Behind the Brand®

The Digital Transformation of an Iconic Brand with Ian Nairn

Iain Nairn is the President and CEO of The Bay. Founded in 1670, The Hudson's Bay Company is North America's longest operating company. In this episode, Jeff and Iain talk about the modernization of the oldest company in Canada. Iain provides insight into why the customer relationship is the most valuable asset in a business and the ways businesses can utilize technology to foster that relationship on an even deeper level.

Listen to the full episode here:

The Impact of Customer-Led Tech Businesses

Jeff: Is there a defining moment when you realized that you had an interest in business, specifically retail?

Iain: I come from a very academic family. I'm the youngest of four, [and] my father was a career civil servant. [His] last role in civil service was running pensions and child benefits for the whole of the UK. My eldest brother [is] a scientist and a professor at Yale. My sister is a pharmacist, and my second brother is a banker. I started working in a market store when I was 15 years old in Chelmsford in Essex. We travelled the county in a banged-up old van, and sold stamps and toys, but I loved it. Despite the early mornings, I learned so much at 15. Customers [are] the most important thing. If you don't have customers, you can't succeed.

Jeff: What have you seen change from the 15-year-old Iain Nairn?

Iain: Fundamentally, nothing has changed, just the approach is different. The channels that the customer you communicate with [are] different. It's almost more detached because of the kind of onset of digital. If you look at the best in the world nowadays, the best retail is customer-led tech businesses. They came up with a solution to do exactly what I did on that market store, but through a tech way. Customers change, so the customer is comfortable being sold that way. Still, the people who have excelled have come up with the solutions that customers needed to get that one-on-one personalization. I strongly believe that there are still going to be stores and still gonna be one-on-one selling. That's still going to be here forever.

Jeff: I think I read a statistic that people spend roughly 12 minutes out of every waking hour on some sort of device. Hudson's Bay has this amazing footprint. You've got employees engaging with customers face to face every day. How do you translate that face-to-face experience into digital?

Iain: Prior to COVID, we still had 80% of our turnover coming to stores, so there was always this ability. You didn't talk about [how] you were evolving your digital footprint. But when COVID came along, it was like, “How on earth are we going to talk to those customers” because we [had] all these people employed, but we didn't have the stores open. We developed some technology to allow a customer to come onto our digital channel chat, decide which store they wanted to chat with, direct the customer to that store, and then start the conversation there.

Now you could walk into a store on Queen Street in Toronto, and our staff associates would have a lanyard on with a QR code. [They] could be talking to a customer, engaging on a product line, or styling the customer, and that QR code on the lanyard will take you to a personal associate landing page. [That way], they can keep that conversation going outside the store. If I go back to my market store example, you start with [a] one-on-one conversation, but now you've extended it to a digital solution. You can now talk to them one-on-one [and] outside the store through the digital solution. The fundamental key here is [the] longevity of relationships. You build a relationship, inspire the customer, and then you want that customer to come back and back and back again. So that's the tech solution we're trying to find.

How Technology Can be Used to Reimagine the Customer Experience

Jeff: Walk me through that customer experience, because I want our listeners to understand it. If I go into a Hudson’s Bay location, I'm able to get helped by the people in the stores, but then I'm also able to form a digital connection with an associate. [The interaction] will be recalled when I engage with The Bay online?

Iain: Yeah, they may build you a style [guide] and say, “We've got the lookbook for you, and this is your product. You like this colour, and you like this shape, and this is the new ....” They get to know you, and then next season's collection comes in, and they can adapt that to a certain group of customers who like that look. They can show it to you live or send it to you on a digital interface and start the conversation again. It's great, and we're refining [it] every day.

This is the journey we're on of moving the business from being an organization that used other people's tech to being a company that [now] is tech [forward]. This is a fundamental difference where we are thinking through what the right tech solution [is] for our customers. There's no point of difference in buying other people's tech. It's the same as buying the same clothes for everybody. There's no differentiation between you and the other brand. So we're trying to come up with solutions that make us more relevant than our competitors.

Jeff: You're now starting to hear more and more companies say [that] we're a tech company that sells sneakers or a tech company that sells clothes. Identifying more as a tech company. How does The Bay think of that transformation when it comes to your identity?

Iain: Tech is not about a particular channel. It's just because today's channels will be what they are. You don't know what they're going to be in three or four or five years. [Communication] channels will evolve, but it's about the relationship [between] the brand and the consumer, and understanding that consumer. Now at The Bay, we have 10 million Canadian shoppers every year. 10 million, out of a country population of 38 million. You know that they come to us. We know that they love us. Our role is to become more relevant to them in where they are, how they're shopping, [and] what they want to buy.

“Tech is not about a particular channel. It's just because today's channels will be what they are. You don't know what they're going to be in three or four or five years. [Communication] channels will evolve, but it's about the relationship [between] the brand and the consumer, and understanding that consumer.”

A great example for us would be that a high proportion of our customers have pets, for instance. We sell them clothes, perfume, and home furnishings. There's absolutely no reason that we couldn't sell a pet bed or pet food. It's really thinking in terms of relationships. If we can build a more engaging relationship with that consumer, they would have the confidence to buy further products from us across net new categories. We're using tech to make that transformation because stores alone aren't where they shop. They are shopping across a lot of different formats. We've got to get ahead of the curve and be there for them in a way that allows them to think that we're more exciting than anybody else.

The Speed of Change

Jeff: If you went back in time and told Iain, the CEO 10 years ago, something, what would that be and why?

Iain: I would have said, “Think about the changing behaviour of the customer more.” I had a lightbulb moment. I used to work for Laura Ashley in the 90s, and I was the COO for that business. One of my roles was running their mail-order business. We had an old-fashioned catalogue business, and in those days, it was [about] how many products you could get on a page. You send all these catalogues out to the customer, and you get a response two months later, and then you'd reskin the catalogue, and you'd resend it out on a slightly smaller book. This [was] the world we lived in.

We set up our first digital site in the late 90s, [which] amazed me. Talk about low tech. That was a front end that sent an order to a warehouse. I remember selling beds at three o'clock in the morning. The insight that we found [when] we were looking at our sales coming in [was that] it was clear [that] customers woke up with a backache at three o'clock in the morning. Those days, I thought even as I transformed my career around the world, it was still very store-focused. I went to Australia and was probably the first person to launch a proper transactional website, but I could’ve moved [it] quicker. Amazon has grown to be a $500 billion business in the time that I've gone through. I could have been quicker. I think that's the lesson. We're trying to think about the business at the moment.

We've termed ourselves the first 351-year-old startup. Don't think [of us as] an old traditional business. Start thinking about us as a startup business. That's what's going to change the ethos of moving quickly, testing, and learning. We're not going to get it right. Agile methodology, groups of people who we don't have to sit over and give us bits of paper and talk to me and say, I want to spend X. Just give them the stuff and say, here's the list of things we agree on that could make a difference. Go off and do it.

Jeff: As humans too, we always underestimate the speed of change. The amount of information that's being created is accelerating far faster than we ever anticipated. Everyone always talks about the importance of data. In one instance, you have seen that go from pen and paper in the 90s to now [at the] click of a button, it arrives at your house. How do you prepare for that change? To catch the change, you need to provide a lot of flexibility. How do you balance out giving customers what they want right now, but then also saying, “Here's where we think the puck is going, and we need to go there instead of just chasing after it”?

Iain: Part of our cultural change in the organization is twofold. One is more insight and conversation with the customer. You have to have the ability to track that and understand that and almost get ahead of that. And then internally in the organization, we're moving to a model where we just pose questions. We get groups of people around and sit in a room and say, “This is what we're seeing.” These are not senior leaders. These are just people in the organization to say, “This is why I'm feeling this,” and [we ask] our associates, how would you react to that? What would you do with this? What would you do with that? What would be the solution to overcome the problem that we're posing for you? It's about insights, research, and problem-solving.

Jeff: You've talked about the relationship with the customer, and we were talking about one-to-one earlier. I think everyone has a favourite coffee shop or a shop that they go to where the owner or the staff know them. That's a great feeling when you walk in, and someone says, “Hey Jeff, do you want the regular?” They know how to make it the way you want it, and you know what the price is. And that is the dream transaction or the dream relationship. At the same time, when you get to the size of a brand like The Bay, it becomes more difficult to scale that up because you're dealing with 10 million customers. How do you have a one-to-one relationship with 10 million people?

Iain: It's about segmentation and personalization. That's where the investment in really smart people to figure out that solution comes. Customers want it at some levels, but they don't want other levels. Even in stores, some customers just want to come in, and they don't want any hassle. They want to wander around [and] pick their things, so you've got to work out who wants what, [and] what products. Where [is the] price the most important thing? Where is experience the most important thing? Where is service the most important thing? So every interaction has one of those different components.

Jeff: It's not an overnight journey. Maybe as customers, we’re often not very tolerant or patient. I remember the early days of SkipTheDishes, we were using Skype chat to chat with couriers, and we were faxing orders to restaurants or having to just call the restaurant and tell them what the order was. There was no order tracking. Fast forward four years, and now you've got live GPS tracking and millions of orders being processed. Four years doesn't seem like a lot of time, but now with technology, you can transform so quickly. Are you seeing that pace of change occurring?

Iain: I think you're a great example. You're my first interdigital, and you did it in a super quick time. It is exactly that. What's the customer problem? What's your problem with solving that? And the solution is a technical solution. That's where as an organization, we'd be the first people to say that we're not doing the best job that we should be doing. We want to be a nine out of 10 in the things that our customers find important. That's why we made the conscious decision to reorganize our business so we could focus on technology and come up with those solutions quicker than we ever had before.

Technology and the Customer Journey

Jeff: Let's talk about that reorganization, then. A lot of people, when they think of Hudson's Bay, they think of it as [an] iconic department store, but it has a massive online presence. I believe [you’re the] sixth-largest online retailer in the country, [and] 10th most visited e-commerce site in Canada. How are you guys changing perceptions about the brand?

Iain: The most important thing is, we break down the customer journey in terms of, “Does a customer think about us first?” That this is something you'd measure. When you wake up in the morning, and you think, “I'm going to do something today or buy something today,” what's the first thing that springs into your mind? We call it the think and consider score. If we can lift our think and consider score, that's top-of-mind thinking. We've got to be out there and invest more heavily in our customers to make sure that they understand that we're a digital business.

This is part of the reason we've even created the PR of reorganizing our business. It's a lot about [the] brand. It's a lot about how we show up as a digital business. If you think about a historic department store, it was all about sending a flyer out or sending direct mail out. In the digital world, [it is a] completely different [way of] thinking. We intend to quadruple our investment in marketing.

It's changing the perception of the customer, even using The Bay [as] a more regular use term, because everyone associates thebay.com. So again, it's thinking through the cues that send customers into ours first. A lot of it is about our relevance to them.

Jeff: This think and consider score, I'm interested to understand, how are you measuring that? Is that survey-based? Or is that based on some of the analytics that you have in your tech stack? How did you get to that?

Iain: [It’s a] combination of both. We have data, [and] we run a data analysis every single week, which is a combination of a whole series of things. From surveys going out to groups of people, to what people are clicking, [what] they’re clicking first, and then we merge them both. We know that if we send out a Tiktok ad, we can see that customer’s journey. They may go straight to our website, or they may go in-store, and then we can track the conversion from both of those.

There's tonnes of data out there, [and] you've got to synthesize it down to two or three things. That's why we're trying to make it simple. Did they think about us? Do they consider us once they get to the website? Did they convert? What [is the] transaction value? Do we get a repeat customer? Repeat is hugely important for us because if you think we've got 10 million coming once a year, yes, we can get new customers, but we've got a big chunk of Canada already.

What is equally, if not more important, is repeat purchasing. The biggest thing that keeps me awake at night is that repeat purchase, because that truly shows the relationship. If that's growing, and it is growing at the moment, net new plus existing, but then I'm seeing a nice new retention score, [that] is critical for us.

Jeff: A lot of what we've been talking about is all technology and data, and it's almost like the left brain, right brain where one's very kind of conversion, analytics, almost engineering-minded. Then you have the other side of it, which is more brand and purpose. I would love to understand a bit better around the purpose side of things. The Bay wants to inspire Canadians to live their best style [and] explore the colourful life they can design for themselves. What does that mean to you? What do you see The Bay's purpose as being?

Iain: We've been in Canada for 351 years. We're part of the whole growth of this country. It’s beholden on us to play a role for the next 351 years. We've developed a concept called Charter for Change, where through our foundation, we have planned to invest about $30 million into helping Canadians live a better life. We've just joined [forces with] the [Toronto] Raptors, which is partly because they are also on the same journey. We also want to be part of the discourse [around] developing what Canada is for the future. Rather than be an organization that's just purely interested in profit, we want to be an organization that is part of helping Canada for the future.

Jeff: Can you tell me more about the goals or some of the initiatives you guys are planning? Has that been announced yet, or is that still in development?

Iain: Education for those who can't get it as easily. Our investment in the 15 Percent Pledge that we've made is a critical thing. We've developed a council to bring different diverse designers into the spotlight. One of the big issues for up-and-coming designers is that they just can't fit in with a big organization's processes on their terms and conditions. We would demand 30 to 90 days [of commitment]. That would be the standard, big company terms we work on. But that's difficult for some people. We had to change our processes to allow our new designers to come on board. That would be a great example [of] helping people, but helping people through business.

Jeff: You hear a lot of people talk about wanting to be a part of a positive change or being purpose-led, but then very few change their own company. I think that's cool to see that you guys are making those changes. I'm curious to talk a little bit about risk. How do you guys think about taking risks when it comes to marketing or brand[ing]?

Iain: We have the concept of a Brand Council. Through COVID, the feelings that the country was going through, [and the] ups and downs. We pulled campaigns because we thought that's just not in tune with what our consumers are feeling now. Then there are other times you can take bigger risks because people are in a good space. That's the way we look at it. We allow the marketing team to go out and take the pulse of the Canadian people, and then they put up scenarios. Through our Brand Council, we evolved [to] understand [what’s] appropriate, and everyone has a view.

Jeff: You recently came out and announced a new business structure whereby The Bay and Hudson's Bay operate as distinctive businesses. What was the motivation behind that change?

Iain: One was focus. The skills and experience you need to run a store and a digital business are different. We talked a lot about tech, [and] you need a different level of skill. Primarily we did it because we wanted to show the value of what we had as a business. The Bay is a tremendously successful business. We’ll do $1.1 billion in demand this year. It has been growing at that rate for the last five, six years. Ever since its inception as a digital business. That's what we're trying to unleash, is the ability for people to see that we have this incredible brand and a great growth story.

Jeff: From the customer perspective, they won't notice a difference except for maybe the fact that the e-commerce side of the business, thebay.com, can heavily focus on the digital side. The customer should be getting an even better digital experience because you're focused on that. The experience in the store is the same because there are no changes there. Do the stores become more fulfilment-focused versus conversion-focused, like the online side? Or [when] you think of Amazon, for example, they're out there opening fulfilment centres outside these cities. Everyone just thinks of them as a purely digital business, but you have the advantage of having physical locations across Canada, and you have this robust digital business. How does that relationship work?

Iain: First, we see stores evolving into experiential [businesses]. We've now turned them into discovery stores. It's the Hudson's Bay Discovery Store. How do you discover the exciting things that are happening within the organization? How do we bring those to life and make them more inspiring for the customer? How do we use the stores to learn from our strategy in digital, [which] is to 10x grow our products? What we will learn from all of that information is much more effectively what we should be putting in your local store because we get a better data understanding. Now we're going to have all this information from the ten times more products to refine and curate the store offers more effectively.

Navigating Marketplaces

Jeff: There are some trade-offs [with marketplaces]. Skip was a marketplace, [and] Neo Financial is a marketplace [of sorts] as well. I always struggle with that tradeoff because, as a customer, I think, “Hey, I’m making the purchase with the brand, not with the marketplace seller.” How do you think of giving up some of that control? Because it’s not The Bay necessarily, but it is at the same time, and the customer doesn't care.
Iain: I agree. I wouldn’t say we gave up control because we didn't see ourselves [as] being Amazon. We see ourselves curating the range to meet the same aspirations we know they want. To us, it’s no different from us buying it ourselves or doing a drop-ship model. We’re looking for premium brands, you know, that fit exactly along the lines of where we’re going. It’s a rigorous approval process. We check their credentials and do a lot of due diligence on them. Even 10X growth is not a big marketplace in the scheme of world marketplaces.

We’re trying to create a curated view of the world and double-check before allowing any marketplace sellers to come on board. We’re giving small Shopify sellers, who may have a small business, access to 220 million visits a year growing at 50 percent. We’ve got our customers on one end, and we’ve got all these other great people that they’ll never see on the other end. It’s a new designer that’s never had that exposure before.

Jeff: I think people don’t understand how big that is for a small or medium-sized business to get listed on thebay.com. Even as a small business, you could have an amazing product, but you don’t have access to demand. If all of a sudden, you can get access to The Bay, you’ve just unleashed a huge amount of exposure to customers that would never have‌ seen your product. Then for yourself, it increases your selection, which will continue to increase demand. It almost creates that virtuous cycle of the more suppliers you get, the more demand you have, and then the suppliers are happy because they’re getting the demand.

Iain: The cultural change in the organization launching a marketplace, is [that] sellers are customers as well now. That is a partnership. We need sellers to be successful. Giving them advice, feedback, and access to the right set of customers, is going to make the difference.

Jeff: Another [thing] that I’ve heard about is the second-hand clothing market. This is said to [have] become an 84 billion dollar market globally. I believe over the last 12 months, over 120 million consumers have tried reselling for the first time. It’s growing rapidly, and I just heard that you had signed a partnership with Rebelstork, a Canadian tech startup here in Canada. It’s awesome to see that you guys are partnering up with more tech companies in Canada. Do you think that this is driven primarily by sustainability trends? Or do you think it’s more focused on just price? Customers can get the same product they want, but just at a lower price.

Iain: It’s a blend of both. If you think about the very top end and how you get accessibility to your favourite Gucci or Chanel bag, that may be outside your realm. There’s a consumer there. It’s about quality, the aspirations to own one of those items, so definitely price is the key driver there. But in Rebelstork’s case, that’s about sustainability. I think if we can give them access to that, that’s fantastic. And also solve a problem for the customer. We started with Rebelstork. How do they get their product to go onto their marketplace? The fact that we have stores, a space, and a customer base that can come to an event to get a product that could be sold onto Rebelstork’s site, that’s a solution that we’ve solved for them. It becomes a virtuous circle of opportunity. The customer wins, either selling it or buying it.

Jeff: Hudson’s Bay has one of the most popular loyalty programs in Canada. How are you thinking about loyalty today, and where do you see it going 2 to 3 years from now?

Iain: We know we have to give a better value proposition to the customer on loyalty. Make it more obvious and make it easier to use. That was the most critical thing, [and] it comes down to tech. It has to be seamless. It has to be integrated, and it has to be valuable. The relationship we’ve built up with Neo has been part of that journey. We ‌ wanted to find a digital partner who could reach outside our organization, get into that customer’s other spend, and get loyalty there.

We’ve created a wider ecosystem. Canadian, tech-focused, digital-first. More importantly, [we] created a product of value that was outstanding in the Canadian market. That adds value to our pedigrees and our loyalty program. We’ve got lots to come. We think this is a huge space for us to work on as we grow the number of categories we're in. We think we can transform our loyalty program that we have at the moment into something unique from what Canadians have seen before.

Jeff: Well, Iain, it’s been an absolute pleasure and honour having you here on the show. Are there any messages you want to leave with [us]?

Iain Nairn: We’re an exciting digital business. We’re going to be there for you. We’re going to offer you more things, and we want to inspire you. Come with us on the journey because it’s going to be exciting and rewarding.