Canadians should expect to see more of their familiar store brands disappear over the next few years as American chains continue to look north. But increased competition means consumers will be the winners, says a report.
“Foreign retailers will look for opportunities to enter the Canadian market quickly and easily through acquisition rather than store by store expansion,” says a report by commercial real estate brokerage Colliers International. “A couple of years from now Canadians will have a different roster of tenants to choose from at their malls.”
Earlier this year, American retailer Target announced that it was buying 220 Zeller’s department stores. Other retailers rumoured or confirmed for the Canadian market have been Express, J.C. Penny, Nordstrom, Topshop, J. Crew and Dick’s Sporting Goods.
In what could be perceived as a defensive move, Canadian Tire announced it was purchasing sporting goods retailer the Forzani Group Ltd., which owns Sports Chek and Athletes World, for $771 million.
“Canadian retailers will have to readjust to compete with the new reality; for others, it will be about getting swallowed up,” said James Smerdon, one of the authors of the report along with David Bell.
Smerdon says it makes more sense for American retailers to grow by buying existing Canadian retailers because it allows them to establish their banner across the country more quickly using familiar retail locations.
“The U.S. retail interest has been episodic in the past, with Wal-Mart and Best Buy coming to Canada. But this time it is not quite piecemeal; it is much more full-blown,” said Smerdon.
Canada has been attractive to U.S. retailers, especially since the loonie has been floating above par with the greenback in the $1.04 range during the last month.
In 2004, based on a much weaker loonie, Canadian retail sales per capita were equal to $8,000 (U.S.) compared with $12,000 south of the border.
Currently, per capita spending in Canada is slightly higher than the U.S. and is projected to go higher.
Recession ravaged retailers in the U.S. are looking at the strong retail performance of Canadian malls and liking what they see, said Smerdon. The average Canadian shopping mall is pulling in $580 per square foot in sales compared with $309 in the U.S.
There is also much more competition in the U.S., with a retail sector that is overbuilt, with 23 square feet of shopping mall area per capita, compared to only 14 square feet per person in Canada.
A bonus for some U.S. retailers is that some brands, such as lingerie maker Victoria’s Secret, don’t even need to do much additional marketing because they are so well known in Canada.
“There is already pent-up demand in the marketplace for some brands,” he said.
The advance of U.S. retailers means that some weaker Canadian players may be in the market to sell. This could mean some apparel retailers, home goods stores, footwear companies and home and garden centres, said Colliers.
“Getting the right fit is important, U.S. retailers will be looking at chains that fit their profile, whether it is inside enclosed malls, or power centres, and whether they have good locations. It would also ideally mean this is an underperforming brand.”
Source : The Star
