Analysis: Rona looks outside the big box for a turnaround

Sun Jul 22, 2012 5:12pm EDT
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By Allison Martell

BOUCHERVILLE, Quebec (Reuters) - Rona Inc, Canada's home-grown answer to Home Depot Inc and Lowe's Cos Inc, has built its turnaround plan around a bold theory: the golden age of the big box store is ending.

For years, Rona organized its business around cracking the big box market. Now, facing sluggish consumer confidence and smarting from falling sales at established stores, it is closing or splitting up 23 of its 79 biggest outlets.

Luc Rodier, Rona's executive vice president for retail, says the novelty and excitement of bigger formats has worn off for consumers, and the performance of Rona's smaller stores shows customers want to shop in smaller outlets, closer to home.

Under a strategic plan announced in February, Rona is opening more "satellite" and "proximity" outlets that run 5,000 to 35,000 square feet, rather than the 100,000 square feet-plus found at most big boxes.

"A nice 100,000 square feet at peak season, it's phenomenal. At low season, it's a big box," Rodier says. "It's a big building."

He says shoppers can get lost in such a big space, and that's a turn-off.

"I can put 60, 70 people on the floor and you'll say, there's nobody here - when we know that our customers are looking for expertise and service."

At stake is Rona's slender lead over Home Depot in Canada. According to its own data, last year it still held the largest share of the hardware and home improvement market at 19 percent, ahead of Home Depot's 16 percent.   Continued...

Robert Dutton, president and chief executive officer of Rona Inc. speaks during their annual general meeting in Boucherville, Quebec, May 9, 2012. REUTERS/Christinne Muschi