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Hudson’s Bay Company: From Fur Trading to Retail

When you think of department stores, you probably think of elevator music and holiday sales. You probably don’t think of frontier warfare, forbidden romance, and the rugged heroes of Manifest Destiny, but maybe you should, because today we’ll be looking at the Hudson’s Bay Company.

The Fur Business

The Hudson’s Bay Company is best known today as a Canadian retail conglomerate. It owns department store brands like Lord and Taylor, Saks Fifth Avenue, and of course Hudson’s Bay. HBC has stores all over Canada, the US, and parts of Europe with annual sales of almost 7 billion Canadian dollars, but it didn’t start out that way. In fact, it started before department stores even existed, all the way back in the tail end of the 17th century.

In 1659 two French fur traders got a tip from the native Cree that Hudson’s Bay was a rich opportunity for fur trading.

They sought backing from the French, who controlled the Canadian fur trade at the time, to set up a Fort in the Bay to reduce the costs of transporting their goods. After being refused, they set out anyway and upon their return, they were arrested for trading without a license. They were fined and their furs were confiscated by the government (not the optimal start), but still, they were convinced that the Bay was the place to be for a fur trader looking to strike it rich.

King Charles II

Stonewalled by the French, they approached a group of Boston businessmen looking for investments and with the help of their benefactors, they set out to England to secure more support. In 1670, King Charles II granted the group a trading charter and incorporated their venture as a governor and company of adventurers of England’s trading into Hudson’s Bay. Charles’s cousin, Prince Rupert, was installed as the company’s first governor.

Building a Multicultural Empire

They were granted nearly one and a half million square miles of Canadian territory to explore, including modern-day Ontario and Quebec. The Canadian fur trade was heating up by that point, but the region was still fraught with danger and the constant threat of warfare. The HBC relied on native trappers to supply many of their pelts, but various native tribes were often at war with one another and expeditions had a tough time making it back to the trading forts which were concentrated in the Bay without being attacked by rival tribes.

Henry Kelsey, a Hudson’s Bay apprentice who would later become company governor, made serious inroads with the local Cree, learning their language and adopting their customs in an effort to promote peace among the tribes. In fact, Hudson’s Bay employees integrated quite often into local Cree culture.

Henry Kelsey on the western plains

Many HBC traders married Cree women and had children, known in local parlance, as half-breeds. This was of course considered illegal by the company, but it happened nonetheless.

Eventually, the HBC eliminated its regulations against intermarriage and the children of these mixed-race couples became employees of the company. It wasn’t just the local native tribes that presented a problem for the HBC though…

Expansion

Skirmishes with the French forces looking to establish dominance in the fur trade were a fact of daily life for much of the HBC’s first century. In 1759 however, in the middle of the Seven Years’ War, the British defeated the French at the Battle of Quebec. The French abandoned their nearby forts, but French allied native tribes refused to recognize British authority, burning several forts until King George III signed a treaty that established land outside the trapping grounds as protected territory for the First Nation people.

But all this competition only forced the HBC to expand, especially as they strove to outpace their economic rival, the Northwest Company, which employed a legendary trapper named Alexander Mackenzie, who once covered a round trip of 3200 miles in just over a hundred days. That’s more than a marathon every 24 hours. Beating a guy like that is pretty good motivation to expand and so they did.

The First Nation

The next big hurdle for HBC was the gold rush of 1849. As 40,000 laborers looking to get rich came West, the massively increased demand made basic goods almost unaffordable. The price of unskilled labor, for example, doubled.

The profits from gold mining offset this enough to keep things profitable, but new tax and customs laws were a huge inconvenience for HBC. Their ships, for example, had to sail an extra 350 miles off course just for inspection. In 1881, HBC created its first mail-order catalog, the start of which would become its multibillion-dollar department store business, but the 20th century is when the retail arm of the Hudson’s Bay Company really started expanding. After all, it was a natural extension of their experience with trading posts updated for the modern world.

Leveraging the Trading Experience

Their trading posts, by the way, were so successful that now major Canadian cities sprung up around them like Winnipeg and Calgary. In 1926 HBC entered the oil and gas business, which persisted throughout a good chunk of the century until the crashing oil prices of the 1980s, but as urbanization and rising consumerism of the 20th century continued to grow, it was HSBC’s investment in retail that kept paying off.

By that point, its share of the fur trade had dwindled to almost nothing and it was a target of consistent attacks by anti-fur advocates leading the company to sell off its line of fur auction houses and to abandon the (fur) trade completely.

Jerry Zucker bought HNC for just $15 per share

But while the retail division was soaring above its American rival Sears, in 1994 another American giant entered the Canadian market: Walmart. An all-out pricing war developed between the Walton family superstores and HBC’s discounter, Zellers.

In just three short years, Walmart gained a 45% market share outpacing Zellers. HBC’s answer was to invest in much larger Zellers locations, and they even purchased all the Kmarts in Canada. Zellers was rebranded as a more upscale discount store closer to Target than Walmart, and it’s historically lousy customer service was actually improved, but low sales persisted. By this time, e-commerce was just starting to become a viable market and HBC quickly jumped on board with hbc.com.

The existing competition, however, was just too much. Sales remained stagnant and the stock price began to plunge. In 2005, South Carolina billionaire and takeover artist, Jerry Zucker launched a hostile bid, eventually winning the company for just over 15 Canadian dollars per share, but he died in 2008, leaving the company in chaos just in time for the great recession.

Zellers locations were either sold off or leased out to Target Canada, which declared bankruptcy in 2015. As you can imagine with Amazon knocking on the door, the HBC’s management isn’t very confident. In February 2017 they tried to sell out to Macy’s, but with decreasing profits and an increasingly uncertain future, it probably won’t be long before the Hudson’s Bay Company joins the fur business in the history books.

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