Canada retail sector about to heat up

Canada retail sector about to heat up

Canada has no problems enticing global retailers to open up shop here and that trend is set to rise, which bodes well for the almighty consumer in likely all but one key aspect: prices.

Having more global retailers here is good for competition, right? Yes. More convenient for shoppers, right? Sure. Makes for far lower prices? Probably not. And, rightly so, consumers are tired of feeling ripped off.

We've all heard about that roughly 10 to 15 per cent price gap between the United States and Canada -- due to a range of issues from higher transportation costs here, the relative size of the Canadian market to tariff rates -- that has enticed many Canadians to increasingly border hop to shop.

That's why the retail sector in Canada is about to get a whole lot more interesting, and it's about time. If companies are finding it harder to compete purely on price then the fight should ramp up in the area of perks, meaning the much-valued guests (a.k.a. you, the consumer) should expect some pretty sweet forthcoming shopping experiences.

Not only will there likely be some mega deals, it's probably pretty safe to assume there is the potential for better designed stores, more unique goods, freebies, loyalty programs and the like. All in the name of customer appreciation.

These factors already matter, but they'll matter even more especially if you believe a new study by consultancy CBRE titled "How Global is the Business of Retail?" that says Canada ranked sixth among top destinations for retailers that are seeking beyond-borders expansion.

The report also predicts a shift that focuses on a new retail construction cycle and the building of, for example, new outlet malls is underway in the Canadian retail market, which will allow foreign retailers to enter the country more easily in years to come. The national retail inventory is expected to grow by 5.4 million square feet in 2013 and new supply predicted to trend above the 10-year average of 5.2 million square feet annually, CBRE says.

Let's not forget about those Canadian retailers that are struggling, and have leases in lots of places across the country. They're likely targets for U.S. companies looking to expand here, says Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the Sauder School of Business.

Canadian shoppers more savvy

But even as these dynamics unfold, the cost-conscious consumer is pickier than ever, keeping up the public pressure (thanks, social media) in an effort to influence the sticker price . "The retail pie is only so big. Everyone is fighting for that almighty dollar," says Ian Thomas, chairman of Thomas Consultants, which focuses on the retail sector. "Just because you're here and you've got a certain market share doesn't mean you're going to have that in perpetuity."

Just before U.S. retailers step on Canadian soil, we get the same sales pitch. In the case of Nordstrom Canada, its president Karen McKibbin vowed at a Retail Council of Canada conference on Wednesday there will be no “Nordstrom Lite” when it arrives in 2014, the Globe and Mail reported.

McKibbin also said the retailer is going to "do everything we can to minimize" the anticipated higher prices in Canada and won't be undersold on comparable products by domestic rivals, noting the issue is "top of mind with Canada so it's top of mind with us."

Sound familiar? Target Corp pretty much said the same thing in the months leading up to its grand opening this spring. Shortly after, price comparisons found goods to be anywhere between 1 to 8 per cent higher, depending on the basket mixes.

Canadian consumers have become much more savvy and effectively no longer an easy get for American retailers who have long viewed Canada as a haven for its geographic proximity and stronger retail sales growth.

Once consumers get over the infatuation with things that are shiny and new, especially a well-known brand, they're going to want more. And more. And more. More in the department of perks that will impact their wallets. Or else, why would they keep coming back?