Introducing Generation Z, A Groundbreaking New Loyalty Program Designed To Reward Kids.

TORONTO--(BUSINESS WIRE)--Oct. 8, 1998--Building on the success of its flagship loyalty program, Club Z, established 12 years ago and now numbering over 10 million members, Zellers today announced the launch of a groundbreaking enhancement on the concept, Generation Z, the first retail loyalty program designed especially to reward young customers.

"Zellers wrote the book on the creation of loyalty programs and now, with Generation Z, we've written an innovative and exciting new chapter for a second generation of customers," said George Heller, Zellers' President and CEO. "Most important though, Generation Z confirms Zellers' commitment to Canadian families. It represents an opportunity for Zellers to differentiate itself meaningfully in the marketplace. For Zellers, loyalty programs are a strategic advantage."

Generation Z, whose target demographic is ages 6 to 14, is, in fact, a program for families designed to extend opportunities for rewards, shopping, saving and trading to kids whose parents are Club Z members [eight out of ten Zellers shoppers collect points]. By empowering kids to make informed independent buying/redeeming decisions under the supervision of an adult, Zellers effectively connects with a second generation of potentially loyal customers - members of the Zellers family.

To join, potential young members must sign up in Zellers stores across Canada starting on October 14, 1998, accompanied by a consenting parent or guardian holding a Club Z membership. Club Z and Generation Z cards are then electronically linked in the Zellers database. For every dollar spent by an adult, 100 Club Z points are awarded the adult, and another 100 points awarded the child Generation Z member. Generation Z points can only be redeemed by the child holding the card [with authorization from parent or guardian]; however, families can pool points accrued on both Club Z and Generation Z cards and redeem them accordingly.

"Generation Z is all about freedom of choice - which is what kids dream of," said Doug Ajram, General Manager of Club Z. "We're convinced that this program will successfully bring a whole new generation of loyal shoppers on stream at Zellers." Zellers' Club Z is recognized worldwide as an industry leader in loyalty program management. Having created, launched and successfully implemented Club Z 12 years ago, Zellers has developed critical infrastructure and management competencies that have, in turn, proved to be valuable as a stand-alone service. To date, Club Z management has consulted on the creation of loyalty programs for a diverse range of clients including Citibank, American Express and the Royal Bank of Canada. These initiatives establish value with customers because they offset the costs of the program, thereby providing enhanced reward structures. With the advent of Generation Z, Zellers again takes the industry lead.

In addition to the launch of Generation Z, Zellers has also introduced key improvements to its core customer loyalty program, Club Z, including the publication of a 400-page toy catalogue; the establishment of a toll-free number for redeeming points/ placing catalogue orders; a separate catalogue section designated exclusively for mothers and Internet access to the catalogue at www.zellers.com

Supported by a new television advertising campaign featuring the tag line "Join the Free World," the Generation Z loyalty program aims to create for young customers a new vision of Zellers. The Generation Z rewards catalogue will focus on providing products and services that will excite young customers. For instance, points may be redeemed in exchange for participation in events including a MuchMusic video dance party, invitations to movie premieres, the chance to fly a jumbo jet simulator, as well as products such as inline skates, boom boxes and so forth.

A key element of the communications campaign is the Generation Z web site, located at www.gen-z.com. Upon its debut, the web site will contain information on the program itself, a prize catalogue and a point tracking feature for individual members. Through a feedback function, young customers will be invited to provide input on additional site features, such as games, contests or on-line chats. While visitors to the site cannot join the Generation Z program or redeem points for rewards merchandise, the web site is a key tool in building and strengthening the newly-established relationship between Zellers and its young customers.

The launch of Generation Z is the latest announcement in a series of bold, new initiatives undertaken by Zellers during the past six months in which the company has aggressively accelerated its focus on the customer, from massive store renovations to revamped brand strategies.

Recent major brand launches aimed at significantly enhancing Zellers' performance in the marketplace include the introduction of Martha Stewart Everyday Home [available in Canada exclusively at Zellers], and the launch of Cherokee, a major new signature brand of affordable family apparel and accessories. A casual, comfortable clothing line of classic yet stylish fashions, Cherokee is designed to offer value-conscious shoppers standards of quality normally associated with recognizable sportswear brands found in specialty and department stores. Available now for the first time in Canada, Cherokee is a leading U.S. brand and one of the top ten most respected and recognized names in American sportswear.

Zellers is Canada's leading chain of mass merchandise department stores, with over 350 locations in communities from coast to coast. Established in 1931, Zellers Inc. is a division of Hudson's Bay Company.

The Generation Z program can be accessed on-line at: http://www.gen-z.com. This site will be ready to accept visitors on October 14, 1998.