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The Zellers Story

Zellers visual identity, circa 1962

Zellers visual identity, ca. 1962

In 1931, Walter P. Zeller, a native of Kitchener, Ontario, bought the 14 Canadian stores of American retailer Schulte-United. By so doing Zeller in effect bought back some of the very stores he had sold Schulte only a few years earlier when he had agreed to sell his company in order to allow their expansion into Canada. During the few years that Schulte operated in Canada, Walter Zeller was the manager of their Canadian operations. When the depression hit, Shulte-United went bankrupt and Zeller saw a great opportunity to own his stores again. Zellers was incorporated in 1931. Stock was moved around, new people were hired, the Schulte-United signs were taken down and replaced with shiny new Zellers signs and the converted stores re-opened for business in 1932.

Right from the start, Zellers launched an aggressive growth program. In its first year of operation 12 stores were in operation in south western Ontario, Quebec and New Brunswick. Of these 11 were former Schulte-United stores and one, in Kitchener, was a brand-new Zellers. Within the next 25 years this number had grown to 60, the company's revenue had expanded by a factor of more than 20 (from just over $2 million to more than $43 million) and its workforce had increased to over 3,000. Zellers marked its 25th anniversary in 1957 (when its 1956 results were announced) and while it was a year of celebration for all these successes, there was also cause for grief. In line with company policy Walter Zeller had retired from Zellers in 1955 at the age of 65. With great sadness his death was reported in 1957, tarnishing an otherwise record-breaking year for the company he nurtured so well.

Zellers store front, ca. 1942

Zellers store front, ca. 1942

Seldom has a company succeeded as well under its founder as did Zellers under Walter P. Zeller. Truthful to his deep convictions, Walter Zeller had always given his employees every opportunity had amply rewarded their hard work. Thus, after only 10 years in existence, and in the midst of the Second World War, Zellers introduced its first Group Life Insurance and Group Pension Plans. This generosity paid off: in 1943 the company had its first $10,000,000 year. Meanwhile the chain's offering of "quality goods at low prices" continued to ensure the company's health.

Zellers was proud of the success its growth strategy had yielded in driving up earnings and profits. For the first 20 years of its existence the company made reasonably good progress, despite the fact that WWII prevented the opening of any new stores. In 1952, the company, which itself had begun thanks to a takeover, made a strategic move into Eastern Canada through the acquisition of Federal 5-10-15¢ to $1.00 Stores. More than a dozen stores were immediately added to the Zellers portfolio, most of which were immediately converted to Zellers. It was decided to keep operating some as Federal stores, at least until their leases ran out. The last Federal store closed around 1962.

While Zellers was expanding through its acquisition of the Federal Stores chain, it also concluded a deal with the W.T. Grant Company, a much larger American retailer operating stores very similar to its own. The Grant Company was allowed to purchase 10% of Zellers common shares, and was given options that eventually translated into a 51% effective ownership of Zellers in 1959. In return for this, the "Grant Company [was] making available to Zellers its experience on matters of merchandise, real estate, store development, and general administration". This arrangement greatly benefited Zellers. Employees were sent to Grant stores and head office for training and together they made common buying trips to the Orient, a practice that benefited both companies.

Walter P. Zeller, n.d.

Walter P. Zeller, n.d.

The period 1952 - 1976 was a very good one. Sales climbed from $27 million in 35 stores to $407 million in 155 stores. Zellers made forays into a number of non-traditional areas, and adopted some of those innovations. The year 1960 was notable for such changes: the opening of the first in-store restaurant, the Skillet; the first auto-centre; the first store in a suburban mall. With the dramatic expansion of the Canadian suburbs and the consequent transformation in retailing in the post-war years, it is sometimes easy to lose sight of the fact that Zellers, like most mass merchants, began its business in the downtowns of yesterday. These retailers simply followed their customers when people began to move towards the outskirts of our cities.

But the "suburbanization" of Zellers did not stop the company from also staying firmly anchored at the centre of the cities where it had a presence. In 1956 Zellers opened its first fully self-service establishment at the Norgate Shopping Centre in St. Laurent, Quebec. As Jack Carson, the manager who was entrusted with this big opening, recalled:

The opening was pretty hectic, as most openings are, and we didn't have enough cash registers and the lines went to the back of the store. Mr. Zeller stood there talking to me for 15 to 20 minutes. Even the Vice President of Operations was operating the jewellery counter cash register and you can imagine the confusion (laughs); it was all hands. They started calling it quick service rather than self-service. Mr. Zeller's only comment was: "You call this quick service? There is a line to the back of the store!"

The year 1976 was a tumultuous one for Zellers. The Grant Company withdrew from Zellers and Fields Stores Limited won a bid to control the Company. Headed by Joseph Segal, Fields, a clothing retailer founded by Segal in the 1950s, became majority shareholder. This situation, however, was completely turned around within a few months when Zellers effectively reversed the takeover and made Fields into its own subsidiary, adding Fields 70 stores to its portfolio along with Fields' subsidiary Marshall Wells and its 162 franchised hardware stores.

Cover of Zellers Forum, September 1974

Cover of Zellers Forum, September 1974

But for Zellers the rocky 1970s were not yet over. In 1978, in a bid to expand its reach and diversify its activity, Hudson's Bay Company became sole owner of Zellers. Hbc was keen to maintain Zellers as a separate division in order to reach a broader customer base.

As part of Hbc, Zellers maintained its fast growth and quality service. In terms of revenue Zellers hit the $1 billion mark in 1983, passed the $2 billion in 1989, and had over $3 billion by 1993. The company continued its strategy of growth through store openings and acquisitions.

In 1991 the numerous locations of Towers Department Stores, founded in 1967, were merged with the company's operations. Following Hbc's takeover of Vancouver-based Woodward's in 1994, some stores were converted to Zellers while the others were integrated with the Bay. A similar situation unfolded when Hbc acquired the Canadian stores of the American retailer Kmart in 1998. The following year Zellers relocated its head office to Brampton, Ontario, in the building formerly housing Kmart Canada's head offices. It is interesting to note that until 1996 Zellers Head Offices had always been in Montreal, even though the company did not have a store in that city until 1952!

 

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