Ottawa — Change has become the only constant among Canada's Top 10 furniture and bedding retailers, as the widely varied players in this elite group jockey for position with consumers.
A major change is occurring at the very top of the list, with The Brick Warehouse Corp. destined to unseat Sears Canada, long this nation's No. 1 furniture merchant. Earlier this year, the aggressively expansionist The Brick acquired No. 9 United Furniture Warehouse. Their combined sales would put The Brick at No. 1.
In addition, The Brick is going public this month, becoming an income trust, in part to finance further growth.
For five of the 10, their prominence on the Canadian furniture scene is almost an afterthought, since furniture represents a small part of their overall business. For instance, furniture and bedding accounts for less than 10% of total business at Sears Canada, the only department store in the Top 10.
The other four broad-based merchants in the Top 10 are No. 2 Ikea Canada, No. 6 Wal-Mart Canada, No. 7 Costco Canada and No. 8 Staples/Business Depot.
Only three of the Top 10 are traditional full-line furniture retailers. That is, in addition to selling furniture, bedding and accessories, they offer household appliances and consumer electronics. In this group are No. 4 Leon's, The Brick and No. 5 Groupe BMTC.
The remaining two slots are filled by specialists United Furniture Warehouse, a low-end/promotional furniture house, and Sleep Country Canada, the sleep shop chain.
Eager to add stores
One common thread among the Top 10 is an expansion posture. Most have either recently completed or are in the midst of campaigns to add stores. The only Top 10 retailers who didn't add stores in 2003 were BMTC and UFW.
Still, the approach to growth continues to be conservative. With the notable exception of The Brick's acquisition of UFW, the Top 10 mostly has rejected acquisition as a growth strategy. Most choose to build their brands one store at a time. The best example of this is Leon's, which for the past few years has kept on hand between C$80 million and C$100 million in cash and marketable securities to finance growth.
One significant change in Canada's Top 10 is the emergence of U.S.-based big-box stores and mass merchants. Wal-Mart, Costco and Staples quietly have been building a presence in this country for the past 10 years or so, and now are asserting themselves as major players in furniture and general retailing.
For 2003, Sears Canada retained its No. 1 position, even though it was the only member of the Top 10 to record a drop in furniture sales last year. While it built five freestanding Sears Home stores in 2003, furniture was removed from 24 mall-based department stores, a move reflected in its top line.
Much of the ground should be regained this year and next. Three more Sears Home stores will join the network this year. Furniture and bedding will get more pages in the Sears catalog — this country's only nationally distributed general merchandise catalog — and Sears Home is running its own TV advertising campaign.
Sears rolled out Natuzzi and Sklar Peppler galleries last year, and is contemplating adding Alexander Julian galleries featuring case goods and upholstery. Plans also are in the works for testing freestanding mattress and appliance stores. And the national brand strategy inaugurated last year is credited with helping grow Sears' bedding business.
Ikea Canada, meanwhile, will complete its part of its parent's ambitious North American expansion plan when it relocates and expands its store in Calgary, Alberta, later this year. Last year, it opened its new-concept store in the Toronto suburb of Vaughn. The merchandising and operational innovations there have yet to be introduced to the rest of the chain.
Like Sears, Ikea has a growing catalog and Internet business, publishing both a general/household catalog and a small office/home office catalog. It operates one of the few selling Web sites in the Canadian furniture industry. Sears, The Brick and Staples/Business Depot have the others.
The Brick, which earlier this year entered the metro Montreal market with a bang, is moving towards becoming a national player, poised to enter Atlantic Canada, probably with a store in Halifax, Nova Scotia, in the next five years.
After deciding the business models weren't compatible, The Brick sold its two La-Z-Boy Furniture Galleries stores in metro Toronto last year to focus its attention elsewhere.
The high-impact promoter has big plans for United Furniture Warehouse, which has no stores east of the Ontario-Quebec border. Growing UFW beyond its 81 existing stores into Quebec and Atlantic Canada will soon become a priority, but first a new senior management team, under the leadership of Paul Comrie, son of The Brick founder Bill Comrie, has to take firm hold of the reins.
This summer, The Brick will open its second Homeshow Canada superstore, followed shortly by a third, all in metro Toronto. Some observers believe the superstore concept is ready to take off.
Investing in operations
Publicly held, family-managed Leon's remains the Canadian industry's most consistent and profitable performer. It's an aggressive, high-impact promoter with a commitment to operational excellence matched by few other retailers. Last year, Leon's invested in information technology and implemented chainwide a radio-frequency bar coding system.
Like Sears and The Brick, Leon's is increasing its presence in smaller cities and towns. The Brick and Leon's are growing their franchise networks, while Sears is expanding its independently owned and operated dealer stores.
Groupe BMTC long has been the dominant furniture and bedding merchant in Quebec, a position it won't willingly surrender to The Brick. This publicly held retailer has seen above-average top-line growth, thanks to a continued strong housing market and low mortgage interest rates. It's also improved operational efficiency and recorded consistently strong profits.
The company has emphasized expanding selling space, not store counts. Last year, BMTC added over 60,000 square feet to three of its 20 stores. Since it sold off what is now Today's Colonial Furniture almost five years ago, BMTC has shown no interest in expanding beyond Quebec.
The three newcomers to Canada's Top 10 generally are not thought of as furniture retailers, but the sheer momentum they have in the marketplace has pushed them past the overwhelming majority of traditional furniture merchants.
Wal-Mart, Costco and Staples/Business Depot differ little from their U.S. counterparts, although all promote "Made in Canada" in many categories. Costco taps a number of Canadian furniture manufacturers. Wal-Mart's emphasis is on North American ready-to-assemble furniture, complemented with imported chairs and other accent items, all at low prices.
Staples/Business Depot, called Staples/Bureau en Grôs in Quebec, has become the dominant player in the home office/small office market.
Wal-Mart recently opened six Sam's Clubs in southern Ontario.
Rounding out the Top 10 is bedding specialist Sleep Country Canada, which became a publicly held income trust in April 2003. The chain plans eight fill-in stores this year, and after completing a strategic review later this spring, should be ready to push outwards once again.
Sleep Country Canada's emphasis on the three major national brands — Simmons, Serta and Sealy — coupled with aggressive TV and radio advertising featuring founder and President Christine Magee, continue to be a winning formula.
