Sandy Silva is director of fashion and apparel at The NPD Group
This week, Roots Canada announced that it was selling majority control of its iconic Canadian business to Searchlight Capital Partners LP, an investment firm with offices in Toronto, New York and London. The company, founded in 1973 by Detroit natives Michael Budman and Don Green, has had immense success touting apparel that is unmistakably Canadian. While the company's beaver logo has become a staple in the Canadian fashion industry, the news suggests that Roots is increasing its focus on international expansion in an effort to compete in today's truly global economy.
In many ways, the move is not surprising. Retailers everywhere are being forced to adapt continually to the high-pressure global landscape. As a brand, Roots faces many challenges, including its aging consumer base, a saturated domestic market and constant margin pressure, given its ongoing commitment to keeping a portion of its manufacturing process in Canada.
While these factors represent real and undeniable challenges, the Roots brand is strongly positioned for international success. It is also worth noting that the company's strategic focus on international expansion is not necessarily new – Roots has worked diligently over the past decade to ensure that its unique focus on "rustic luxury" resonates strongly with consumers in international markets. Of the current 245 brick-and-mortar Roots stores, the majority (125) are located in China and Taiwan, more than the 115 stores in Canada itself. (There are also five in the United States.) Given the company's success in these key international markets, it's not hard to see why the focus going forward will probably be to continue to scale the brand in key markets abroad.
While establishing brick-and-mortar locations in specific markets will surely be a focus, the company must also seek to boost its e-commerce capabilities. According to recent reports, e-commerce accounts for about 10 per cent of Roots sales, which is in line with the industry average.
Recent research suggests that online purchasing is increasing in popularity with consumers both in Canada and around the world. According to the NPD Group's fifth annual E-commerce Channel Report, 75 per cent of Canadians have purchased an item online in the past six months. Furthermore, online buying visits grew 10 times more than at brick-and-mortar locations over the past 12 months. E-commerce growth is largely being driven by companies that offer innovative online features such as free or reduced shipping and hassle-free return policies. Consumer trust in online security features has also increased over the past three to five years as new options continue to make payment more secure and convenient.
While e-commerce represents a unique opportunity for retailers looking to expand globally, purchase barriers still exist. One of the most significant is, and has always been, the cost of shipping. Consumers in the NPD Group's E-commerce Channel Report also suggested that the inability to see a product in person and worries about returns and exchanges were significant deterrents to online shopping.
There have also been some interesting changes in the demographics of the typical online shopper that bode well, given Roots's target consumer. Unlike previous years, 18- to-34-year-olds are just as likely to shop online as 35- to-54-year-olds. Furthermore, higher-income households are almost 20 per cent more likely to shop online than lower-income households. Online shopping also provides a unique advantage when it comes to product availability in markets where traditional brick-and-mortar locations are not accessible.
All of which is to say that providing access to products is one thing; attracting and retaining customers is another. As Roots continues to develop its international expansion and e-commerce efforts, its success will rely heavily on the brand's ability to build strong localized consumer relationships in markets outside Canada.
In a world in which the consumer retail experience is increasingly accessible 24 hours a day through the click of a mouse, retailers have more opportunities than ever before to engage with shoppers and convert them into customers. Whether Roots succeeds in its efforts to sell Canadiana abroad will depend largely on how well it develops relationships with consumers both in-store and online. Whatever the approach, it will be interesting to see how Searchlight Capital Partners embraces this traditional notion of Canadiana in an effort to keep this iconic brand strong both in Canada and around the globe.