The Bay Redesign: Challenges & Opportunities

Can Ruby Liu revive Retail? The Enterprising Plan to Reimagine Department Stores

Is the department store model dead, or can a fresh vision breathe new life into these retail giants? Ruby Liu, a B.C. mall owner, is betting billions that she can not only save the concept but revolutionize it. After Canadian Tire acquired Hudson’s Bay‘s name and trademark stripes, Liu pivoted, securing leases for up to 28 former Hudson’s Bay and Saks locations across Alberta, B.C.,and Ontario. her goal? To create a “new modern department store” experience. But can she overcome the significant hurdles ahead?

The Landlord Hurdle: A Critical First Step

Liu’s immediate challenge is securing landlord approval. Hudson’s Bay, having sold its real estate years ago, leaves Liu dependent on convincing landlords to embrace her vision. This won’t be easy. Landlords, as Don Gregor of Aurora Realty Consultants points out, prefer control and may resist having tenants chosen for them, especially ones inheriting deeply discounted “trophy leases.”

Why Landlords Might Hesitate

• Below-Market Rents: Many of these leases date back to the malls’ inception, with rent charges significantly below current market rates.
• Restrictive Clauses: These leases frequently enough include clauses limiting what other tenants can move in or what can be built on the site.
• Lost Opportunity: Some landlords may have preferred Hudson’s Bay to go bankrupt, freeing them from these restrictions and allowing them to redevelop the space as they see fit.

The negotiation, as Gregor describes, will be a delicate “dance” of give and take.

Liu’s Strengths: Experience and Opportunity

Liu isn’t new to the game. She made billions in real estate development in China before expanding her Central Walk business to Canada, acquiring malls like Tsawwassen Mills and Mayfair shopping Center. These malls feature a mix of familiar Canadian staples and unique attractions, like Bass pro Shops and robot barista kiosks.

Expert Tip: Landlords often dislike leaving large spaces vacant. Liu offers a solution, sparing them the headache of finding a tenant to fill hundreds of thousands of square feet.

Lisa Hutcheson of J.C. Williams Group highlights another advantage: Liu’s willingness to address deferred maintenance issues, such as broken escalators and HVAC problems, which have plagued Hudson’s Bay stores for years.

The Cost of conversion: A Multi-Million Dollar Gamble

Revamping these spaces won’t be cheap. Gregor estimates that HVAC repairs alone could cost half a million dollars per location. Add to that the $100 to $150 per square foot needed to reshape the stores,and the total investment quickly climbs into the tens of millions.

Hutcheson points to La Maison Simons, which is spending about 18 months transforming former Nordstrom locations in Toronto. “And that’s with a fully baked concept,” she notes. Liu faces the challenge of creating a brand-new concept from scratch.

Competing in a crowded Market: Online vs. Brick-and-Mortar

Liu’s new department store will have to compete with established players like Simons and Holt Renfrew, as well as the ever-growing dominance of online retailers. This requires a compelling value proposition and a unique shopping experience.

Supplier Relationships: A delicate Balance

Securing supplier relationships will be crucial, but Hutcheson believes suppliers may be “a little bit nervous” after suffering losses from Hudson’s Bay’s struggles. Liu has promised to prioritize suppliers and vendors who previously worked with Hudson’s Bay, offering a lifeline to those affected.

The Human Element: Hiring and Retention

Building a strong workforce is essential. Liu has pledged to prioritize hiring former Hudson’s Bay employees, who numbered 9,364 before the company’s decline. Central Walk CEO Linda Qin recently announced that Liu interviewed 13 former Bay employees and hired 10, including some with 30 years of experience.

Swift Fact: Employee retention will be a challenge. As Hutcheson notes, many former Hudson’s Bay employees will likely find other jobs before liu’s stores open.

The Potential Payoff: A New Retail Model

Despite the challenges, Jenna Jacobson, the Eaton Chair in Retailing at Toronto Metropolitan University, believes Liu’s efforts could be transformative.If Liu can mirror the overseas department store model, incorporating new brands, supermarkets, restaurants, salons, entertainment, and digital experiences, she could “usher in a new form of retail” that the canadian market desperately needs.

Drawing Inspiration from Overseas

Jacobson points to Chinese department stores, which often function as destinations in themselves, offering a wide range of services and experiences. This model encourages customers to spend significant time and money, creating a more lasting and engaging retail surroundings.

what are the main challenges Ruby Liu faces in reviving department stores?

The main challenges include securing landlord approval, managing high renovation costs, competing with online retailers, establishing strong supplier relationships, and hiring and retaining a skilled workforce.

Will Ruby Liu succeed? Only time will tell. But her ambitious vision and willingness to invest in a new retail model offer a glimmer of hope for the future of department stores.

Can Ruby Liu Save Department Stores? Expert Insights on the Future of Retail

Time.news: The retail landscape is evolving rapidly. Ruby Liu is betting big on the revival of department stores. Here with us to dissect her ambitious plan and the challenges she faces is Dr. Evelyn Reed, a leading retail strategist and author of “Reimagining Retail: Strategies for Success in the digital Age.” Dr. Reed, welcome!

Dr. Evelyn Reed: Thank you for having me. It’s a fascinating situation.

Time.news: Absolutely. Let’s start with the core question: Is the department store model truly dead, or is there room for innovation, as Liu believes?

Dr. Evelyn Reed: The customary department store model, as we knew it, is definitely struggling. But “dead” is too definitive. It needs a radical transformation.Liu’s vision of a “new modern department store” aligns with the evolving consumer expectations. People are looking for experiences, not just products. So, she’s on the right track. The key will be execution.

Time.news: Liu’s first hurdle involves securing lease approvals from landlords. The article points out below market rents and restrictive clauses. How significant are these logistical and financial hurdles?

dr. Evelyn Reed: They are critically significant. These legacy leases, while financially beneficial for Liu, can be a major sticking point for landlords. Landlords want control, and they want to maximize their property’s potential. Below-market rents eat into profits, and restrictive clauses stifle redevelopment opportunities. liu needs to present a compelling, collaborative vision to convince landlords that her revitalization plan benefits everyone in the long run, not just herself.

Time.news: It’s mentioned that Liu’s experience with Tsawwassen Mills and Mayfair shopping Center gives her an advantage. How can that existing local business know-how translate to this much more ambitious task of revitalizing retail giants in multiple provinces?

dr. Evelyn Reed: Her previous successes demonstrate a keen understanding of the Canadian retail market and the ability to create engaging destinations. Her experience with attracting retail brands and curating unique experiences-like combining Bass Pro Shops with more traditional offerings-indicates a willingness to experiment and cater to diverse consumer tastes. That’s an advantage. Moreover, she understands the Canadian consumer, that experience alone is a plus as some foreign companies struggle coming to the country.

Time.news: The article highlights the ample costs involved in renovating these spaces, perhaps tens of millions per location. Is this expense justified, given the already challenging retail climate and the competition from online retailers?

Dr. Evelyn Reed: It’s a significant gamble, there’s no doubt whatsoever. But renovation is unavoidable.Many of these former Hudson’s Bay stores have suffered from years of deferred maintenance. Addressing issues like broken escalators and outdated HVAC systems is essential for creating a positive customer experience. The investment is justified if it translates into a differentiated and relevant retail offering that can compete with both brick-and-mortar and online retailers. However, she better do so quickly before landlords seek other options.

time.news: Speaking of competition, how can Liu’s new department store differentiate itself and attract customers away from established players like Simons, Nordstrom, and the convenience of online shopping?

Dr. evelyn Reed: Differentiation is paramount. Trying to be “another department store” is a recipe for failure. Liu needs to cultivate a unique identity, perhaps by focusing on a specific niche market, a curated selection of brands, or a truly immersive shopping experience. Think along the lines of themed entertainment or retail-tainment which are emerging post-pandemic. Incorporating elements of entertainment, dining, and interactive digital experiences can create a destination that draws customers in and keeps them engaged.

Time.news: Sourcing supplier relationships is critical, but suppliers have already been burnt by Hudson’s Bay’s struggles. How can Liu reassure suppliers and build trust?

Dr. Evelyn Reed: Clarity and a strong financial foundation are key. Liu needs to demonstrate a solid business plan, a clear understanding of the market, and a commitment to fair business practices. She needs to actively communicate with suppliers, address their concerns, and build mutually beneficial partnerships. Honouring outstanding payables from Hudson’s Bay whenever possible will also boost trust and good-will from suppliers.

Time.news: The article mentions Liu’s commitment to hiring former Hudson’s Bay employees. How significant is this human element in her revitalization strategy?

Dr. Evelyn Reed: It’s a smart move on multiple levels. First,it’s socially responsible,offering a lifeline to experienced retail professionals.Second, it gives Liu a workforce with deep knowledge of the department store model and customer service. However, retention will be a challenge, as many former employees may have already moved on. Liu needs to create a compelling work habitat, offer competitive compensation, and provide opportunities for professional growth to retain top talent.

Time.news: drawing inspiration from overseas department store models, as the article suggests, and incorporating elements like supermarkets, restaurants, and entertainment, that looks like she’s attempting to make retail destinations. How realistic is this vision?

Dr. Evelyn Reed: It’s ambitious but potentially transformative. The moast successful international department stores aren’t just places to buy things, they’re destinations for leisure and entertainment.They offer a range of services and experiences that cater to diverse needs and interests. This creates a more engaging and lasting relationship with customers, encouraging them to spend more time and money. The Canadian market is ripe for innovation, and Liu’s vision aligns with the direction retail is heading. But it requires careful planning, flawless execution, and a deep understanding of the local market.

Time.news: Great insight. Thank you for your time, Dr. Reed

Dr. Evelyn Reed: My pleasure.