Introduced in 1961, Canadian Tire's loyalty program has been extremely popular and a highly successful way of reinforcing its brand in the consumer's mind. Personally, I remember collecting Canadian Tire money in earnest when I was younger, and many people still have drawers with the loyalty money stored in it for some future purchase. Sometimes, Canadians abroad have even been known to use it in in place of Canadian currency to buy goods from unsuspecting vendors.
Canadian Tire's vice-president stated that the money will not be eliminated in the foreseeable future, but the writing seems to be on the wall now. Other highly successful loyalty programs like AirMiles, PC Points, Aeroplan Miles, Shoppers Optimum Points, and Petro-Points are all handled via Point-of-Sale terminals and plastic cards. Electronic rewards programs are far more effective for marketing purposes because the purchases and buying habits of each customer can be stored and analyzed to help the store serve and target-market each customer segment more effectively. With the current Canadian Tire loyalty program, this valuable information is lacking. In addition, the processing, production, and transportation of the paper loyalty program simply costs the company more to operate than an electronic system without the key benefits of a loyalty program like PC Points or Optimum Points.
As an intelligent investor, it is good to see your business developing better and more efficient methods of attracting and retaining customers. Shoppers Drug Mart (TSE: SC) and Loblaws (TSE: L) have already realized the benefits of an electronic loyalty program, it is about time that Canadian Tire decided to do the same. Other elements of Canadian Tire's business have also been doing well, in particular its finance business, which has grown a great deal in the last 5 years. In addition, it has largely been able to resist the Wal-Mart effect on its bottom-line and kept most other competitors at bay due to its strong association with seasonal activities like hockey and barbecuing in the eyes of the Canadian consumer, as well as an excellent automotive business. To be sure, as a limited element of a portfolio, Canadian Tire is a quality choice. It has very low debt levels and a fair amount of assets in the form of property and cash holdings.
For more information on this topic, just go to:
Below is Canadian Tire's Assets and Debt Levels, Excellent for a Retailer: