They says Canadians apologize too much, but a simple “Sorry” may not cut it for a few retailers who might agree: Retail business in Canada is a tough job.
You’ve heard about Target closing its 133 sets of doors for good after only two years (and a $2 billion USD loss - yikes) in our northern lands. But what does that mean for other retailers? According to Vivian Lo, portfolio manager and retail stocks specialist with Aston Hill Financial - it’s complicated.
The good, the bad - and the others
In the long term, it’s a net positive to other Canadian retailers who are now seeing a competitor who had the potential for meaningful growth leaving the market place and easing competitive pressures. Yippee - right? Maybe not quite…
In the short term, as Target sets out to liquidate its inventories at heavy discounts, Lo warns that it could cause disruption to other retailers overlapping in the same categories Target occupies - mainly household goods and apparel. Indeed, there will be a moderate dislocation in the market as Target stores begin seeing an increase in traffic at the expense of the other retailers in its category.
And if that’s not enough, the devastation could continue well after Target’s left the building. Consider smaller retailers who were dependent on the foot traffic this big box retailer generated to their stores as an anchor tenant - they are now left with significantly reduced resources with which to attract customers.
We wish we could say the story ends there - but Target isn’t the only one shutting its Canadian stores for good this year.
Batten down the hatches - we sense a retail storm a’brewing (Canadian weather, right?). Here are some of the other major brands to which we can expect to wave our mittens buh-bye over the next few months.
4 retailers likely to follow Target out of Canada
A Quebec-based fashion giant founded nearly 40 years ago, Jacob announced in October 2014 it would be filing for bankruptcy and dismantling all 92 of its nation-wide stores.
- Sears Canada
Unable to produce results for shareholders from its Canadian model, the Chicago-based company announced plans late last year to sell much of its stake in its Canadian division - one it began building as far back as 1953 - in an effort to raise $380 million USD. It’s already sold many of its leases and speculation that it could soon close all stores is rising.
The Montreal-based women’s fashion retailer (and parent company of Smart Set) may have spoken a bit too soon when, a few years ago, it announced (perhaps a bit naively) that it wasn’t concerned about Target’s imminent arrival to Canadian soils; that it could stand up to the likes of Walmart and G.A.P. - so why not Target? As it turned out, it couldn’t quite keep up with the added competition Target brought to the table. Profits for 2013 fell 60 percent and the company has announced plans to shut down many of its Smart Set stores (some of which may be converted into Reitmans stores).
- Holt Renfrew
One thing this brand has learned: You win some, you lose some. That’s why the high-end department retailer went on a closing spree in all of its smaller markets, such as Ottawa and Quebec City. But fret not, Holt Renfrew-ers. It has 300-million-dollar plans to expand in bigger markets such as Vancouver, Calgary, Edmonton,Toronto and Montreal.
Want to stay open? Be open to change
The landscape in Canada is changing all across different retail sectors and niches - which means small retailers across various categories will have to start thinking about how other store closures (not just Target) will affect their own businesses. Retail business in Canada is a tough job indeed - but proper preparation and continuous efforts to be aware of changes in the market may just go a long way for some.