Nature's Own Medicine: Expanding into the Canadian Market

A Market Opportunity?

Major Case Study: Nature’s Own Medicine (NOM) Introduction When award-winning specialty retailer Nature’s Own Medicine (NOM) started exploring the possibility of expanding its operations into the Canadian market in 2013, it already recognized the attractiveness of the robust retail industry in the country, particularly the health and wellness category. The natural supplement market is a growing $3 billion industry in Canada, which sees 70 percent of Canadian citizens taking supplements on a regular basis. The company also understood that there was clearly plenty of room for another retailer of vitamins and health products to play. The questions they had, however, were far more philosophical in nature. “We kicked off the official business effort internally about 18 months ago,” explains their director of business development Mr. Balbale. “There were two key questions that we asked initially. We first wanted to identify whether or not there was an opportunity for us to really create a compelling offering to the customer based on what our core values are—assortment, knowledge, and value. And the second was, do we have the organizational breadth internally to successfully execute against the opportunity?” A Market Opportunity? To answer its first question, the company, which branded itself as Nature’s Own Medicine for the Canadian market, didn’t have to look any further than its product. It conducted a review of the competitive landscape in the country and identified a real opportunity to bring a unique offering to Canada. “We view ourselves as a single destination in the market that serves the entire family,” explains Balbale. “We carry not only vitamins and supplements focused on the health-conscious consumer, but we also carry a strong line of sports supplements focused on the active consumer.” Whether the NOM customer is looking for gummy multivitamins for their kids, basic fish oils and supplements, or more obscure herbs for those people becoming more conscious about taking care of their health in specific ways, Balbale believes that the supplement retailer has it all. Organizational Strengths and Capabilities However, he points out that the product is only the beginning of the NOM experience. “The level of assortment and breadth that we offer is unique to the market,” he says. “That comes with a level of service and knowledge that engages the customer in conversation and imparts product value.” And because of this, NOM’s store associates, called “health enthusiasts,” are core to what the company is and what they do, which is serve customers. “We want to amaze our customers by impressing them by the level of engagement offered in our stores. We want that to be our differentiator.” Retail Sales Management V1.17 Business Administration Diploma Page 2 of 4 NorQuest College To achieve this, the company knew that it needed to hire the right people—people who would believe in what the store stands for and become ambassadors for its products and values. It also knew that it could not stray from its objectives during the recruitment process. “We hire on three filters—empathy, knowledge, and passion—and we never compromise on these core attributes when searching for talent,” he says. “But we’re particularly mindful of hiring people who want to serve customers and who are enthusiastic about good health and about nutritional education. We’ve found that if we hire with these criteria in mind, we get great people who are tremendous for our brand.” In its search for the right associates, the company talked to a lot of people and posted on job boards. But there was a very active aspect to its efforts, which included visiting nutritionist colleges and job fairs associated with nutritionist colleges to find talent. The company asked for recommendations from its suppliers and vendors in Canada, and also scoured LinkedIn to see if it could find interested people connected to the industry. “In the end, we just talked to as many people as we possibly could,” says Balbale. “And we’re really pleased to say that we found the right people who fit our profile and who are enthusiastic about the opportunity.” The right people with the right attitude and knowledge level were hired to join the Canadian team; however, their journey was just beginning. NOM invited senior members of its store team, including the district manager and store managers, to spend three weeks in The Vitamin Shoppe’s Buffalo stores close to the border to impart the softer cultural side of what the company is and what it aims to do. The team then entered into a sophisticated year-long training program that the company developed. “We call it Nature’s Own University. It’s an online training program that provides our health enthusiasts with the tools to become more knowledgeable and improve their customer service abilities.” The training combines online curriculum with in-store training exercises that focus on three things: (1) building category health knowledge, (2) building specific brand and product knowledge, and (3) focusing on developing empathetic customer engagement skills. Time is scheduled for each team member to train during store hours to complete three modules, each with three levels of learning within them, with a test at the end of each module and level. The training program has been very well received by the retailer’s health enthusiasts as it prepares them to properly offer the service that NOM is building its brand on. And, what’s more, the company has instituted a pay-for-knowledge program in which individuals receive an increase in pay for each level that they pass that’s commensurate to the score with which they passed. “Our store health enthusiasts really appreciate the program because it has real incentives for them to excel and grow and learn with the company,” points out Balbale. “We think it provides the right feedback for all of the personal investment that our store health enthusiasts put into the company and serving our customers.” Aside from the customer and the health enthusiasts that serve them, the company also had to examine its internal breadth that Balbale speaks of to ensure that challenges related to expansion into Canada were met head on. BUSD 2021 Major Case Study Business Administration Diploma Page 3 of 4 NorQuest College “This was our first expansion outside the United States, and so we faced internally the challenges that any company does leaving its native market,” explains Balbale. “We had to learn everything from managing multiple currencies, how to identify and comply with local regulations, whether it be financial or human resources related, finding local partners, our legal counsel, marketing partners, and folks that could build a construction for us and put our fixtures together in our stores.” The company tackled these challenges by making the expansion a company-wide effort. According to Balbale, NOM and its American parent NOM USA are both internally very operationally focused and have a pretty collaborative culture. The combination allowed them to tackle the challenges as they arose by making each of its business units responsible for delivering their respective solution in Canada. “We worked really hard together to make sure that where those business units overlapped, we really understood the nuances and requirements so that we could deliver an exceptional experience for our Canadian customers.” What was most challenging for the company, however, was in developing operational processes that differ from those that they employ in the United States. Differences in the Canadian Market “In the United States, we’re a 582-store chain,” says Balbale. “We have our own distribution centres, and we have all of the vendors ship to our distribution centres, which we then ship out to our stores. In Canada, because of our smaller scale with two initial stores, we chose to develop a direct-to-store delivery supply chain model.” The direct-to-store model involves product coming into the store that needs to be opened, counted, and audited, with all information communicated back to the vendor. Balbale admits that the process is not perfect, allowing too much room for error on both the store and vendor sides, but that they are working through the challenges. Another challenge faced by NOM in Canada, and another reason to implement the direct-to-store shipment of product, is in addressing challenges posed by Health Canada regulations, which differ significantly from those south of the border. In Canada, retailers offering supplements and other health food and vitamin products are required to sell only products that have been registered with Health Canada and that have received what’s called a national product number. In addition to that, the full chain of control from manufacturing to delivery of product to the store needs to be licensed by Health Canada. “In order to comply with Health Canada regulations, we’re working primarily with Canadian distributors—over 80 percent of our product is sourced locally.” This decision, however, was not only to simplify the sourcing strategy and to reduce the number of imports, but to ensure that NOM is a truly Canadian brand and Canadian distributor. “It’s a decision that we’ve come to be really proud of,” says Balbale. “We’ll continue to monitor our stores and will continue to listen to our customers. If there are gaps within our assortment that we can’t fill from within Canada, we’ll find brands and products in the U.S. to help strengthen that assortment. But we’re really proud of the fact that NOM is a Canadian business. One that supports other Canadian businesses.” And the decision to partner primarily with Canadian manufacturers was also made easier due to the fact that the company already had great relationships with Canadian vendors from their work in the U.S. Retail Sales Management V1.17 Business Administration Diploma Page 4 of 4 NorQuest College “We’ve had some really great relationships with Canadian brands even before we entered the market. They actually helped us in understanding their view of the market and have been incredibly helpful to us in providing market insight and advice. The Future This really helped strengthen our relationship with them, and it continues to provide already strong Canadian brands with opportunities in our stores in the United States. We really look to our suppliers and vendors as business partners and work together to make both of our businesses better.” NOM opened its first stores in Canada, both in the Greater Toronto Area, in January 2014. And though it may be too early to tell exactly how the company is being received by its Canadian consumer, Balbale is extremely optimistic concerning the progress of the stores. “We’re here for the long run. We plan to open additional stores later in 2013 and 2014 and are looking at real estate actively. Vancouver certainly is an exciting market for us to go next. It has a particular focus on health and wellness which in some ways looks a lot like the West Coast in the United States. But right now, we’re focused on building out Toronto and building enough scale to support our brand and the infrastructure in Canada.” Case study used with permission from Levy, M., Weitz, B., Watson, D., & Madore, M. (2017). Retailing management (5th Canadian ed.). Toronto, ON: McGraw Hill Education. Case Studies, pp. 546–548 Assignment Instructions Use the "Major Case Study" Forum to locate a partner. Have one partner inform your instructor of who is on your team and who the team lead of the partnership is. Read this case study: The Last Days of Target on Page 515 of the textbook. As a team, answer the following questions while adhering to the rubric: Using the 7 P's marketing mix model, analyze each P in terms of Target's move to the Canadian market. Indicate what went wrong with each of the seven marketing mix components. Should Gregg Steinhafel, CEO of Target, have opened all 124 stores at once? Why or why not? What was Steinhafel's rationale for opening all 124 stores at the same time? You are the CEO for Target. What would you have done to ensure a smoother transition to the Canadian Market? Make sure you elaborate on your rationale. When you are ready to submit the assignment, click on the Add submission button at the bottom of this screen. Either drag-and-drop your file to the indicated area or click on the Add... option and select the file you wish to submit. 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