Eatons Returns

Eatons Returns

Richard Sorby sweeps his fingers lightly across the top of a cherrywood counter being installed in the new Eatons store in Winnipeg. "This," he says, "isn't laminate." No, it is the real thing and he's making the point that the new Eatons - rebranded sans apostrophe, with a lower-case logo - is going to be a class act.

As he speaks, the department store is 2 ½ weeks away from its much anticipated Nov. 25 relaunch, and workers are going seven days a week to pull it together. Sorby, the executive responsible for Eatons' redesign, is crisscrossing Canada, visiting each of the seven locations. On this survey, the only store he misses is Ottawa, travelling from his home base in Toronto to Winnipeg, Calgary, Vancouver and Victoria in the space of five days. Here, at Polo Park mall in Winnipeg, building equipment butts up against stacked cartons of merchandise. New counters and cabinets are mostly in place - those in the cosmetics department are already filled with products. But overall, the site is a construction zone. Porcelain floor tiles - some matte, some high-polish - are still being laid. Light fixtures - recessed pots alongside swank halogen spots - are being installed. The floor design is curvy and matched by dropped ceilings made of varied materials - wood, perforated metal, as well as drywall. Walls and cabinets, too, are eclectic: etched glass, more cherrywood, rosewood, maple, stainless steel.

In the larger Toronto and Vancouver stores, Romeo and Juliet balconies hover over central atriums, where escalators surrounded in glass and light-toned tiles will glide up and down between storeys. An Eatons designer says the goal is to capture the zen of shopping, if such a thing exists. Quiet waterfalls, curved lines, a sophisticated use of tones and subdued colours all aim, Sorby explains, to provide a sensory experience. Each location will have personal shoppers, hotel-style concierges and people who can carry bags to your car. The sales staff will be twice as large as it was in the old stores. In a moment of hyperbole, Sorby says the reopening of Eatons will be the most exciting retail event "in the world."

Sorby's enthusiasm aside, the store's launch date, or "November two-five" as he calls it, has been marked in the agendas of Canadian retail circles. In an ever-evolving industry, the re-entry of Eatons is making a big splash. A few stores - Victoria and two others the company won't name - are close to ready and may open their doors early. Sorby says he is trying for something entirely new. "I threw out the book," he says. "We're going to break the mould."

The redesign might also break the bank. Eatons' parent company, Sears Canada Inc., won't say how much all this fine detail costs, but there are clues. A retrofit like that costs at least $100 a square foot, says an industry source. At 2.5 million square feet total, that adds up to $250 million, a figure Eatons does not dispute. The company has said that the tax losses acquired when it bought the 130-year-old T. Eaton Co. Ltd. last year would cover the cost of refurbishing the stores. Those tax losses amount to $250 million.

Whatever the amount, Sears Canada, which in turn is controlled by Chicago-based Sears, Roebuck & Co., is in for the long haul. Initially, Paul Walters, Sears Canada CEO, said Eatons will turn a profit after its first year, but last week an official said the company would no longer make that promise. He did stand by the prediction that Eatons will have revenues of $1 billion within three years. The goal is to capture a broad spectrum of shoppers - with Sears catering to middle-class suburbanites and Eatons aiming for the upper-end urban crowd. Eatons, says Sorby, will become a destination store.

It will have to be, snipes the chief competition. Given that there are only seven stores across Canada - compared with 86 in the heyday of the old Eaton's (then with an apostrophe descended from founder Timothy Eaton) - people will have to drive a distance if they want to go to one, says George Heller, president and CEO of Hudson's Bay Co., which owns both the Bay and Zellers. From Heller's perspective, the competition the new Eatons serves up for the Bay will be spread thinly across the country. "People talk about Eatons reopening as if it was Eaton's reopening," he says. "It's not. We're talking about a totally different animal here."

The new Eatons, argues Heller, won't beat the Bay on three of the four principal items that department-store retailers are concerned about: products, location and people. The only thing left is decor. And that doesn't leave him quaking. "Do you have that much better a mousetrap?" he asks. Heller is sure Eatons will not expand beyond the seven stores: "On that, I'd stake my firstborn." The reason, he says, is there's no prime real estate left in the downtown cores, the space Eatons targets.

While Heller says he's not worried about the chain's debut, he is keeping a respectful eye on its progress. After all, the final demise in 1999 of the former Eaton's was a blessing to his enterprise. Not only did the Bay no longer have to spend a lot of money and effort doing battle with its chief opponent, but Eaton's departure also left open the mid- to upper range of shoppers. To grab them, the Bay developed a strategy it is still in the process of executing, Heller says. It has brought home furnishings and appliances back into its stores. It revamped its marketing strategy in an effort to shed stodginess. It cut back on its Scratch and Save days. Instead of producing ads focused on such events, the store now promotes the experience itself ("Shopping is good") - similar to Eatons' strategy of calling itself a destination.

There have been results. Last year, the same one in which Eaton's collapsed, Hudson's Bay Co. reported its best earnings in five years and doubled its profit from 12 months earlier. Heller doesn't want to give up any of that edge, particularly to a competitor that has only seven stores. But he knows the Eaton name has cachet and both companies are after the same range of shoppers. For HBC, its Zellers stores are aimed at the lower to mid-end of the market; its suburban Bay stores are geared to middle-class suburbanites; and its downtown and regional mall stores are targeting higher-end shoppers. Heller is aware that all these customers can be fickle and he doesn't want to lose them.

The retail business is at the tail end of a decade of tremendous upheaval, Heller points out. While the demise of Eaton's is the one event most Canadians easily remember, there were many others. Simpson's. Woodward's. Robinson's. Woolworth. Kresge. Kmart. One more significant event occurred in the '90s. The entry mid-decade of Wal-Mart, the world's largest retailer, almost overnight set off the big-box craze: huge, cavernous stores based outside the city centres with lots of easy parking. It's caught on in home renovation, pet products, business supplies.

The big boxes forced the department stores to re-evaluate what they were doing. The upscale Eaton's struggled, losing much of its high-end clientele, and then scrambled for a piece of the lower end of the market. The company owned by Timothy Eaton's heirs dropped furniture, appliances and electronics to focus on fashion. But the retailer only confused and further alienated its customers. Over a period of 2½ years, the department store teetered. It sought bankruptcy protection. It sold much of its real estate, including its stakes in the Toronto Eaton Centre and the Pacific Centre in Vancouver. It became a public company. In its final full year of operation, the 64 remaining Eaton's department stores lost $72 million on sales of $1.6 billion. Finally, it cratered, and in May, 1999, it put itself up for sale.

Enter Sears Canada Inc. A bid of $80 million bought the leases to 18 Eaton's locations, outright ownership of the downtown Calgary site, the Eaton's name and all rights to the Eaton trademarks. Sears set aside seven locations to be relaunched under the Eatons banner and kept the other 12 for Sears. Even before the deal closed on Dec. 30, Sorby had begun the redesign of the Eatons properties.

The department-store pie in Canada is worth about $30 billion, Statistics Canada says. Times are good these days - the economy is strong, Christmas is coming and Canadians are shopping. It's just a small piece of that pie that Sorby wants to capture. To slice it, the company conducted a series of focus groups with shoppers in major cities and found they wanted the quality of Holt Renfrew without the snootiness, Sorby says, adding, "not my words." The design team began to play with terms like fun, alive, intuitive, simplicity, refreshing, good taste. The store will capitalize on the Eatons name and its reputation for quality, but, Sorby says, "you don't have to be stodgy." And it doesn't mean "ozone-level" pricing, although no one should mistake Eatons for a discount store. Already it has sent out 4.4 million catalogues and its new Eatons credit card to old cardholders. Its marketing campaign, centred on the promotion of the store's new signature "aubergine" colour (reminiscent of the deep violet skin of an eggplant), is already under way. But to some observers, what's out there so far lacks focus.

The redesign, says retail consultant Joan Pajunen, is a "hodgepodge" of ideas. From the TV ads to the catalogue, the marketing campaign pushes too many different buttons, she says. The key to making a new department store is differentiation. "What's new here? What's unique?" she asks. She says the lower-case, encircled "e" symbol triggers hip e-commerce thoughts, while the emphasis on class and quality recall the old Eaton's. The catalogue, she says, jumps from Sears-style fashions to Victoria's Secret-like lingerie to a $4,999 diamond-encrusted, heart-shaped gold pendant. "The emperor's new clothes," she says. "This is the image that comes to mind."

As snow dusts down on the fields surrounding Winnipeg, Sorby says he's confident about the new store that's soon to open. Sorby, who grew up in Winnipeg and whose parents worked for Eaton's, is proud to deliver a new version to his home town: "This store will blow them away." And hopefully, customers will blow a little cash - or Eatons could be in trouble again.

Maclean's November 20, 2000