Challenges and Champions in Canadian Retail
Dawn breaks over the eastern Maritimes, and the great economic engine of Canadian consumers revs up for another day. Breakfasts and school lunchboxes, clothes and cosmetics—millions of consumer goods will all be synthesized into the activities and lives of thirty-five million Canadians. Virtually every one of these items passed at some point through the vast enterprise of Canadian retail.
As Canadians awaken and prepare for their workday, one out of every eight will be heading to a job in retail; in the US, the retail sector employs about twice that proportion. Yet while retail’s activity accounts for approximately six percent of Canada’s economy, the ratio in the US is triple that. This significantly lighter saturation of the Canadian retail market, relative to that of the US, is one of the notable disparities luring the attention of US-based retailers to growth opportunities north of their border.
Powered by the engine of Canadian consumers—and by their annual shopping infusion of over $12,600 per capita (totaling over $450 billion)—Canadian retail was up before the dawn. In fact, it never sleeps. Complex global supply chain networks source goods around the clock and around the world, as Canadian retailers—both domestic and foreign-based—constantly seek to better serve the changing tastes and escalating demands of the shoppers of Canada. Sophisticated retail technology systems ceaselessly churn through mountains of data. Retail merchants strive for the perfect assortment of goods, offered at the optimal price and promotion; while retail operators execute the merchants’ plans to ensure that all the right items are in the right places, each at the right time, with just the right number of retail store associates to deliver the ideal shopping experience.
One hour later, in the Eastern Time zone that stretches from the mouth of the St. Lawrence to the western bank of Lake Superior, dawn wakens the heart of the French Canadian market. The urban centers of Ottawa and Toronto comprise over 60% of the population of Canada, a large majority of whom live within 90 miles of the US border. Fashionistas make plans for shopping trips in the apparel stores of Quebec and Montreal, where the latest styles from France, Europe, and around the world adorn the storefront windows. The apparel tastes of the world are brought to these markets by merchants like Larry Rosen, Chairman and CEO of the Harry Rosen chain, founded by his father in 1954. Although his chain already accounts for 40 percent of the Canadian market in high-end menswear, Larry personally visits fashion centers around the world every year, immersing himself in the customers’ shopping experience there at clothiers large and small. These days, Larry make his visits with his new iPhone in hand, having replaced his business-worthy Blackberry with the device that he finds helps him better identify with his target consumer. Customer-centricity is a mission that never ends.
Local markets across the culturally diverse greater Toronto area serve up the particular tastes of their local enclaves. The strategy that ethnic eateries, handbag boutiques and neighborhood booksellers have always known—that of being obsessively tuned to the tastes and experiences of their local clientele—now drives all of retail. Some have had to adapt, like Eleanor LeFave, whose bookstore, Mabel’s Fables, has recently countered the pressures of online and big box booksellers by finding new sales opportunities in wholesaling to school book fairs. In the ceaselessly competitive world of retail, the courageous merchants who innovate and adapt to changing customers and competitors survive and thrive. Those that have failed to steer by the customers’ compass lose their way, and ultimately fall behind.
Sunrise in the eastern prairies shines each morning on one of the most notable sites of changing retail formats. Portage Avenue in Winnipeg was once the home of “The Big Store”, Winnipeggers name for the then-giant Eaton’s, where in the 1960s they spent 50 cents of every shopping dollar (excluding groceries). The store, however, was only a small part of the giant catalogue fulfillment centre which covered 21 acres and employed 8,000 workers.
As times changed and Canada’s population became increasingly urban, more and more consumers had local access to stores; by the mid-1970s over 60% of Canada’s suburban population lived within a thirty-minute drive of an Eaton’s store. In January of 1976, Eaton’s announced their last catalogue, and a massive layoff. A string of missteps over the next two decades culminated in filing for bankruptcy in 1997, acquisition of assets by Sears a few years later, and the eventual retirement in 2002 of one of the most iconic Canadian retail brands. Today Portage and Main in Winnipeg features shopping malls connected by an underground concourse and the Winnipeg Skywalk—both measures taken against the location’s legendary (if unproven) status as the coldest and windiest intersection in Canada.
As morning reaches the western prairies in Alberta, another day’s preparations begin for the 23,000 employees who work at the West Edmonton Mall—with over 350,000 m² of leasable area, the largest mall in North America (the world’s largest until 2004). In the mid 1990s this mall included two full Bay department stores, the second having been added when the chain took advantage of space vacated by the bankruptcy of Woodward’s. Other retailers leaving at that time included Canadian Tire and IKEA, part of a trend towards ‘big box’ standalone properties; but the space was subsequently filled by T & T Supermarket. Since then, new additions have included the first Victoria’s Secret in Canada (2010), and La Maison Simons’ first outlet outside of Quebec (2012). Today there are over 800 stores and services offering world-class retail experiences to over 28 million visitors per year.
Finally, dawn lights up the Rockies and the westernmost Canadian urban center of Vancouver. Here, as in many urban areas, fewer young people are getting driver’s licenses—healthier lifestyles, digital socializing, and online shopping are making personal automobiles less relevant as the Millennials move into the mainstream. Smart retailers are reading these winds of change, and finding opportunity there.
Mountain Equipment Co-Op, a pioneer in healthy lifestyle merchandising since its founding in Vancouver in 1971, was also an early innovator in multi-channel retailing. In 2013 it won the Canada Post E-commerce award for Best Multi-Channel Retailer of the Year. Lululemon began here in 1998, also with a focus on healthy living. Its 4,500 “educators” (a.k.a. store associates) mentor customers—traditionally females, but now including male yoga enthusiasts—towards the benefits of healthy lifestyle (with, of course, the proper apparel) in over 200 stores. In a model to which many retailers aspire, the focus of retailers like these on quality goods and a well-educated customer base are overcoming the traditional “race to the bottom” on price discounting, which has dragged down other low-cost-focused retailers. It’s working: Lululemon is now expanding into the US, UK, and across the Pacific to Hong Kong, Australia and New Zealand. MEC has over 3 million members in Canada and internationally.
Meanwhile, in the global time zone of cyberspace, where the sun neither rises nor sets, retail is always open. Retailers with strong e-commerce programs are continuously retuning or reinventing themselves. Staples, voted the most trusted brand in Canada in 2008, and a top 10 most trusted brand ever since, just re-launched its already successful loyalty program, and plans to add another 200,000 items to its e-commerce site by the end of 2013. In the world of consumer-driven retail, continuous improvement is now de rigueur.
The machines and merchandise of Canadian retail, with their planning and problem-solving, never sleep – because they dare not. Because the retail and consumer goods sectors are as challenging as they are rewarding, and as brutally competitive as any industry. Because shoppers today have more choices and knowledge of alternative sources, more access to product and price information, and more connection with the influence of their peers than was dreamed of even a decade ago. The dynamics of Canadian retail are accelerating at an unprecedented pace – and retailers that are slow to keep up are thrown out of orbit. – JTS