before closing their stores for Target. The character was used as a static picture, but no animated television commercials of him were made during this season. However, some employees decided to wear the Zeddy costume to celebrate the return of this teddy bear. Shortly thereafter, in December 2011, Zellers launched a "Zeddy Bucks" promotion. Those who spend at least $50 before taxes on toys would receive a pair of red 2012 Summer Olympics mittens, plus a $10 Zeddy Bucks voucher. This voucher could only be used on a later date.

• 

  1 – early 2000s

• 

  2 – November 2011

• 

  3 – November 2011

1. Zeddy, on the far right, is walking in a parade in the early 2000s.
2. Zeddy appears in the Toyland section of Toyland in November 2011.
3. Zeddy is featured in the "Festive Finale" flyer for Zellers in late December 2011.

External links

• TheRecord.com: Zellers chain has roots in Waterloo Region
• Zellers store website
• Zellers store website (French)
• Hudson's Bay Company corporate website