It was all about market share, which the Hudson’s Bay Company wanted to protect.
Because by the start of 1998, the venerable retailer was watching as a major competitor — that would be Walmart — was capturing an increasing slice of the Canadian market.
And so HBC made a move to preserve its own market share, spending $240 million to acquire a different rival and also to put some distance between itself and Walmart.
“Canada’s biggest department store went shopping for a bargain today and came home with a bargain store,” the CBC’s Alison Smith told viewers on The National on Feb. 6, 1998, the day the news of the deal broke.
“The Hudson’s Bay Company bought Kmart [Canada].”
The CBC’s Lynn Robson provided more background on the persistent and tough competition that HBC had been facing, as a result of Walmart’s entry to the Canadian market a few years earlier.
“Two years ago, The Bay held 17 per cent of the department store retail market. Zellers, which is owned by The Bay, held 24 per cent. Kmart was at nine [per cent] and the American-owned Walmart was at 16 per cent,” Robson explained on The National.
Robson said Walmart’s market share had continued to grow, while The Bay, Kmart and Zellers had seen their own market share fall.
“Combined, those three are bigger than Walmart,” she said.
Though not mentioned in the report on the HBC-Kmart deal, Walmart had pulled a similar move when it entered the Canadian market — it had acquired 120 Canadian Woolco stores, which provided a foothold for its entry into business on this side of the border.
A loss for consumers, workers
Retail analyst John Winter said the further consolidation of Canada’s department store industry would not likely be a net gain for consumers.
“This was a three-horse race — Zellers, Kmart and Walmart — and now it has become a two-horse race,” he told The National, leaving The Bay off that list. “One horse has just died.”
Also, the Kmart deal was expected to put up to 6,000 jobs at risk, as HBC shut down various outlets.
“The takeover means more than 40 stores may close, some Zellers, but mostly Kmarts,” said Robson, noting that the final details of those closures would be worked out in the months to come.
‘The passing of a great name’
Robson said “the familiar Kmart logo” would be phased out within a few weeks.
“Certainly, everybody hates to see the passing of a great name in Canada,” said George Heller, the president of Kmart Canada. “And certainly Kmart was one of them.”