One-fifth of Lee Valley Tools business is direct to U.S. customer sales. But with U.S. tariffs, it’s hard to predict what will come next.
Jason Tasse, the president and chief operating officer of Ottawa’s Lee Valley Tools, would love to be able to apply an old woodworking adage to the prospect of American tariffs: Measure twice and cut once.
In other words, be very sure about your next move before you make it.
But in these turbulent economic times, it’s impossible to predict what will come next, and that’s a challenge for any Canadian company, particularly one that does business in the United States while Donald Trump is in the White House.
“No company likes volatility,” observed Tasse in an interview. “You can plan effectively in a stable environment but in a volatile environment, the risk is ten-fold. You’ve got to be very cautious, and it’s pretty hard to measure the unknown right now.”
Lee Valley was founded in 1978 by Leonard Lee, a public servant, as a mail-order business that sold do-it-yourself stove-making kits. Over the years, it grew into a multi-million dollar enterprise, with 18 stores and an e-commerce site offering a curated selection of woodworking tools, gardening implements, kitchen gadgets, hardware and gift items, and Leonard’s son, Robin, in the CEO chair.
These days, about 20 per cent of its business consists of direct sales to U.S. consumers, Tasse said.
In addition to the retail sales is a manufacturing arm, making the company doubly vulnerable to the expected tariffs. The Trump administration has not only threatened a 25 per cent tariff on Canadian goods coming into the States but also proposed a separate tariff on steel, a raw material used in the manufacture of tools.
The Canadian goods tariff is expected to come into effect March 4, while the 25% tariff on imports of steel and aluminum products from all countries is expected by March 12.
Evening Update
For now, Tasse said the strategy is to stay focused.
“Any time when you have sweeping and highly disruptive policy changes that affect supply chains, global trade and standard business operations, the best thing you could do is build organizational capacity to respond,” he said.
“Of course, you want to do some scenario planning but scenario planning can only go so far,” he added. “You could turn your organization upside down trying to anticipate the impact. You have to focus on the actual change and not the rhetoric.”
Another Ottawa company that does business in the United States is Calian Group, a consulting company founded in 1982 by former Ottawa mayor Larry O’Brien and now run by CEO Kevin Ford. A publicly traded entity, Calian does about 22 per cent of its business in the U.S., mostly involving the provision of services, but only about 5 per cent is likely to be subjected to tariffs, Ford said.
Still, the uncertainty has Ford plotting a strategy based on a five-prong approach, which he outlined in a recent interview. The first step is to assess the level of U.S. sales affected, and secondly, examine the supply chain to determine if any parts of it will be vulnerable to either the proposed tariffs or retaliatory tariffs.
“Are you manufacturing any parts in China or the U.S. to incorporate in products in Canada? You’re definitely going to have to dig into just where your parts are coming from,” Ford said.
The third point of his analysis is the general impact of tariffs on the economies of the countries in which business is conducted, taking into account the potential hit to both employees and customers.
“As a business leader, you have to be conscious of how your employees are feeling about all this,” Ford said, giving the example of how the cost of living soared during the pandemic and people were spending more on food. It’s important to “try to determine the impact on their buying behaviour, and then see how we can help our customers get through this as well.”
Ford’s fourth action item is to review procurement practices with a mindset to support Canadian suppliers, a tactic he urges the federal government to adopt, too.
“It’s time for the government to lead,” Ford said. “I’m hoping this is a time for our government to shine, and really lead the country in prioritizing Canadian industry in spending.”
The fifth pillar of the strategy is to not to overlook the impact on the Canadian dollar and exchange rates. “As a global company, we’re already seeing the downward pressure in the Canadian dollar. It creates opportunity but it also creates risks,” Ford said.
In Ottawa and elsewhere, strong businesses will adapt to the tariff threat, just like they adapted during the pandemic.
At Calian, the COVID-induced disruptions of recent years prompted the company to establish a geographical presence in the United Kingdom and the States.
“Coming out of a global pandemic, it really highlighted to us that we had to consciously plant flags in our target economies,” Ford said, “so we bought a company in the U.K. last year and two companies in the U.S.
“We got through the pandemic but we’re still dealing with instability, whether it’s climate change or political strife. I think that’s just our new reality. Every leader’s got to be thinking about building resilient companies.”
Lee Valley, meanwhile, was well-positioned to respond to the demand when people rediscovered hands-on activities like woodworking and gardening during the pandemic-induced lockdowns. Sales surged as the company focused on expanding its digital capacity, starting with the revamped website.
“One of the outcomes in the past few years has been digital fatigue and an appreciation for analog activity, whether it’s making bread, birding, or carving their first small project,” Tasse said. “We’re all about helping people take the first step.”
The company also made a major investment in robotics technology at the main warehouse on Carp Road. There, 42 red robots retrieve products from a high-density storage system of bins, not only saving space and improving efficiency but also smoothing out seasonal gaps in staffing and eliminating physically challenging tasks such as repetitive lifting.
No matter what the future holds, Tasse says Lee Valley remains committed to Ottawa.
“This is our community and we continue to invest in it,” he said. “(But) the right thing to do given the current climate is a little less emphasis on growth and expansion, and more emphasis on job protection and protecting the foundation of the business.”
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