The Source: How to successfully navigate a major brand transformation
For some retailers, there is a silver lining. This summer, electronics retailer The Source opened a newly designed, interactive store that is transforming the way consumers shop for electronics. By introducing an interactive, immersive shopping experience, The Source has reinvented its brand strategy.
Join Ron Craig, VP of Marketing and Business Development at The Source, as he discusses the rewards and challenges of embarking on an extensive rebranding initiative.
In this webinar you will learn:
- Ways to evolve and grow your brand to survive in today’s rapidly changing retail climate
- How to onboard your team to successfully navigate a rebranding initiative
- Tips on how to protect brand equity during a major transformation
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Jean-Pierre: Hi. I’m Jean-Pierre Lacroix, and welcome to this session of Design Lounge. I’m very fortunate to have with me Ron Craig, Vice President of Marketing of The Source. Ron, thank you very much for coming. I’m very excited about having you here today.
Ron: You’re welcome. Happy to be here.
Jean-Pierre: Yeah? Great news about the opening of the new store. And I think today we’re going to talk about The Source and The Source transformation.
Ron: We’re pretty excited about what we’ve seen so far. It’s part of a bigger overall strategy that you know, that we’ve been working on for the past couple of years. A fairly comprehensive transformation of The Source brand that really started on a number of fronts and has now extended to our main touch point which is the store and the store design. And that’s why we brought you guys to the table.
Jean-Pierre: So for the audience, because some of them are from the US, talk to me a little about The Source. What is The Source, and how did it come to be and all that great stuff?
Ron: So The Source is a small box consumer electronics and communications retailer. So we’ve been in Canada for over 40 years in various iterations, but fundamentally started as the Canadian version of Radio Shack. Branded as Radio Shack, went through an ownership transition when Radio Shack sold to Circuit City. Circuit City rebranded it as The Source by Circuit City. And then Circuit City went bankrupt in the US. Canadian operation was still strong, so Bell and BCE acquired it from Circuit City. Dropped the Circuit City branding, and we’ve been The Source for the last seven or eight years under Bell’s ownership.
And continued to evolve the concept as part of Bell. They are a mobility and home services, satellite TV, Fibe TV, internet. And so that’s become part of our offering, but we still remain at the core a consumer electronics retailer. And as I said, we operate out of about a 2,000 square foot retail location, primarily mall-based. But we have some street front stores and some power center stores, and we’re coast to coast. We’re now numbering about 550 plus branded locations across the country.
Jean-Pierre: So Ron, you know, obviously the retail landscape is shifting here in Canada with Future Shop closing their doors. Obviously, that’s an indication of the toughness of the marketplace. Has their exit benefited The Source or has it changed nothing?
Ron: Well, you know, we’ve had some short-term impacts from it obviously where we’ve been geographically close to locations, and we expect to continue to see a lift from their market share as it shifts. But the exit of Future Shop and also some of the exits of some of the other retail players are just an indication of how challenging the environment is in Canada, both in retail and particularly consumer electronics. In the last number of years as consumers have shifted from retail to online you start to see some of the business go in that direction. We have the luxury of having both channels, so we’ve seen a shift of our mix a bit, but growth in both channels.
The other piece that affects consumer electronics is really the lack of innovation in the space. It is an area that really benefits from new news. And without any major developments in consumer electronics, the demand stays relatively flat. And then that’s what we’ve been seeing. As retail traffic has suffered through downturns in the economy and things of that nature, a lot of the big box players and some of the other players just can’t survive under their model. As a small box retailer, we’re really well suited within this environment to weather it and succeed in it. One of the things that is truly of meaning to a consumer in our space is the service experience, the personalized service experience. And our environment and our model really lends itself to that, and that’s really what we looked at in terms of the design exercise is how do we better leverage that strength and evolve our stores to meet that need and thrive within that space.
Jean-Pierre: We talk about challenges in the marketplace. Obviously, you’ve initiated a transformation driven by how to better leverage one of your strengths, which is your sales force. Your individuals on the floor have a great reputation for being knowledgeable. But what was it, the crux that drove you to initiate the transformation initiative?
Ron: It’s a broader opportunity, and I guess challenge then you define. I talked a little about the history of The Source, and it really evolved as more of a convenience play. The Source has been primarily a destination for the impulse items — batteries, accessories, add-ons — and not for the main devices that would have driven the different type of demographic and traffic. And part of the reason that we’ve looked to evolve it is the opportunity that’s in front of us. As other players get out the marketplace and as the technology changes, a small box environment no longer is a limitation. So technologies got smaller. Even TVs that used to be — they’re still enormous — are now really thin. And our ability to play in this space in key categories that we focused on is not limited by the size of the box.
And as I said earlier, what that lends it to is a more personalized service experience. So by bringing together a design and a store experience that’s more suited to that need, we see a lot of opportunity to succeed and evolve the concept. So as I said, it extends beyond the store experience and the store design to how we communicate the brand, what our identity is, what our positioning is, and most importantly what do we sell. We’ve evolved our product offering significantly.
What used to be, as I said, more accessories and private brand focus is now a destination for top-tier brands, your Apples, Sonos, Bose, Monster, Beats. All of those Tier 1 consumer electronics brands in our core categories are now part of The Source offering. And it makes us, again, much more appealing and much more of a destination to a broader demographic.
Jean-Pierre: So if you look at Radio Shack, I’ll call it technobilly products, where people come for that one gadget they can’t buy anywhere else which now is moving to more online, and you look at the original Source that we were looking at, there were a lot of categories and SKUs that we had to rethink if we were to get focused. And so how did that process go where you go from 4,000 SKUs down to probably 30 SKUs? That’s got to be painful for an organization through that transition.
Ron: That is one of the fundamental challenges as we looked at changing the concept of the store. The vision of what The Source is becoming is understood and it’s embraced from all levels of The Source organization. But when you then start to change the face in the store, you have to make some tough decisions. And moving out of categories that are still profitable, although slowly shrinking, are tough choices in order to invest and transform your real estate to showcase what we want to become or we’re starting to become. You know, our tagline is “I Want That.” So being the place for “I Want That” means you have an identity for those fun, cool, exciting new products that are going to draw in traffic and they’re going to engage the consumer.
We’re not getting out of the things that we also have a strength in, so some of the accessories, but we’re just streamlining some of the categories that are on their tail end, and making room for the new categories that are emerging — wearables, connected home — all of those things. This space is always in a state of transformation so we need to stay with the curve to be relevant in the marketplace.
Jean-Pierre: We started this journey about a year ago, not quite a year ago. And maybe we can talk a little bit about the process we took from a client perspective. Obviously, we do this every day, but it’s not like Ron does brand transformation every six months. Hopefully you don’t. God, no. But talk a little bit about the journey we took from a client perspective. How was it? What were the insights, maybe surprise of the process we took or some of the outcomes?
Ron: You talked a little about some of the challenges of evolving a 40-year-old concept. And one of the reasons that we selected you, and I’ve shared this with you, is I knew that the process would need to be collaborative. I knew that we needed to get people on board. Although they bought into the strategy and the vision, when you start to see the tangibles, you need to hold people’s hands and listen to them. That’s, I think, one of the strengths I saw in working with your team was you got that from the outset. There wasn’t a lot of creative primadonna activity on your team which would have caused us challenges moving forward with some elements of our organization.
So that, I think, was the first step to making this work right from the ideation sessions that brought everybody on board, gave everybody a voice. And then the other part of it which I thought your team was helpful in making sure that we stayed on track was communication. It was a longer process than we’d originally planned because we had to make some changes on where we located the first design. But as a result of that, keeping people informed throughout the process became key to keeping them engaged and keeping the momentum within the exercise. And you know, I thought that was something your team helped us with through a number of different devices in your process.
Jean-Pierre: Well, I found having a mock store of your existing store in your office was very helpful. I know that we spent, I think, three days going through the inventory and the merchandise, and talking to the buyers and the merchandise managers to understand what were the nuances of the categories. How did you find that? When we left, what happened? What was the feeling from these individuals? Because we were really talking about transforming their categories — categories they’ve worked on for years.
Ron: To your point, I think having the luxury of having a mock store within our facility helped us really kick the tires on some ideas and look at them in context. But I think the general approach, just because it was staged and everybody was brought up to speed and involved throughout, made some of those sessions much more collaborative and less combative. I was surprised. There was less defensiveness in some of the players because, you know, I think your team came to the table with, first of all, an approach of “Tell us how we can help you succeed.” And I think that was appreciated versus somebody coming and saying, “We’re going to show you how it’s going to work better.” And that helped us, I think, get people in a mindset of “We have to make some changes for me to make this work.”
Where we netted out, I think there was opportunity to take things further then where we have, but quite pleased that this is the right starting point. What we’ve seen in terms of reaction and results — it’s early days yet — would indicate to me that we’re not too far off what we wanted to do. The transformation of our brand and our store environment is not so dramatic that — and this was one of our objectives — that people walk in and don’t know what we’re all about. We didn’t seek to completely change. We’ve got a lot of strengths, and we wanted to leverage them. We just wanted to make a better Source, and I think that’s where we’ve netted out. It will only get better with learning from this prototype, but all indications so far are that we’ve hit some of the key deliverables. So we’re pleased.
Jean-Pierre: So Ron, like every assignment, every project, there’s specific goals that need to be achieved. There’s mandates either that were driven by the marketplace or internally identified. Could you talk to me about the goals of the retransformation of The Source?
Ron: I guess it would fall into two camps. As I mentioned, we were engaging…this is a part of what we’re trying to do in terms of the brand transformation. There’s branding elements that we are looking for the store design to reinforce. Communication or appeal of the store to a broader demographic, making it more female friendly, making us more appealing to a younger audience, showcasing our core categories in a way that makes them more destinations. We can see those in the actual tangible measures of store performance — traffic, basket size, growth of some of the key categories that we’re focused on.
So all of those things we kind of presented to you as our fundamental goals here. But, you know, as I said, within this, it’s aligning with what we’re trying to do in terms of perception and consideration. And those we’ll measure over time, and with a single store it’s not going to be a fundamental overnight change in the entire chain, but you start to see as you do post research what this store is delivering that our current store design isn’t doing.
Jean-Pierre: When you look at where you were, where we’re going, if you could talk to us a little bit about from where you are to where you want to go from a store design standpoint. Obviously, I’ll give you one. If you want to create a comfortable store environment, having walls plastered red is really not a great idea. If anybody’s got heart problems, I think shopping at The Source wasn’t a good idea. It was kind of ill-advised by the doctor. But can you talk to me about some of the froms, where we started and where we were going, what were the attempts across the store experience.
Ron: To put it simply, moving and evolving us from what I would describe as more of a convenience store environment for consumer electronics to the place where “I Want That.” And by that, I’m talking about a considered destination, an experiential destination for consumer electronics and communication. The previous design didn’t envision the need for people to listen to headphones, to test a Sonos system, to touch and feel and demonstrate a tablet. That wasn’t what the early iterations of Radio Shack and The Source were all about. So the design needed to catch up to what the brand is becoming. And that was the opportunity that the new store design afforded us within the broader transformation.
Jean-Pierre: And so talking about the transformation, could you highlight some of the neat design elements of the new store experience?
Ron: It’s a completely different store. You walk in and it does feel like a store because it still showcases the core categories that we’ve evolved to within our concept, but what was lacking and what we now have is, I guess, first and foremost is the experiential element. We’ve improved the site lines in the store dramatically. We’ve removed some of our fixtures that were making the store feel claustrophobic and not as inviting and not as shoppable. We moved to table displays for some of the categories that really are better showcased that way — mobile phones, cellphones, tablets, streaming audio. All of those products if you look at best in class and best practice merchandising within some of the manufacturers — the Apples, the Microsofts — that’s what allows consumers the best experience. So we bore it from that, and obviously applied it to an overall design that your team brought to the table that worked to soften the overall experience.
You talked about the harshness of reds in the lighting, the whole environment which is dated back probably a good 10 years from when the design first went in play to now reflect what is more, I think, a contemporary feel in retail. The other reality that we face is the environment that we’re operating in, certainly in Canadian malls, is they’re moving up. With the influx of some of the US players and transformation of malls to try and make them overall more destinations, the expectation of the landlords and our consumer is we need it to look and feel like we were part of that environment. And that’s what this design starts to do for us.
Jean-Pierre: So when you look at all of the technology, there’s a lot of digital signage. Obviously, this store is a lot more immersive. How do you see the value of this? Because obviously it’s a significantly bigger spend with all the technology you’ve put into this store versus a conventional store where you’re using your current TVs that you’re selling as your LCD screens, and now you have dedicated areas. So what was the value of creating this immersive experience? Are you seeing any benefits of this technology in your stores?
Ron: Well, as a tech store, not having technology was a fundamental gap. And so use of digital technology as a communication vehicle in this iteration is primarily where we’ve landed, but the opportunity to take it to the next step and make it interactive is where we will go with this moving forward. But in some of the elements of the store, there is that interaction; certainly our mobility areas and some of those areas allow you to do some things that are more interactive. But simply being able to showcase the categories and the brands, which digital affords us and allows us to get messaging to consumers while they’re shopping. It just makes the store much more dynamic.
And what we’re seeing with Yorkdale is it’s drawing people in. It is a more inviting and a more interesting experience, and it seems to be having an effect. We’ve seen strong growth in our traffic in that store over your metrics. It’s much more than what we would have expected. So that’s pretty exciting, and we’re hoping to see that continue.
Ron: I think that, coupled with some of the other elements that your team brought to the table in terms of just design…you talked a little bit about the investment and it is…if you look at the store, it looks significantly more impressive than where we were. But one of the objectives was we needed this to be scalable. So your team, I thought, has done a great job working with our internal construction team to bring new design that is practical to bring to life in a 500-store chain. There is certainly premium on where we were, but not to the point where it’s going to limit us. This is not intended to be a showcase store. It’s intended to be a scalable prototype that we’ll take across the network.
Jean-Pierre: Just as we wrap up, we’d love to share…obviously, you’ve gone through a major change. I mean you’re a large player in the technology, one of the key players in Canada. Obviously, your colleagues south of the border, Radio Shack, have not fared as well in the success of their program. Obviously, we’ve approached it very differently. What tips and insights could you share with the audience as they look at going through a similar exercise?
Ron: Well, I think the learning and kind of the insights are not specific to our category, but more to just evolving a concept within the environment that we’re operating in. I talked a little bit about dealing with multiple stakeholders, and I can’t stress enough early alignment across the organization is going to be the key to success. Then building from that, it’s also communication because it’s a process that is not happening overnight. It’s not a quick process. But keeping everybody involved and engaged throughout at various stages is going to help you when you get to those key decision points that you’re not revisiting and starting from scratch again. As I said, I think your process lends itself well to that kind of requirement. You’ve worked in the retail space a lot so it’s certainly not new to you.
And the last thing I’d say is you’ve got to be flexible. As much as we had a pretty clear design or objective in terms of what we wanted to do for design, once you kind of roll up your sleeves and get involved in the nitty-gritty stuff, things change. We had to change our location, change the shape of the design. I think that your team was able to adapt what we originally envisioned quite well, and we’re quite comfortable that we’ve achieved it in Yorkdale, which as I said, was not the original prototype design.
So those are the keys. I think to go back to your question on Radio Shack, bigger challenge, different challenge than just store design. And you know, some of the strengths that I talked about earlier with The Source are why we are succeeding. We’ve been in growth mode and certainly continue to evolve our concept. We’ve started to, beyond what we’re doing with Yorkdale, evolve into different formats of retail. So we have the kiosk design that we’ve put at Pearson Airport that you guys designed for us as well as got into vending.
So consumer electronics is going to continue to be a challenging business, but I think as we work to find the right space for The Source and then build to deliver on it, the opportunity for us is looking quite positive. So we’re excited about it, and we’re very excited about the work we’ve done with your team to get to the next level of our brand transformation.
Jean-Pierre: Well, thank you very much for letting us be part of this journey, and we definitely enjoyed the exercise and your team’s involvement and your involvement. Thank you very much. I’m Jean-Pierre Lacroix. Bye now. Thank you.