After operating for eight years as an e-commerce site, Canadian Tire Corp. has decided to stop selling its merchandise on CanadianTire.ca in a cost-cutting strategy that could help save it money in tighter times.
The company will stop home delivery of products now available on the Web as of Jan. 29, the retailer announced on the Web site Monday afternoon.
The site is mostly being used as a research tool by customers and was not making enough money to justify the expense, company spokeswoman Lisa Gibson said.
"Some of these things that people were looking into [on the site] are extremely expensive to ship - things like patio sets - and people were just looking online to buy it [in store.]"
She added that the store was also spending too much money on third-party help to fill Web orders and on warehouse space that was allocated strictly for the online business.
Joining the likes of Sears.ca, which already had a delivery infrastructure in place due to its catalogue operation, Canadian Tire began selling its wares online in late 2000. Others, like Hudson's Bay Co., began selling certain items online and then pulled back from selling lower-volume categories in 2003, using its retail sites as primarily informational vehicles. Under its new ownership, The Bay began selling an expanded selection of goods online last year. Others, like Wal-Mart Canada, developed Web sites to showcase products but did not sell online.
It underlies a reality that many large bricks and mortar retailers have faced in Canada since the wave of online selling began a decade ago, noted retail industry analyst Richard Talbot, president of Talbot Consultants International: that it is expensive to sustain an online retail business in Canada given the country's population relative to its geographic size.
"This is really the first general merchandise store that has pulled out like this, but it's not really a huge surprise," he said.
"Everybody I think knows that with the exception of some categories like CDs and books, most people use the Internet to check prices and product specs and most of the purchase is done in the stores. I think this will be the first of several as more and more retailers realize that consumers are doing this.
The fact that Canadian Tire has more than 450 retail stores across the country and frequently trumpets that 85% of Canadians live within a 15-minute drive of one of its stores could actually hurt its Web business, Mr. Talbot said.
"They have such a strong network of stores you might as well go to the store [for purchase]. And those who do not live near the stores are really far out and expensive to ship to."
Ms. Gibson said that some of the money saved in making the shift will be redeployed to enhance the current research capabilities and online features. This spring, the retailer will be testing a program in select markets where consumers can order and pay for items online and pick them up at a retail store.
The announcement on the company's Web site said that the move was being made "because our site is primarily used for research and product comparison." The retailer will continue to sell gift cards online, it added.
In its most recent third quarter, Canadian Tire saw quarterly profit rise 6.3% and the retailer reiterated its full-year forecast, which had been cut in August amid concerns about the economy.
But analysts are questioning how well the retailer will fare in the months ahead.
"The consumer slowdown and rising unemployment contains dangers for Canadian Tire on almost every front: not only are sales and margins at risk, but the financial services business needs to manage down risk while preparing for rising costs of write-offs and insurance products," analyst Perry Caicco of CIBC World Markets wrote in a recent note to clients, predicting the retailer will face rising inventory levels due to a consumer spending pullback.
via FinancialPost
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