BusinessMEC to open shops within select Hudson’s Bay stores to expand reach

MEC to open shops within select Hudson’s Bay stores to expand reach

Customers shop inside MEC Canada’s flagship store in Vancouver on April 9, 2021.DARRYL DYCK/The Globe and Mail

Outdoor store chain MEC is partnering with Canada’s oldest retailer in a bid to reach more shoppers, by building “shop-in-shops” in Hudson’s Bay Co. department stores and selling products on the Bay’s website.

MEC shops will open in three Bay locations in Toronto this fall, with plans to build more in other markets such as Quebec and British Columbia next year. The arrangement, announced on Tuesday, marks the first time Mountain Equipment Co. has sold goods through another retailer.

“The opportunity to partner with the Bay was great in terms of exposure, but also allowed us to get into markets quickly where we’re really under-represented,” MEC chief executive officer Eric Claus said in an interview. While two of the chain’s 21 stores are already located in Toronto, MEC was looking for ways to reach more customers in the city, as well as suburbs such as Mississauga, where the Bay’s Square One location will play host to one of the shop-in-shops.

While MEC is looking for more retail space, Hudson’s Bay has been paring some back. The company has closed down four Bay locations since going private in early 2020, and now has 84 stores across Canada. And Hudson’s Bay has been looking to “modernize” its sprawling department store properties by repurposing some of that space for other uses, such as offices and restaurants. While shop-in-shops are nothing new for the Bay, the MEC arrangement is part of this overall strategy.

“These kind of partnerships become super valuable and critical as we look at where we’re repurposing and how we’re allocating space,” Hudson’s Bay president Wayne Drummond said. “ … How these partnerships play into our whole real estate [strategy] and maximizing our square footage is critical.”

MEC will also sell products on the Bay’s e-commerce “marketplace,” which allows third-party sellers to list items on theBay.com, while handling their own shipping and customer service.

MEC’s shops at Bay stores will be between 7,000 and 11,000 square feet, and will stock outdoor clothing and footwear, as well as gear such as tents, coolers and sleeping bags. (Because of space constraints, some items such as bikes and skis will not be available.) MEC will sell its own private-label branded products, as well as products from other brands including The North Face and Salomon. Neither company would disclose the financial terms of the partnership.

“It really opens up for us a brand new category of business,” Mr. Drummond said. “ … We trade in the style end of active sportswear, but where we aren’t is in that whole technical, outdoor lifestyle.”

MEC was founded as a co-op 51 years ago, but after years of struggling financially, it filed for creditor protection during the pandemic. MEC sold to California-based private-equity firm Kingswood Capital Management in September, 2020, in a contentious deal that some co-op members fought. The new management has been working to turn around the business since.

“We’re looking to grow. This is part of a really sound strategy to responsibly grow the business,” Mr. Claus said.

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