This August, Canadian Tire announced Michael Medline as its new CEO, starting on Dec. 1. As the company’s current president, Medline has worked closely with departing CEO Stephen Wetmore to revitalize the once-moribund retailer over the past six years, hiking retail sales by 25% and the company’s stock price to more than $110, from less than $45. In his 13-year history with the company, Medline executed or was involved in almost all of Canadian Tire’s big strategic decisions, including its acquisition of Mark’s Work Wearhouse in 2002 and the purchase of Forzani Group Ltd. (which operates numerous retail brands, including Sport Chek, Nevada Bob’s Golf, National Sports and Atmosphere). Last year, Canadian Tire signed a landmark 11-year agreement with dealers (or store owners) ending years of tension between head office and the stores.
James Cowan: When your appointment as CEO was announced in August, you said Canadian Tire needed to become “best-in-class” with its digital strategy. The company ditched online shopping in 2009, but recently started letting people pay online and pick up at a store. Is that the new model?
Michael Medline: You go where your customers want to take you, and at this point, that is a little different by banner. At Sport Chek and at Mark’s, we do deliver to homes. But because there are so many Canadian Tire stores right across the country—I think 90% of the population lives within 15 minutes of a Canadian Tire—it’s much simpler just to order online and pick up at the store. But I can tell you that Canadian Tire will look at every way to compete and beat our competitors to make the customer experience better, and if that means delivering to homes, we will be looking at delivering to homes. If it means delivering to a lockbox or a locker somewhere, we will do that, and if it means picking up in the store, we’ll do that.
How is it simpler to pick up at the store? I have to put on shoes to go do that.
You have to be home, though, to get a delivery.
And certain items are just easier to pick up in the store. But you may be a deliver-to-your-home customer, and I may be different, so it’s just about being able to do all these things. Sure, they’re more complex, and in some ways more expensive, but as we adapt to the new world, we’re actually seeing better results, both on the top line and bottom line. Maybe 10 years ago people were worried about digital. Now we see them as opportunities, not as threats.
You just announced a new loyalty program. Does that play into the digital strategy as well?
I think it’s one step on the way to that goal. What we’re seeing is a generational shift, and we have to be able to move with our customer. If you put your head in the sand and you don’t move with the customer, someone else is going to eat your lunch. But we had the world’s first loyalty program in 1958, which was Canadian Tire ‘Money.’ It was a great program and continues to be a great program. I think if we had wiped out paper Canadian Tire ‘Money,’ Canadians would have been at the barricades. It would have been like the reaction to New Coke. However, we want to become famous for serving all generations. So we kept the paper money, which doesn’t give us any information to better serve our customers, and decided to give them digital offers that will excite them.
I’m intrigued by your commitment to the old Canadian Tire ‘Money.’ From a business standpoint, it seems inferior to a loyalty card or your new app. Why not just get rid of it?
Well, for a couple of reasons. One is we have what I would say is the best Canadian brand in this country, and the paper money, which people grew up with, is part of that brand. The other reason is that we’re basically giving people choice and letting the brand evolve, not getting stuck in the past but not throwing it out either.
So I’m a guy with $3.85 in Canadian Tire ‘Money’ in my sock drawer. Why should I join the new loyalty program?
Well, it allows us to personalize offers for you. If you or your family is really into hockey, we can send you specialized offers to tell you about the newest hockey products. And you don’t have to go into your sock drawer to redeem the points. So it’s easier. And there’s also all sorts of features on the app in terms of keeping track of your purchases, knowing how much Canadian Tire ‘Money’ you’ve collected, and accessing your receipt digitally so you don’t have to go digging it out to make a return.
Right. As you’ve been making these changes, how has it affected your relationship with the dealers?
The dealers have been great. I mean, to even do pickup in the store was a change in process for the company. We’ve had to invest the time and the money so we can make these sorts of changes. We need to know how many, say, wiper blades are available at the store nearest you. And then the store needs to know you’ve made the order and set it aside to be ready for you to pick it up. It sounds so simple, and it isn’t. But the dealers have been fantastic, actually. They get it. This is the strongest relationship we’ve ever had with our dealers, because we want the same things and because we embrace, at Canadian Tire, the dealer method of business. I mean, one of the reasons we’ve had so much success as a retailer is because we have local dealers who know our customers better than anyone. They’re a competitive advantage.
You say this is the best relationship Canadian Tire has had with its dealers: How did you accomplish it?
I need to give Stephen Wetmore, our current CEO, credit. He turned it on us at Canadian Tire and said, “How can we better serve not only our customers but our dealers? And how can we look in the mirror every day and make sure that we’re doing everything possible to make their lives simpler and better, and be making the offers that we should?” And the dealers in turn responded to that by upping their game.
Speaking of Mr. Wetmore, he once mentioned how Canadian Tire is always a bit like a treasure hunt. That can be frustrating for customers, but they expect it. How do you maintain the things people love about shopping at Canadian Tire while trying to remake the company for a modern age?
You’ve got to respect your tradition, but you have to move. The stores are always going to be exciting treasure hunts, like Stephen said, because of the products we put in them. But that experience has to change for every generation. My first memory of going to Canadian Tire—I don’t think it was my first time, but my first great memory—is buying wheels and axles for a go-cart, which was really important to me. But for the next generation, they’ll remember going online and finding their first pair of skates. And when you are more digital or more modern, you find that the strengths you’ve built—the interaction between the team and the customer—become more important.
What do you mean?
Our customer coming in now, 80% of the time, has researched the products online and has a lot of knowledge. They’ve also seen what their friends have said about the product. So we’re talking to a customer who is very sophisticated, and the conversations aren’t just, “What size shoe are you?” It is, “What are you going to be using the shoe for? Oh, you’re running in the 5 K next week? That’s interesting,” and getting into conversation, because the customer needs something value added. You can’t just rely on, “Oh, now the customer can research it online, so that’s doing our job for us.” No, that’s not doing the job: Customers expect more when they come in the store.
I know you were fairly intimately involved in the various acquisitions that Canadian Tire has made over the past few years, like the Forzani Group that operates Sport Chek and Mark’s Work Wearhouse. Why were you certain these acquisitions would be successful?
We look for great brands that are—for the most part—well managed, but can dream bigger, and where we can add our great capabilities and competencies, such as marketing, such as real estate and, increasingly, in digital, in-store and online. So we look for gems where we can really improve them. Secondly, we look at culture.
If you make an acquisition or a merger that is not a good cultural fit, you’re not going to reap a reward. And when I talk about culture, I also mean assessing the talent we’re bringing in. Are we bringing in people who are going to be able to dream big and grow with us? If you look at our three retail divisions—Canadian Tire, Mark’s and FGL Sports—two of the three are now headed up by Forzani Group executives.
There’s been a lot of focus on how Target entering Canada could affect you. But people don’t talk about the major American sporting-goods stores expanding into Canada, like Bass Pro. Did your acquisitions protect you against them? It seems to be a brilliant move.
It wasn’t as brilliant as… Look, we do not make moves for defensive purposes. So, you know, we know what our competitors are doing. At the same time, we expanded our sports business because it was a key heritage category, and we saw a company that had the bones to be the best sports retailer in the world. That was the dream.
You’ve said Sport Chek is your pioneer or “shock troop” division. Was that a consideration you had going in, that if we get this youth-oriented brand, we’ll be able to innovate?
I’ve gotta admit to you—because I try to be totally transparent—that I don’t think we even had a grasp, three years ago, of how much we would do that. The world has changed so much. Paper flyers—especially at Canadian Tire—are a great marketing tool. But the world’s changing. So at Sport Chek, we made the choice to start exiting paper flyers, which was a big decision. And we decided to try digital flyers,but I don’t mean taking the paper flyer and taking a picture of it and putting it online. I mean, disaggregating that flyer and putting a hockey stick on Facebook, the green running shorts on Instagram and using all of the digital channels. We believed, at the time, that it was a more efficient and flexible way to do business. It turns out, at least at Sport Chek, that it is an incredible tool to boost sales. Now we’re seeing it has advantages in other divisions, too.
It snowed in Calgary at the beginning of September and our paper flyers weren’t set up for a mammoth snowfall. But Mark’s, which had started adopting digital tools, was able to quickly inform customers: “You need boots? We got boots. They’re in. You need outerwear? We got it.”
I want to ask you about succession. You’ve been with the company a long time. Was there a moment when somebody said to you, “Look, we think you might have the royal jelly” and began preparing you? Or has it been more accidental?
I wouldn’t call it accidental, and I wouldn’t call it a moment of pure clarity either. But it’s hard to speak about yourself, so I’ll speak more in general. I would say our board has adopted succession planning practices that are best in class. You don’t start with one person, you start with a lot of people, and you bring them up through the system. Canadian Tire is very open to giving individuals chances to succeed in different portions of the business, and in my case, I was very fortunate to either head up, be part of, buy, be on the board of and basically have a role in every portion of our company. There’s not a part of this company I don’t know intimately and have not spent a lot of time with. But when I look back now, it really is helpful to understand the business and where we’re going, to have been part of or have led the acquisitions and be someone who’s been part of the transformation from the old to the new world.
As someone who has worked closely with the departing CEO, do you feel a need to continue his legacy, or do you feel a need to sort of distinguish yourself as your own leader?
I’ve been part of the decision-making that’s been going on since Stephen joined the company six years ago, and we’ve worked closely together. If you talked to Stephen, you would find, maybe, differences in tone or emphasis, but you would not find differences in terms of strategy. Having said that, what we will face in the next six years will be different than what we faced in the last six years. But people should not expect a seismic shift here: We are on the right path.