TORONTO – Walmart will spend $450 million this year to open several new stores and expand its distribution network in Canada amid what is becoming an increasingly competitive retail landscape in this country.
The U.S.-based discount retailer says it plans on completing at least 37 additional supercentre projects by the end of next January, bringing the total number of Canadian locations to 388.
Nine of those locations will be new stores, with the remainder being conversions of existing properties into Walmart supercentres with a grocery offering.
Although the company refused to go into specifics, it says some of the locations slated to open will be in the Maritimes, where Walmart isn’t currently operating supercentres.
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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 Canadian shopping malls brought in 50 per cent more in sales, per square foot, than their U.S. counterparts 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.
Remember Zellers? How about Eaton's, or Woolworth's or Simpsons? A&A Records, 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 Target Canada is doing with Zellers locations and Nordstrom Canada is doing with Sears stores.
Growth in Canada's retail sector was 34 per cent faster than it was in the U.S. between 2004 and 2008, 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.
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, according to a report at Nasdaq.com. This would suggest that the U.S.'s retail market is saturated, while there is plenty of potential growth in Canada.
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 only about 50 per cent of Americans have disposable income, but the same is true for 64 per cent of Canadians.
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 only about half of Canadian women shop online, compared to 75 per cent of American women. That means more opportunity for brick-and-mortar stores planning to move into Canada.
The same study of female shoppers 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 expansion will also create 7,000 jobs — half of which will be retail positions. The company already employs about 94,000 people.
As part of its expansion plan, the company says it will also be adding 2,000 new private label products to shelves this year to offer customers more options and value to brand-name products. It will be also be selling the highly-anticipated BlackBerry 10 from Research in Motion (TSX:RIM), once it launches. Customers can currently pre-order the device in-store, but models and prices have yet to be released.
President and CEO Shelley Broader says the expansion move has little to do with its U.S. rival, Target, opening its doors here next month but added that the arrival will add to changes in Canada’s discount retail market.
“Any time there is something new that happens in the market, any time there is a new competitor, what it should do is make you sharper, make you stronger and make you more focused on your core strategy,” she said from the company’s head offices in Mississauga, Ont.
“We’re only becoming a better Walmart, a better low-cost operator, a better low-priced operator, a better one-stop shopping destination for our customers, based on exactly what they’re telling us.”
As more U.S. retailers continue to court Canadian dollars, Broader says the company remains confident that it can still provide customers with the best bang for their buck.
“The way that we look at the market isn’t really based on any specific competitor or series of competitors,” she said.
“The way we look at the market is completely focused on the voice of our customers. And we listen to them every single day. What we offer and our dedication to low prices is completely based on what we hear out of the mouths of our consumers.”
Walmart first came to Canada in the early 1990s, and since then has been expanding year after year to become the country’s largest department store retailer by sales.
Last year was one of the most aggressive for the discount chain, with planned spending of $750 million for the opening of 73 new Canadian stores — including 39 locations owned by former Canadian retailer Zellers.
But starting in March, rival Target will also be opening the first of between 125 and 135 locations also once owned by Zellers.
Target is spending about $10 million per store to upgrade and in some cases triple the existing square footage.
Although most retailers are quick to say they’re unfazed by the entrance of the U.S. retail giant, some, including Shoppers Drug Mart (TSX:SC), Hudson’s Bay Co. (TSX:HBC), Canadian Tire (TSX:CTC.A) and Loblaw (TSX:L), have scrambled in the past year to become more competitive. Steps have ranged from job cuts and management shakeups to capital raising and making renovations.
Walmart Canada has previously said it is confident it’s prepared for Target’s arrival. And it said it planned on lowering the prices of more items to about $1 as it also answers the expansion by Canadian dollar store operator Dollarama Inc. (TSX:DOL).