The Changing Face of Canada's Home Improvement Retailers

Could big box home improvement stores be on their way out?

Canada's largest home improvement retailer, Rona Inc., recently announced plans to turn 13 big-box stores into new, smaller "proximity" stores that will decrease the sales area by 30 to 50 per cent.

Competitor The Home Depot has not opened any new big-box stores for a couple of years, leaving only Lowe's in big-box expansion mode. With 31 stores in Canada, Lowe's is sticking with its plan to eventually open 100 Canadian stores.

Rona CEO Robert Dutton recently said that big-box stores are "not the right concept" for the future in the Canadian market. "For a number of years, Rona has foreseen the emergence in the market of proximity stores that meet the demands of consumers who want a higher level of service," the company says. "Rona pioneered in this area by reinventing the proximity store in the early 2000s, and these stores have been a great success."

Luc Rodier, executive vice-president of Rona, says the stores, with an average area of 35,000 square feet, "will give consumers a completely new shopping experience." He says the stores "emphasize service, with more experienced staff and a central service counter that forms the heart of the store and is visible as soon as you enter, along with a more user-friendly layout, a regionally based offering and an optimal choice of products in key categories."

Rona has more than 800 corporate, franchise and affiliate stores of various sizes and formats, ranging from big boxes to small storefront hardware stores. During the last 20 years, Rona purchased many well-known smaller home improvement retailers across the country, including Cashway, Lansing, Revy and Totem. It also serves the professional plumbing and HVAC market, with a network of almost 60 sales outlets and four distribution centres.

Recently the company has been losing money in the competitive home improvement market, prompting it to unveil its New Realities, New Solutions business plan.

The plan includes rolling out a new website "to orient different types of consumers in their maintenance and renovation projects and support all of our retail operations."

The proximity store concept will be used for about 20 per cent of the network, with sales volume from 10 big-box stores being redeployed to 15 new proximity stores and 10 new satellite stores. The big-box locations will then close.

In the 13 stores that are being transformed into proximity stores, the extra space will be rented out. The company also plans to convert 20 Totem stores in Alberta to the new proximity store standards.

"The primary objective of the plan is to bring us closer to consumers, which means being either just a click away, or no more than 10 minutes distance from a Rona store that perfectly meets their needs," says Dutton.

After the announcement of the new plan, rumours began to surface that Rona was for sale, and that Lowe's was the most likely purchaser. Rona issued a statement that it "is not for sale, and that it is not presently of the view that a combination with another corporation would be in the best interests of Rona and its stakeholders…"

Canada Mortgage and Housing Corp. says that more than $22.8 billion was spent on home renovations in 2010 across 10 major centres in its survey. It says that 42 per cent of homeowner households did some sort of renovation work, spending an average of just under $13,000. Remodelling of rooms, painting or wallpapering and hard-surface flooring and carpeting were the most popular renovations.

A recent survey conducted for RBC says that 83 per cent of Canadians would rather renovate their homes than find a new place to live. The survey found that bathrooms and kitchens were the rooms that most people are planning to renovate, and just under half of those surveyed plan to do the work themselves. Most plan to spend less than $10,000.

Dutton says that he believes other retailers will soon be following Rona's example and moving toward smaller stores. Canadian Tire, which opened some big-box stores a few years ago, is now focusing on smaller stores, says the industry trade publication Hardlines Home Improvement Quarterly. In the U.S., even Walmart is opening smaller "express" stores, it says.



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