Go digital or die, Sephora’s expat CEO tells Canadian retailers

As someone who is waging a retail war in the United States, Calvin McDonald wants his fellow Canadians to show the same fighting spirit here north of the border.

As president and CEO of the Americas for Sephora, Canadian-born McDonald works out of an office in San Francisco, plotting out the French cosmetics giant’s battle plan for this corner of the world.

With margins razor thin and consumers constantly upping their expectations, U.S. retailers are pulling out all the stops just to stay alive, he told the Retail Council of Canada’s Store retail conference on Tuesday.

Here in his native Canada, however, some merchants don’t seem to realize their entire industry is in the grip of a life or death situation, McDonald said during his keynote.

French makeup retailer Sephora remains committed to physical stores while embracing digital channels.
French makeup retailer Sephora remains committed to physical stores while embracing digital channels.

“What we’re seeing in the U.S. is traditional retail under siege in a fight for survival. Do we have the same sense of urgency in Canada as in the U.S.?”

Answering his own question, McDonald suggested “Canadian ecommerce is behind the U.S. by about five years, from a sales penetration standpoint” and that Canada’s major retailers are 10 years behind cutting edge leaders like Amazon.

McDonald knows whereof he speaks; he was CEO of Sears Canada before moving to Sephora in 2013 and spent nearly two decades prior to that at Loblaw Cos.

Fight for survival

Compared to the massive U.S. market, “there’s not an abundance of retail competitors” in Canada, he said, which leads to “less innovation, less online competition and not necessarily the urgency that’s required in this fight for survival.”

He pointed out that two-thirds of Canadian online shoppers order goods from foreign ecommerce sites, with 72 per cent complaining they still can’t find the products they want on Canadian websites.

McDonald: Canadian retail needs innovation and a “sense of urgency.”

As a wakeup call, McDonald’s speech warned Canadian merchants that the retail landscape will only get tougher. As a rallying cry, it also urged them to fully embrace digital. According to McDonald, that goes beyond bringing mobile convenience to shopping.

“It’s about truly rethinking the client relationship and how digital is providing an opportunity for you to redefine that relationship.”

For McDonald, that means targeting customers via online, mobile and social channels: “You have to do all three. You can’t do one in isolation anymore. The expectation of the client is full engagement with your brand.”

In his estimation, it also means retailers shifting their ultimate goal from making the sale to creating and nurturing a loyal, lifelong customer.

“We’re building an emotional relationship versus a transactional relationship,” McDonald said.

“We don’t sell things”

Saks Fifth Avenue president Marc Metrick advocated a similar shift in his own keynote.

“We’re turning shopping into an experience, not a transaction,” said Metrick. “We don’t sell things. We sell Saks.”

(Since Metrick is an American heading up a Canadian-owned retailer – HBC acquired Saks in 2013 – his current career path is sort of an inversion of McDonald’s.)

A big part of the shift at Saks includes holding events – from runway shows to yoga classes – inside stores “because people like it as an experience and they’ll rush to share it on Instagram,” Metrick said.

Personalization plays a key role, too, with Saks “marrying data analytics with warm, personal, one-on-one service,” he added.

In a bid to mix virtual and personal service, the company offers online shoppers the chance to live chat with a sales associate from the Saks store closest to them. It’s a recognition that each shopper’s experience with a retailer no longer ends at the cash register; thanks to social media, it’s a long term relationship that merchants have to nurture on an ongoing basis, Metrick said.

The Saks store at Toronto's Eaton Centre is one of two Canadian locations the retailer opened this year.
This Saks store at Toronto’s Eaton Centre is one of two Canadian locations the retailer opened this year.

Paris-based Sephora is also maintaining investments in both the digital and physical channels. It still holds iPad-based makeup classes in some of its stores (so customers can share their lessons on social media, McDonald explained). Yet shoppers can try on over 5,000 lipstick shades using its Virtual Artist app without leaving their homes.

Still challenging

HBC, the Canadian owner of U.S.-based Saks, is making an even deeper commitment to bricks-and-mortar. It opened its first two Canadian Saks stores (both in Toronto) this spring and announced plans on Tuesday to put a third one in Calgary. HBC recently said it will open up to 20 stores in the Netherlands under its Saks Off 5th and Hudson’s Bay banners.

Although HBC posted a fourth quarter profit of $370 million in April, the global retail environment remains challenging on many fronts. In Canada, U.S.-based Target came and went, Black’s folded, Grand and Toy has gone online only and Sears Canada is aiming to slash costs by $100 million this year after revenue fell by 8.7 per cent in its fourth quarter.

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Christine Wong
Christine Wonghttp://www.itbusiness.ca
Christine Wong has been an on-air reporter for a national daily show on Rogers TV and at High Tech TV, a weekly news magazine on CTV's Ottawa affiliate. She was also an associate producer at Report On Business Television (now called BNN) and CBC's The Hour With George Stroumboulopoulos. As an associate producer at Slice TV, she helped launch two national daily talk shows, The Mom Show and Three Takes. Recently, she was a Staff Writer at ITBusiness.ca and is now a freelance contributor.

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