Roots Corp. has a strategy that it expects will differentiate it from other retailers while attracting milliennials and others who want to personalize their clothing.
The Toronto-based chain (TSX:ROOT) is rolling out a series of what it calls “enhanced experience” stores, with the third one in the world launching at Vancouver’s Pacific Centre on November 8.
Customers at the new store, which is within one kilometre of two Roots stores on Robson Street, can go to a kiosk and tell employees how they would like to have their clothing customized. Staff will then work with the customer to provide the desired colour combinations, distinctive buttons or message inscriptions sewn on jacket liners.
The customization won’t be done entirely online because, at least initially, Roots wants employees to ensure that customers are sure about their creations. The clothing will then be made in Toronto and shipped to the customer within three weeks.
It is Roots’ bid to compete in an increasingly challenging retail market, where online merchants are opening stores and all retailers are forced to up their game to lure customers. Nike Inc. (NYSE:NKE), for example, already allows consumers to customize shoes.
Roots’ move follows its disappointing initial public offering (IPO) on October 25 and has analysts speculating on whether the IPO was too early.
“I wonder if it would have made sense to do more of a rollout of the new concept stores before the IPO launched, but obviously, from a financial perspective, they had other ideas,” Retail Insider Media owner and retail analyst Craig Patterson told Business in Vancouver.
He believes that had investors had a better sense of Roots’ “enhanced experience” stores, they might have been more excited about the company.
Roots’ shares went public at $12, which was the low end of a forecasted range. Shares then plunged more than 16%, to close at $10, on the first day of trading, and continued to fall another 14% before rebounding somewhat.
(Image: There is a custom-order kiosk near the front of Roots' new Pacific Centre store | Glen Korstrom)
“Trying to predict what the stock market is going to do on any given day I’ll leave for experts because I don’t think anybody’s done it yet,” Roots CEO Jim Gabel told BIV while lounging in a plush chair at the company’s new Pacific Centre store.
“The IPO is another major step for us as a company to unlock the potential of the brand.”
The good news for Roots is that the company is flush with cash, he said, and it does not need the approximately $200 million it raised in its IPO to embark on an ambitious three-year expansion strategy.
The Roots brand has a deep association with Canada, and Canada will be where much of its expansion in the next three years takes place. Gabel expects to open 10 new Canadian stores during that time while renovating another 18.
The U.S. could see a quadrupling in its number of Roots outlets.
Roots operates only four stores in the U.S., and the stores are in relatively obscure locations, such as Park City, Utah, where Roots founders Michael Budman and Don Green like to ski, and the Detroit suburb of Birmingham, Michigan, which is close to where Budman and Green grew up.
Gabel plans a cluster strategy where Boston and Washington, D.C., each get three stores: one centrally located enhanced-experience store and two others farther out from the core. Chicago and Philadelphia will be the next cities to get stores.
“We ship to all 50 states through Roots.com, and have for almost two decades, so we have a heat map of where our customers are.”
Gabel added that the Greater China region is where most Roots stores are and that region will also see some growth.
A Taiwanese customer 20 years ago was so enthralled with the brand that he wanted to open stores in his home country. That led to Roots having 20 stores in the island republic by 2006, when China’s Li & Fung Group took over operations and expanded Taiwan operations to 109 stores and added more than 30 in mainland China.
“It’s a partnership,” Gabel said. “Roots gets a high single-digit percentage as a royalty on sales.”
Roots also gets to approve all Asian store locations and store designs while Li & Fung must exclusively buy Roots products for those stores.
“We will expand with Li & Fung in 2018 into Malaysia and Singapore where Li & Fung already has operations with other brands.” •
