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Profile on La Maison Simons (Quebec)

Monday, May 04, 2015 > 13:35:55
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(CPA Canada By Kathryn Leger)

Savvy Quebecers have flocked to Simons for 175 years. The retailer now has plans to go national, but can it succeed in markets where it’s not a known entity?

As soon as you are steps away from his executive office in historic Quebec City, it becomes obvious that Peter Simons is in a fashion-forward march that could have an impact on retailing across Canada. A makeshift assembly line of sample sweaters is set up in the antechamber leading to the inner sanctum where the president and CEO of one of Quebec’s most venerable retailers — La Maison Simons Inc. — works when not on the road seeking new fashion products.

Simons is a go-to institution in Quebec, known as an emporium of taste and style with a cachet that attracts not only locals but also a constant parade of shoppers from outside the province. Its assortment of women’s and men’s apparel, accessories and home decor items are housed amid showpiece art installations. The store shelves display a carefully curated mix of goods whose multiple price points appeal to shoppers who can choose from affordable private house brands, mid-range emerging brands and high-end designers.

Product selection is taken seriously and Simons still loves the buying side of the business, even though he handles less of it now and has much more to occupy his mind these days.

Today the company is at a crossroads as Simons rolls out an ambitious campaign to establish the 175-year-old family-run company as a national brand, with a network of specialty stores in major centres in Canada. Plans are in the works to open six new stores within the next two years, with the goal of increasing the total number of Simons stores to about 20 by 2018 or 2019.

These bold expansion plans "should send a shudder through the bones of most retailers in the middle of the market," says Randy Harris, president of Trendex North America, publisher of the monthly newsletter Canadian Apparel Insights. "I think a lot of people have been waiting for Simons to break out of Quebec for a long time."

Almost 20 years ago Peter Simons and his brother, Richard, became the fifth generation to take over leadership of the family company founded as a dry goods store by Scottish immigrant John Simons in Quebec City in 1840. Since the brothers took over the reins of the company from their father, business has grown from an estimated $12 million in annual sales, when operations were exclusive to the Quebec City region, to more than $300 million in annual revenue from a network of nine stores: eight in Quebec and one at West Edmonton Mall, North America’s largest shopping centre and Simons’ first foray outside its home province two-and-a-half years ago.

The business plan has as much to do with taking on new or existing competition as it does with dealing with the company’s growth and making sure the family enterprise can survive the dramatically evolving consumer and technological landscape.

"You can’t sit in your little backyard and say, ‘I am the biggest fish in a little lake,’ " says Simons, who looks after much of the management and operational aspects while Richard Simons, vice-president of merchandising, oversees most of the buying. "It is a big ocean out there and there are a lot of sharks all trying to eat our lunch. We are trying to build a national brand and I felt we needed to be larger to compete and survive."

As part of its pitch to illustrate its unique identity, Simons points out that it is the oldest family business in operation in Canada and that it supports local design and architecture firms and artists, not to mention the 100 or so designers it has on staff among its 2,000 employees.

By no coincidence, Simons’ announcement of expansion for the next few years came on the heels of news of a fresh wave of competition in the upscale retail Canadian market over roughly the same time period. Big-brand names such as Seattle-based Nordstrom, Inc. and Saks Inc., now part of Toronto-based Hudson’s Bay Co., are moving ahead to open a swath of stores north of the border, and domestic luxury purveyors Holt Renfrew & Co. and Harry Rosen Inc. are repositioning, upgrading and expanding. As well, because of its multiple price points, Simons is competing not just with chains selling luxury items but with multinational players that have a strong presence in Canada, notably Zara, the flagship store of Spain’s Industria de Diseño Textil S.A. (Inditex); Sweden’s H&M Hennes & Mauritz AB; and Los Angeles-based Forever 21.

But for the most part, retail analysts are positive about the company’s prospects, saying the unique Simons brand and store experience set it apart from its competitors.

Harris does not see full head-on competition from new entrants such as Nordstrom and Saks, which will likely vie with each other, because he estimates an overlap with Simons will only be in the order of 15% to 20%. Simons benefits from a buzz in areas where it does not have stores, especially in metropolitan markets among 20- to 30-year-olds clued in to social media and fashion trends. The fact that its stores and brand are clearly differentiated from its competitors stands the company in good stead, along with its "very logical, some would say methodical" way of adding new locations, says Harris.

And some say Simons did not have an option. Simons has competition and must show that it can parlay its Quebec success into other markets where it really isn’t well known, says Maureen C. Atkinson, senior partner with retail consultants J.C. Williams Group in Toronto. Taking on different management responsibilities dictated by a national, rather than a mainly regional, presence is an added challenge.

"It is obviously relatively risky, but there is also risk in not changing, in continuing to do the same thing you have always done," she says. "In retail if you don’t evolve and change and grow then ultimately you start to crumble, and I think in some cases we are seeing situations where retailers haven’t invested, haven’t taken those chances, when everything else has evolved around them."

One factor working in Simons’ favour is the fact that it is a really good operator, says Atkinson, who predicts that Canadians will respond to what is fresh and different about the company’s product assortment. "They do have upscale, but they certainly have a lot of product that is affordable and, to a certain extent, unique, especially their own product. That is what people are looking for, unique products, unique experiences, and Simons is there."

But Peter Simons understands that nothing can be taken for granted in today’s tough retail environment. Store closings have been piling up on the Canadian retail landscape as companies flame out, scale down, pull back or curtail operations as part of creditor protection.

"Business is a fragile thing," he says. "It is like a great orchestra or a great hockey team. In the end it is a lot of people coming together to accomplish something. It takes nurturing and can break down easily. You can be wiped out pretty quickly." And much of the rationale behind the company’s upcoming expansion is that scale is needed to support the design and technology initiatives that are integral to any retailer for today’s competitive mix and for the future. Collaboration with designers for special products requires production and fee minimums that can be obtained through bigger runs covered by a larger base of stores, Simons explains. The company is also busy growing its own in-house brands.

The technology side is more complex as the company invests heavily in both online shopping and fundamental management functions.

"The key success factors for a business like ours are changing very rapidly — I think that is the bottom line," says Simons. "People are the core of our business, and fashion and design and creativity are very important elements, but if you have all those and you don’t have a sophisticated approach to your information systems, or professional management in terms of your financial planning, I don’t think you are going to survive in the future.

"As a business grows, the decisions become bigger, the environment is much more competitive and different aspects of running a world-class retailer are a lot more demanding than they used to be," adds Simons. "It’s becoming more sophisticated, you have to access more mathematical tools, you’re writing more complex algorithms to run your business, you’re thinking about how to insert automation and intelligence — the whole business is based over a data set, a data warehouse."

It is one of the reasons the growing management team at Simons includes someone with a doctorate in mathematics and statistics, something that would have been unheard of 10 years ago.

On the store level, Simons is moving forward with technology initiatives that are changing the retail game from both management and consumer perspectives. The completely connected store goes beyond the concept of online shopping; a fully transactional website is key to a retailer today, but it’s only part of the equation. "The web is no longer just a store. It is a technological backbone for finding products and offering customers the services they want," Simons says.

"We are trying to refine our concept and we are questioning it continuously, how we deliver it, how the web is going to impact the need for space," he says. "The market is continually trying to renew itself and you have to work hard to maintain your place in the market. My plan is to really add value at the store level and there is no long term anymore. There is immediate term — everything is pressing for tomorrow."

The company’s entire inventory is going online with a fully integrated website featuring a mobile application and a new loyalty program. Stores are also being equipped with iPads so sales staff can access information about products from the web. Near field communication technology, which enables customers to use their smartphones to get information on a product while they’re in the store, is also being tested.

Simons is seen to be on the right track here. "With technology as it is today, the successful retailers are working in what is known as an omni-channel world, where they integrate an e-commerce platform with their physical stores so they work together," says Daniel Baer, national retail and consumer products industry leader for EY. "In a competitive marketplace a successful retailer needs to be two things that sound easy but are extremely difficult," adds Baer. "It needs to be different and it needs to be focused, and that is part of Simons’ success."

How does the retailer plan to stay on top of everything?

"You just stay very humble and stay very alert," Simons says. "You stay thinking about things, and open your mind up to all the changes around you. After that, it’s hard work and good luck."



 


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