With the arrival of luxury department stores Saks Fifth Avenue and Nordstrom and other high-end U.S. chains, Canadian malls may be starting to look a bit more American. However, competition in the Canadian retail space is fierce, and these retailers may soon find out that arriving in Canada is one thing, but staying for the long haul is another.
Like Target learned the hard way, there are several complexities unique to the Canadian market that make it far different from opening a store in a new state. Missing the mark on one or a few of these could create a stumbling block that may be hard to recover from.
“Savvy retailers are doing what I’ve been calling a ‘measure twice, cut once’ approach,” Michael LeBlanc, senior vice president, marketing and digital retail for the Retail Council of Canada, tells Yahoo Canada Finance. “On the outside, Canada looks like the U.S. from a consumer market, but it’s not. It has a number of different elements to it, regulatory, consumer behaviour-wise, structurally, that are just different.”
The reality is that these differences aren’t always easy to tackle. Retailers that want to enter Canada have to take into consideration complications like import tariffs, differences in our currencies and Canada’s two official languages. Our country is also much bigger than the U.S., but with a smaller population that has different consumer habits coast-to-coast. This may make it difficult for retailers to decide where to place stores.
Despite these complexities, Canada remains a very lucrative market for American retailers. This may be partly because many Canadians are already familiar with some of the biggest American retail chains through trips they’ve taken south of the border to save cash on purchases or to find products they’d have a hard time getting at home.
“What I think you’re seeing is international retailers reacting to that and seeing opportunity in the Canadian market, where they’re identifying ‘We have a lot of Canadians shopping in our stores,’ or ‘Boy, why don’t we just come to Canada?’” LeBlanc says.
Retailers have also been drawn to Canada because of our strong economy and relatively stable market.
“The number of foreign retailers that fail in Canada has remained relatively small,” Tony Hernandez, director and Eaton chair in Retailing at Ryerson’s Centre for the Study of Commercial Activity (CSCA), tells Yahoo Canada Finance in an email. “Clearly, major store closures, such as Target, impact retailer confidence, yet not enough to deter foreign retailers from looking at Canada as a viable opportunity for market expansion.”
However, it’s not just American retailers that have set up shop in Canada, European brands like H&M, Zara and Ted Baker have had success in Canada as well. There are also retailers from other regions like Korea (The Face Shop) and Japan (Miju) that have begun to make waves.
To accommodate some of these big-name stores from overseas, many of Canada’s largest malls have been expanded and renovated. Landlords of those malls seem excited to land these international retailers and we might see even more foreign chains in our malls in the years to come.
“We will continue to see more retailers coming to Canada as more and more landlords are looking at ways to differentiate their tenant mix [by bringing] new retailers to the Canadian marketplace,” Hernandez said.
It’s easy to think this influx of foreign stores might send a shiver down the spines of Canadian retailers, LeBlanc says they are competitive. While the disappearance of Canadian brands like Future Shop, Zellers and Danier Leather might have made headlines, he notes Frank and Oak, Aritzia and Dynamite as great domestic retailers that are as mindful of how their brand suits certain locations much like some of the new international players in the market. And Frank and Oak, Aritzia and Dynamite have already seen success in high-end malls.
However, all malls aren’t created equal. Low to mid-end malls and malls in smaller Canadian cities, haven’t seen as much enthusiasm from international chains and trendy home-grown ones, which may be because of the attention currently given to the high end of the market.
“I was reading you got international brands coming in every day, and they’re saying, ‘Where am I going to locate that suits my brand?’” LeBlanc says. “So it does get down to brand. These essential things about retail and marketing still are so important.”
Unfortunately, several low to mid-end malls may already be hurting from the failure of Target and the troubling performance of Sears. While some may be lucky enough to find a few new retailers, including some international ones, that would like to call them home, it may not be enough. And with online and mobile shopping taking off as well, these malls may also be forced to reconsider how they’re using their space. Despite that discouraging news, LeBlanc believes they still have a place in our lives, and that retailers in various segments still have room to grow.
“Malls exist for a reason. Sometimes it’s entertainment, it’s cultural, it’s social. Sometimes it’s convenience,” he says. “There’s opportunities for everyone in every sector, and that’s both physical and online.”