TORONTO - While Canadian consumers ready for the arrival of Target in 2013, a flurry of foreign chains have already been flocking from south of the border and across the pond to set up shop.
Following the path of well-known U.S. brands like Ann Taylor and J. Crew and the U.K.'s Topshop and Topman, the international retail invasion continued in earnest this week with several marquee names opening their first-ever Canadian storefronts.
Microsoft launched its first international location at Toronto's Yorkdale Shopping Centre on Friday, featuring the software giant's range of phones, PCs, tablets and gaming systems.
Other new-to-Canada retailers opening at the mall included Tesla Motors, men's and women's clothier Ted Baker London and luxury apparel and accessories brand Kate Spade New York.
The new store launches were part of Yorkdale's new retail expansion, representing an approximate 10 per cent increase in square footage and a 15 per cent spike in the number of stores at the shopping centre.
Retailers have realized the hurdles of coming into Canada are less onerous then they perceived, and international companies have seen Toronto in particular as a viable market to grow, noted Yorkdale general manager Anthony Casalanguida.
"Once they have an understanding of what that appetite looks like in terms of sales, I would have to say that the majority of them accelerate their expansion plans by, I would say, a full year, as opposed to going to one market and saying, 'Well, let's be there for two years and we'll assess.'"
Kate Spade CEO Craig Leavitt said the company has seen its international business grow steadily for a number of years and they've been looking at the Canadian market for some time.
Kate Spade has partnered with Holt Renfrew to retail its products in Canada for about two years to "great success"; but as brand awareness continued to build, they felt it was an appropriate time to open a freestanding store, Leavitt noted.
Leavitt said the company's expectation would be to further expand in 2013 and 2014, with an eye towards opening new stores in Toronto and Vancouver and exploration of other Canadian markets down the road. It is also investigating the possibility of a Canadian-specific e-commerce site, but doesn't have any current plans in place, he added.
"We can tell that from the shipping that we do from the U.S. e-commerce site that the Canadian consumer is engaged with us, and we see that from social media; so that was certainly one aspect," Leavitt said from New York on the subject of its northern expansion.
"But also ... Canada has continued to have such a vibrant economy, so we're excited about our prospects there."
It was a double whammy at Yorkdale for Ann Inc. with the New York-based parent company seeing the opening of a second Ann Taylor store north of the border and the debut international location for its casual womenswear brand, Loft.
Loft president Gary Muto said Canada hasn't faced the level of economic woes and crises that have existed in the U.S. and now Europe.
"I think there's a lot of stability; and because there's a lot of stability, it's still a growing market," he said in an interview at Loft's new Canadian location.
Muto echoed Leavitt's sentiments on brand awareness saying there are number of Canadian consumers already exposed to Loft, notably through shopping trips south of the border.
"I think that helps. But I think more importantly there's probably a whole host of Canadian women who don't know who we are but we are extremely relevant to them; and I think that's where the exciting opportunity comes into play."
Muto said the company plans to open new locations in the first three quarters of 2013, and is also planning to further expand within the Toronto market. Loft would also like to launch international shipping sometime next year, he added.
The Booming Canadian Dollar
The Canadian dollar has risen from around 62 cents U.S. in 2002 to around $1.03 U.S. at present. What this means is that, from the perspective of international retailers, we're spending a lot more in stores. Colliers Canada reports that <a href="http://www.collierscanada.com/en/News/2012/Canada-Still-Magnet-for-Foreign-Retail" target="_hplink">Canadian shopping malls brought in 50 per cent more in sales, per square foot, than their U.S. counterparts</a> in 2011. While U.S. malls earned $400 U.S. in revenue per square foot, at Canadian malls it was around $600 U.S.. That's a powerful magnet for U.S. retailers looking to expand.
Our Existing Stores Are Disappearing
Remember Zellers? How about Eaton's, or <a href="http://en.wikipedia.org/wiki/F._W._Woolworth_Company" target="_hplink">Woolworth's</a> or <a href="http://en.wikipedia.org/wiki/Simpsons_(department_store)" target="_hplink">Simpsons</a>? <a href="http://en.wikipedia.org/wiki/A%26A_Records" target="_hplink">A&A Records</a>, anyone? Those are just a few of the retail names that have disappeared or are disappearing from Canada's street fronts and malls. With traditional retailers fading, U.S. retailers are seeing opportunity left and right. They are also seeing vacant space they can easily convert to their own stores, as <a href="http://www.huffingtonpost.ca/2012/08/22/target-canada-zellers-protest_n_1822223.html" target="_hplink">Target Canada is doing with Zellers locations</a> and <a href="http://www.huffingtonpost.ca/2012/09/11/nordstrom-canada_n_1874734.html" target="_hplink">Nordstrom Canada is doing with Sears stores</a>.
Our Retail Sector Is Growing Fast
Growth in Canada's retail sector was <a href="http://www.nasdaq.com/article/the-promise-of-the-canadian-retail-market-20120914-00599" target="_hplink">34 per cent faster than it was in the U.S. between 2004 and 2008</a>, according to data from the Retail Council of Canada -- and that's before the financial crisis sank the U.S. into an economic no-man's-land. The Council's data also shows that retail grew 96 per cent faster than the Canadian economy as a whole during that period.
There Are Too Many Stores In The U.S., And We Have Room For Growth
In the U.S., retail supports one-quarter of all jobs and accounts for about 18 per cent of the country's economic activity. By comparison, Canadian retail supports only about one-eighth of all jobs in the country, and retail accounts for just more than six per cent of all economic activity, <a href="http://www.nasdaq.com/article/the-promise-of-the-canadian-retail-market-20120914-00599" target="_hplink">according to a report at Nasdaq.com</a>. This would suggest that the U.S.'s retail market is saturated, while there is plenty of potential growth in Canada.
More Of Us Have Disposable Income
The U.S.'s persistently high unemployment rate in recent years has left many Americans with little cash for buying anything beyond the basics. Data from WSL/Strategic Retail shows that <a href="http://www.businesswire.com/news/home/20120914005044/en/Canada-Land-Retail-Opportunity-WSLStrategic-Retail" target="_hplink">only about 50 per cent of Americans have disposable income</a>, but the same is true for 64 per cent of Canadians.
Less Competition From Online Shopping
Canadians often complain that our options for online shopping are more limited than in the U.S., and that seems to show in our shopping habits. Research on women's shopping habits finds that <a href="http://www.businesswire.com/news/home/20120914005044/en/Canada-Land-Retail-Opportunity-WSLStrategic-Retail" target="_hplink">only about half of Canadian women shop online</a>, compared to 75 per cent of American women. That means more opportunity for brick-and-mortar stores planning to move into Canada.
We're Not As Big On Bargain-Hunting
The <a href="http://www.businesswire.com/news/home/20120914005044/en/Canada-Land-Retail-Opportunity-WSLStrategic-Retail" target="_hplink">same study of female shoppers</a> found that, while 68 per cent of American women use coupons when shopping, only 55 per cent of Canadian women do. Half of Canadian women look online for coupon opportunities, compared to 61 per cent of Americans, and 57 per cent of Canadian women pick up in-store circulars, while 71 per cent do so in the U.S. This lack of hunger for bargains translates into bigger profit margins for retailers.
The iconic American upscale retailer is in talks with Hudson's Bay Company to become a "store within a store" at HBC locations in Canada. The move is seen as an attempt by The Bay to fight off the possible arrival of Nordstrom's (see next slide).
One of the most prominent competitors to Bloomingdale's, Nordstrom announced in September, 2012, that it plans to open locations in Cadillac Fairview-owned malls in Calgary, Ottawa and Vancouver. The stores will open in former Sears locations.
Discount retailer Marshalls entered the Canadian market in March, 2011, and recently announced an expansion of six new stores in Ontario. At least a dozen of its 750 stores are now located in Canada.
The home improvement retailer began moving into the Canadian market in 2007, with a store in Hamilton, Ontario. It has since expanded to 31 locations in Ontario and Alberta.
Ritzy fashion chain J. Crew opened its first Canadian location in the summer of 2011, and immediately ran into public anger about the U.S.-Canada price gap. Shoppers complained that J. Crew's Canadian prices were about 15 per cent higher than in the U.S.
The arrival of Target to Canada in 2013 is easily the most hotly-anticipated retail arrival since Walmart came north of the border in 1994. The discount retailer is planning more than 100 stores across the country, having taken over a significant number of Zellers locations. But the store is currently engaged in a labour dispute, as it tries to keep former Zellers employees from unionizing in the new stores.