Loblaws to Launch Private Label Clothing Line
By George Anderson
The Canadian supermarket chain, Loblaws, is looking to head-off competition from Wal-Mart Supercenters by rolling out its own private label brand of clothing next month.
The line will be marketed under the Joe Fresh brand, reports The Globe and Mail, and it is not the first time the chain has gone outside of grocery in its attempts to maintain its market leadership in Canada. New home products were added to the store’s product selection in the past year but sales have been hampered by distribution problems.
Wal-Mart spokesman Andrew Pelletier told the paper that the company’s George line is doing well in Canada and the retailer plans to introduce new brands as it is doing in the U.S. “We’ll be raising the bar when it comes to apparel because that’s what the customer expects,” he said.
Moderator’s Comment: Is Loblaws on the right track expanding into private label clothing? What will it need to do if it is to be successful as it moves
beyond its core competency in grocery? –
George Anderson – Moderator
From a recent to a brand new Loblaws in Toronto’s Bayview Mall, Loblaws had a lot of general merchandise items set up in an area at the front of the store. It worked very well, and I could see the clothing integrating into this area well. This concept could work very well in Canada, but I don’t see it working very well in the USA unless its a Supercenter or Hypermarket.
The clothing concept is nothing new to Loblaws…their Great Canadian Superstores already carry a full line of clothing and other accessories, even jewelry.
Interesting note, Loblaws’ store decor was extremely pleasant and bright. They are very reminiscent of the Chicago Dominick’s stores designed by Schafer in the 1980’s, with bold graphics, exposed structure and bright HID lighting.
Introducing a nice selection of high-margin private label apparel is a no brainer for Loblaws. A little bit of apparel can make up for a whole lot of milk and cat food. They’ll just need to remain careful regarding their sources of design inspiration in order to compete with the recent spate of laser-focused private labels and specialty store concept launches…AND to avoid legal action from the same stores (Anthropologie’s claims against Wal-Mart for print knockoffs).
I am going against the trend on this but I do not think it is a good idea. Clothing is very trend influenced and difficult to do well unless you truly understand the industry. I am always concerned when a retailer takes their focus off their core business. Unless they envision this as a first move away from grocery and into a supercenter model, I do not see it working. They already offer health and beauty products. It may make more sense to expand HBC and private label food products that match up to their customers or perimeter of store products in general.
Canadian retail tends to more closely mimic the UK model than it does the US. While retailers such as Zoellers and Wal-Mart are US-like channels, the food and apparel business is much more similar to UK-like channels.
In the UK, Tesco, Sainsbury and Asda do a significant amount of apparel and general merchandise business. I believe these amounts are proportionately greater than a typical US grocery chain does. The predominant reason given for this is the lack of a well developed lower and middle market retailing channel. A quick look at Canada reveals much the same thing, although to a lesser degree. The existence of the aforementioned chains, as well as Sears Canada, makes the upside potential of of a Tesco-style format less than it would otherwise.
However, the Canadian market is wide open for appropriate level quality, moderate fashion, and decent priced apparel from a retailer they already frequent. Granting the point of “where will the space come from,” and granting also that we haven’t yet defined “success,” my guess is that Loblaws could potentially create a business which generates a higher than normal (for them) gross margin, and turns acceptably, thus meeting internal GMROI standards.
Without more knowledge, it is hard to speculate on their success potential. Certainly Loblaws has demonstrated an ability to manage and develop food private label programs generally considered close to or at best in class levels. General merchandise is an entirely different set of skills and imperatives, and apparel as a subset has it’s own unique core competencies. High potential, good idea, let’s see about the execution.
This move seems to be well in line with their overall push to get as much of your total shopping basket as possible. From dry cleaning to HBC to garden furniture and general purpose paints, Loblaws wants you to spend your hard-earned dollars in their stores instead of elsewhere. One of the key reasons they opened HABA/HBC in their stores was to directly compete against a particular pharmacy that was experimenting in selling food (Shoppers Drug Mart).
Yes, clothing can be trendy though it can also be casual. It will be interesting to see what segment they’re going to target for their private label…designer patterns, casual comfort wear? It’s a huge margin-maker, and not a brand new concept since many of their Real Canadian (or Real Atlantic) Super Stores (aka RCSS / RASS) have carried clothing for years now.
As for the dilemma on who has to give up shelf space/warehouse space in order to fit this new line in…not necessarily anyone. RCSS loves to have racks and bins and displays all over the store, not necessarily on any specific 40 ft. gondola run. I don’t even know if clothing is something that would even be warehoused, or if it’s DSD.
Yesterday, RetailWire’s story about Target’s food expansion included no statement from Target about which categories would be cut back to give greater space to food. I emailed Target to ask, but got no response yet. Today’s story about Loblaws is similar: they announced an expansion for private label clothing, but were silent on what will be cut back to allow for this expansion. I wrote to Loblaws and I’ll report back if I get an answer. Until they divulge the missing information, I don’t know how anyone can estimate the impact.
Good move by Loblaws. They’ve been doing a lot the last year or so to make themselves more Wal-Mart proof, although they’ve often officially denied any worries. I don’t see this is having an impact on food either way, so long as it fits their targeted customer and doesn’t send any mixed signals about things.