- Giant Tiger
-
Giant Tiger Stores Limited 
Type Private Industry Retail Founded 1961 Headquarters Ottawa, Ontario, Canada Key people Gordon Reid, Founder & Chairman
Andy Gross, President & CEOEmployees 7,000 Website www.gianttiger.ca Giant Tiger Stores Limited is Canada’s third-largest chain of discount stores (after Walmart and Zellers). Following the 2006 acquisition of Zellers and its parent, the Hudson's Bay Company, by American entrepreneur Jerry Zucker, Giant Tiger became the largest Canadian-owned discount retailer. Annual sales first surpassed $1 billion in 2005.
Giant Tiger operates 203 stores,[1] including 106 in Ontario, 51 in Quebec (as Tigre Géant and Chez Tante Marie), 13 in Manitoba, 13 in Alberta, 8 in Saskatchewan, 6 in New Brunswick, 4 in Nova Scotia and 1 in British Columbia. The company has announced plans to open an additional 9 stores in summer and fall 2011.[2] In Ontario, a small number of locations trade under the names GTExpress and Scott's Discount.
The chain employs over 7,000 people.[3]
The headquarters and main distribution centre are located on Walkley Road in Ottawa.
Contents
Business model
Inspiration
In the mid and late 1950s, Giant Tiger founder Gordon Reid, who was then in his early twenties, was a travelling salesman for an importer in the United States.[4] In the American Midwest Reid first saw discount stores, which were a new concept at the time. He was particularly impressed by Uncle Bill's, a chain headquartered in Columbus, Ohio.,[5] which was one of his clients.[6] The discount store concept did not yet exist in Canada, and it therefore represented a business opportunity.
Reid reports that he was also inspired by Frank Woolworth’s continent-wide success, half a century earlier, in creating hundreds of profitable Five-and-Dime stores. Reid’s own retail experience, dating back to his first job as a teenager, had been in department stores rather than in discount,[7] but his mother had worked behind the luncheon counter at a Woolworth’s in downtown Montreal.[3]
Reid would state, four decades later, that he had believed, even at this early stage, that it would be possible to build a Canada-wide chain based on this model. Asked by a reporter whether he had ever imagined that Giant Tiger would eventually have the success it was then enjoying, Reid stated, “Yes. That was the original intention. The idea for the business came when I was a travelling salesman. I saw the discounters growing. My original inspiration was the F.W. Woolworth Co., obviously that was a big chain. So this was always the plan.”[8]
Key features of the business model
The Giant Tiger business model is characterized by a number of features:
- Private ownership.
- A unique franchise system.
- Low prices combined with high sales volumes.
- Low operating costs, which are passed on to the customer.
Ownership structure
Key head office personnel are co-owners of Giant Tiger Stores, Ltd. Initially, Giant Tiger’s head office was quite small; and ownership was therefore shared among a small number of people. By 1980, ownership had been shared between Reid and ten key employees.[9] Gordon Reid has stated that Canada’s agricultural cooperative movement was his inspiration for this innovation.[9] Making his employees into part-owners of the company ensured that, as in the coop movement, all employees would share a common interest in maximizing profits.
Franchise system
The first franchised Giant Tiger opened in Maniwaki, Quebec, in the late 1960s. The franchise owner’s name was Jean-Guy Desjardins. The benefit of this new way of operating was felt immediately. Up to this point, Gordon Reid and his small head office staff had been trying to make all key decisions, with the result that, despite its small size, the chain was slow-moving and inflexible. But, as Reid would explain it forty years later, from the moment the change was made, “the [Maniwaki] store made money and I didn't have to do anything. [Jean-Guy Desjardins] did the advertising, he found the location, he merchandised it to suit his customers, he did everything….And, I thought, 'by golly, that's a good system.' “[10]
The greater autonomy that could be permitted to franchise owners whose personal financial interests were symmetrical with those of the head office meant that there was less need for Giant Tiger to develop centralized systems. Eleven years after Giant Tiger's first experiment with franchising, Reid emphasized the flexibility that it gave his company: “The weakness of the chain stores is that they try to standardize.”[9] Such standardization was not possible in a small chain which at the time maintained its low prices by locating in awkward and non-standard spaces such as converted bowling alleys or garages,[9] and which refused to put money into standardized fixtures or furniture, or to invest in standardized office systems.
Giant Tiger franchises are unusual. A 1980 article describes Giant Tiger's franchise system this way:
“ The company charges franchisees $1 up front plus a percentage of annual sales. Before the franchise is handed over, the manager must earn his Giant Tiger stripes by working for the company at least a year. Most franchisees come with recommendations from years of service in the retail business. 'We don't consider a person unless he has oodles of experience,' says Reid.[9] ” The practice of issuing $1 franchises and of attracting the best managers from other chains has continued essentially unchanged since that time. In 2010, Reid reported that the issuing of no-cost franchises to experienced retailers "was a great way to get experienced people. Over the years we had a lot come from Woolworth, Kresge, Kmart and later Zellers." In the same interview, Reid stated that over twenty Giant Tiger franchises are now run by former Walmart employees, most of whom had been attracted by the same franchise system that he had introduced decades earlier.[6]
Low costs, low prices, high sales volume
In the discount store industry, where margins are assumed to be low, two key indicators of the high volume of sales that are necessary for an efficient and profitable operation are gross sales per square foot and the number of times, per annum, that a company “turns over” its merchandise.
Over the years, Gordon Reid and other Giant Tiger executives have occasionally announced the chain’s then-current sales per square foot and its annual turn to the media, usually in comparison to some publicly-available metric for the industry. These announcements indicate that Giant Tiger has consistently outperformed the industry. In 1985[11] and again in 1991,[6] it was asserted that Giant Tiger was achieving sales of $300/sq. ft., as compared to an industry average for department stores of $150 – $175/sq. ft. and for other discounters of $200/sq. ft.
By 1999, the chain was averaging $450/sq. ft. compared to $300/sq. foot for Wal-Mart, which itself was well above the average for the industry.[12] Also in 1999, Reid stated that Giant Tiger was achieving nine turns of its inventory, compared to an industry average of 4½ turns.[12]
History
Sales volume and number of stores
Gordon Reid opened the first Giant Tiger store, on George Street in Ottawa’s Byward Market, on May 13, 1961, with a $15,000 investment.[3] First-year sales of $139,781 were far lower than Reid had anticipated, and by the end of 1962 he decided to close the store. Unexpectedly, the rush of customers attracted by his going out of business sale provided enough cash flow to keep the business afloat.[6]
Although the store survived, expansion was slow. A second location, in the small town of Brockville, was not opened until 1965.[3] By the time of the company's tenth anniversary, in 1971, it still had only six stores.
Because Giant Tiger has always been privately held, information on profits are not available, and information on sales is available only through media reports. Based on these sources, it is possible to trace a somewhat sporadic history of the company's growing sales figures, number of stores, and, where possible, the number of employees:
- 1962: $139,000 (1 store)
- 1965: $444,000 (2 stores)[3]
- 1980: $20 million (22 stores)[9]
- 1984: $60 million (29 stores)[5]
- 1985: $75 million (34 stores, 500 employees)[5]
- 1986: $90 million (37 stores)[5]
- 1990 $163 million (54 stores)[13]
- 1991: $200 million (60 stores,[6] 1,200 employees)[14]
- 1994: $220 million (63 stores)[10]
- 1996: $300 million (79 stores, 2,000 employees)[14]
- 1999: $450 million (90 stores, 2,600 employees) [15]
- 2000: $600 million (102 stores,[16] 3,500 employees)[17]
- 2007: $1.3 billion (182 stores)[10]
Geographic expansion
In 2001, Giant Tiger and The North West Company (NWC) signed a 30-year Master Franchise Agreement that grants NWC the exclusive right to open and operate 72 Giant Tiger stores in western Canada.
The chain has undertaken a major expansion in the Greater Toronto Area since 2005. It has opened seven stores in Bradford, Brampton, Markham, Newmarket, Scarborough and Etobicoke.
The 200th Giant Tiger store opened in Nova Scotia in October 2010.[3]
Giant Tiger attempted an expansion into the United States with a franchised store in Potsdam, New York, which closed after a few years of operation.
Franchising
In 1968, Giant Tiger opened its first franchise stores, which now account for the majority of locations. The goal was to better serve the customer by having local owners in the stores.
New brands/trademarks
In 1977, Giant Tiger established Chez Tante Marie stores in Hull and Gatineau, Quebec.
In 1996, the Scott's Discount brand was launched as an alternative format for smaller stores.
In 2008, Giant Tiger opened its first GT Xpress outlet, in Ottawa's working-class Hintonburg neighbourhood. GT Xpress stores are intended to service less mobile residents of densely-populated neighbourhoods, so that residents will not have to leave the neighbourhood to shop at a big-box store. Because larger retail spaces are unavailable in such inner-city neighbourhoods, the merchandise selection at GTXpress stores is more limited than at a full-size Giant Tiger, let alone a big-box store. Traditional lines of Giant Tiger merchandise are further restricted to free up space for an expanded produce, dairy, deli and bakery section. Effectively, a GTXpress store is a discount version of a convenience store, characterized by a "focus on what the customer needs today, as opposed to [carrying a full assortment of] what the customer wants." In view of the fact that the ethnic makeup of individual inner-city neighbourhoods is likely to differ substantially, franchise owner at each GTXpress outlet will have the authority to tailor "product lines to cater to ethnic diversity in the area."[18]
Trucking/warehousing
In 1987, Giant Tiger launched its own trucking fleet (known internally as Tiger Trucking)[5] to make regular shipments from the warehouse to stores.[3] In 1999 it was reported that the company's trucks were making deliveries to each store three times a week.[12] In 2001, Reid reported that deliveries were taking place daily: "We have the most efficient shipping and distribution system in the general merchandise field.... It is equivalent to the grocery stores. We deliver to stores five times per week. There is no one else in the general merchandise industry that does that and we do it with our own trucks."[5]
On May 31, 1996, Giant Tiger purchased and took possession of a 29,000 m2 (315,000 sq ft.) distribution centre on Walkley Road in Ottawa, previously occupied by Sears Canada. The company's headquarters moved to this location later the same year.
In December 2005, Giant Tiger opened a new 3700 m2 (40,000 sq ft.) distribution centre for frozen and refrigerated products in Brockville, Ontario.
Merchandising strategy
Over time, "Reid noted a subtle change in the shopping desires of his clientele. They didn't just want the lowest prices anymore. They wanted to buy up-to-the-minute styles inexpensively." In 1990 Giant Tiger responded by establishing a clothing and footwear buying office in the heart of Montreal's fashion district, in order to be closer to the suppliers and manufacturers, allowing the chain to pick up trends faster and cause merchandise to arrive in the stores earlier in the fashion cycle.[3]
Changes in management structure and key personnel
Over the course of the past decade, Gordon Reid has gradually been relinquishing direct control of Giant Tiger. In 1999, he resigned the presidency of Giant Tiger in favour of Jeff York, an executive with ten years’ experience at the company.[15] In October 2010, Reid stepped down as chief executive officer of Giant Tiger, in favour of Andy Gross, a twenty-five year veteran with the chain, who started working as a buyer when there were fewer than thirty stores. Gross had, by this time, already inherited the presidency from Jeff York.[3] Reid retains his post as chairman of the board.[3]
See also
- List of Canadian department stores
References
- ^ An updated list of Giant Tiger locations, including the total number of locations is maintained by the company at http://www.gianttiger.com/en/storelocator.php
- ^ Giant Tiger lists new store openings at http://www.gianttiger.com/en/community/store-openings/
- ^ a b c d e f g h i j Vito Pilieci, "New CEO grabs Tiger by the tail", Ottawa Citizen, October 15, 2010.
- ^ Gordon Pitts, "Tightwad philosophy keeps Tiger running", Ottawa Citizen, September 27, 1980.
- ^ a b c d e f Karen Benzig, “Giant Tiger, a thriving species.” Ottawa Citizen, Oct. 1, 1985, p. A17.
- ^ a b c d e Hugh Paterson, "A retail giant earns its stripes", Edmonton Journal, May 10, 2010.
- ^ ”Profiting from the bargain basement,” in The Enterpriser, (Ottawa), vol. 4, no. 5 (1981).
- ^ “Giant Tiger founder shares secrets of 38-year success” (interview with Gordon Reid). Ottawa Business Journal. September 20, 1999, p. 7.
- ^ a b c d e f Gordon Pitts, "Tightwad philosophy keeps Tiger running. Ottawa Citizen, September 27, 1980.
- ^ a b c Kristin Goff, “Canada’s national Tiger”, Ottawa Citizen, Nov. 17, 2007.
- ^ Karen Benzig, “Giant Tiger, a thriving species.” Ottawa Citizen, Oct. 1, 1985, p. A17. This article also cites Chris Schwartz, an executive at Dylex Ltd., as stating that at BiWay stores, a Giant Tiger competitor, sales averaged $250/sq. ft.
- ^ a b c Bert Hill, “Giant Tiger keeps its stripes.” Ottawa Citizen, Sept. 15, 1999, p. D1.
- ^ Ela Schwartz, "Giant Tiger's nonconformist strategy". Discount Merchandiser, May 1990, p.89.
- ^ a b Bert Hill, "Giant Tiger claws its way past the competition", Ottawa Citizen, May 23, 1996, p. C1.
- ^ a b Richard Roik, "Roaring start for prez". Ottawa Sun, Sept. 15, 1999, p. 38.
- ^ Wendy Stephenson, “Tiger takes on the big boxes.” Winnipeg Sun, October 15, 2001, p. 15.
- ^ Liane Beam, “Leaping Tiger.” Sudbury Star, May 26, 2001, p. B1, B6.
- ^ "Giant Tiger reopens community hub". Ottawa Citizen, March 15, 2008.
http://www.gianttiger.com/en/about_gt/history/index.php
External links
Categories:- Companies based in Ottawa
- Companies established in 1961
- Discount stores
- Retail companies of Canada
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