TORONTO – With Internet retail sales expected to hit new highs over the Christmas period, Sears Canada’s executive chairman admits the department store’s Sears.ca online business is in need of a major overhaul.
“We have some very, very, very big plans to modernize what we do — both online and in mobile,” Brandon Stranzl said in an interview Thursday after the company released third-quarter results, which showed the company’s first quarterly same-store sales increase, (albeit a slight one), in two years.
But sales in the company’s direct channel, which includes revenue from online and catalogue operations, were down $23.7 million in the period compared with the third quarter of 2014. It’s a troubling sign that sales from the retailer’s shrinking catalogue business are not migrating to the company’s Sears.ca online business.
In the second quarter, sales in the direct channel also slid, falling $12.9 million due to the waning catalogue business.
Stranzl admitted revenue from catalogue phone orders has dwindled over the years due to changing consumer behaviour.
“We need to make a stronger effort to push that business online,” he said. “We have to grow our Internet business faster to offset what is an organic decline in that (catalogue) business.”
But Sears Canada has had plenty of time to convert sales to its Internet business. One of the first online retailers in Canada, Sears.ca debuted in 1998. At the time, it had a significant head start over industry rivals on the infrastructure and supply-chain side, thanks to its existing warehouse and distribution systems.
“The fact that Sears Canada is not growing its Web business definitely puts it in a field of its own,” Doug Stephens, founder of Toronto-based advisory firm Retail Prophet. “Most every retailer, if they are growing anywhere, it’s on the e-commerce side.”
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In the second quarter ended Aug. 30, rival Hudson’s Bay Co. reported a consolidated same-store sales increase of 4.2 per cent, while digital sales rose 30 per cent as the retailer worked to better integrate its digital operations with its stores. At Lululemon, same-store sales at its stores rose six per cent in the second quarter, while its online revenue soared 35 per cent.
“I wonder if the remaining catalogue customers have just skewed so old, they are simply outside the band that would shop online, or they are not shopping at all,” Stephens said. “Why else would somebody still be using a catalogue to place an order?”
Though it was keen to share performance details about its online channel a decade ago, Sears Canada no longer discloses the size of its direct channel.
Stranzl said Sears will also work to improve its mobile shopping experience, but he did not give a timeline or details of the proposed changes. Meanwhile, the retailer will continue to print catalogues such as its holiday season Wish Book. “We will always have an historical base of customers that use the catalogue as a shopping media.”
Carrie Kirkman, the retailer’s new president and chief merchant, said there remains an ample opportunity for Sears to reposition itself as a more stylish shopping destination. Women’s apparel and home décor are fragmented categories in Canada, with 75 per cent of the market share held outside of the country’s top five retailers. “It’s an area where very small market share gains (would) have a significant impact on our revenues,” she said.
Overall revenue fell 5.1 per cent in the quarter to $792.1 million as the retailer operated fewer stores and sold fewer tools and electronics.
Sales at locations open for at least a year, known as same-store sales, rose 0.4 per cent, compared with a year ago, when sales fell 9.5 per cent.
The company, which has been selling off real estate assets for years as it reduces its overall cost structure, posted a net loss in the period ended Oct. 31 of $53.2 million, or 52 cents per share, compared with a net loss of $118.7 million ($1.16) in the same period a year ago.