The Canadian retail industry in 2019 is in for a shakeup as competition increases and consumers struggle with personal finances. What is likely to result is more store closures in Canada, though there’s also some good news on the horizon.
International retailers are entering Canada like never before, as the world becomes “smaller” and brands expand globally. In 2017, more than 50 international brands entered Canada by opening stores, and more than 30 opened in 2018, according to Retail Insider’s research. That means the share of the Canadian “retail pie” for existing retailers is potentially shrinking and worse, many Canadians are drowning in debt and the world is increasingly uncertain.
We predict about 30 international retailers will enter Canada in 2019 by opening stores, if not more.
Brokerages and landlords are now traveling the world seeking out the “best” retailers to bring to Canada, and Asia and Europe are particularly being targeted. What that means is we may see more retailers such as UNIQLO and MUJI enter Canada this year, which is exciting news for shoppers.
As well, the brands that have entered Canada over the past several years continue to open more stores — eyewear retailer Warby Parker, for example, entered Canada via Toronto in 2016 and this month it will open its first store in Vancouver. From luxury brands to fast-fashion and discounters, shoppers will have even more options to shop at physical stores as well as on the web, as brands open their own Canadian e-commerce sites to capture online shoppers.
At the same time, consumer debt in Canada is at all-time highs, so many of us have less discretionary money to spend on non-necessities. World events are also concerning — Donald Trump is raising concerns as he makes reckless decisions such as shutting the US government down for a “border wall,” and the recent arrest of global tech giant Huawei’s CFO in Vancouver has damaged Canada’s relations with China. People tend to spend less when they’re stressed and things are otherwise uncertain — and while they’ll still spend money on necessities such as groceries, a new pair of shiny shoes can wait.
Consumer spending patterns are changing.
We’re spending more on “experiences,” be it a meal at a restaurant, or a trip to somewhere warm (sounds nice right about now). We’re also spending more on technology — prices for Apple products continue to rise, for example, leaving little money left for other things.
There’s some good news, though. Over the past few years, retailers and developers have been working on some exciting projects that will make Canada a more interesting place to shop. That includes new retailers as well as food-and-beverage options. “Food halls” and “food markets” will take Canada by storm in 2019 and we’ll see the trend continue into 2020 and beyond. In the fall of 2018, Canada’s first mall-based “food market” opened at Upper Canada Mall in Newmarket (north of Toronto), and this year, several others will be opening including at Galeries de la Capitale in Quebec City, as well as at the massive Square One mall in Mississauga.
Toronto’s Bloor-Yorkville will be getting one of the most highly anticipated food markets when this fall, Eataly will open a three-level, 50,000 square foot “grocerant” at the overhauled Manulife Centre — think of it as mix between a grocery store and a really cool restaurant. The place is expected to be mobbed from day one and will add much needed foot-traffic to Bloor Street, which is quieter as people flock to Yorkdale and CF Toronto Eaton Centre.
This month, as well, Bloor-Yorkville will see the opening of a McEwan grocery store at 1 Bloor Street East, which is anchored by an impressive glass-enclosed Nordstrom Rack store. Nearby, Aritzia will be opening a massive flagship store at the Holt Renfrew Centre, and Holt Renfrew itself is seeing major renovations that will be completed in 2020. Manulife Centre will unveil new spaces for Birks and Over the Rainbow Jeans, as well as several other retailers.
Shopping Centre landlords have been investing in their malls like never before, and this year will see more new features as malls compete for customers as well as new tenants. Toronto’s Yorkdale Shopping Centre, for example, has seen heavy investments over the past decade and this year, it is expected to hit $2-billion in annual sales and to sell in excess of $2,000 per square foot yearly. Canada’s top malls, for the most part, continue to see year-over-year gains in sales numbers, according to the most recent Retail Council of Canada Shopping Centre Study.
Malls are also adding entertainment, such as VIP movie theatres and concepts such as “The Rec Room” (which is essentially a Chuck-E-Cheese’s for adults). Fancy malls are adding valet parking, and value-priced centres are adding new retailers that offer savings.
While the average person is struggling, rich Canadians continue to get richer.
What that means is we’ll be seeing even more luxury stores in Canada this year. In Toronto, the Yorkdale Shopping Centre’s Holt Renfrew store will unveil new boutiques for Gucci, Fendi and Dior, and Balenciaga will open across from it (watch for a few other big announcements, including a flagship Louis Vuitton). In Toronto’s Yorkville, watch for flagships to open for Dior, Brunello Cucinelli, Versace, and Jimmy Choo, and brokers we’ve spoken with say others are on the way. In Vancouver, high-spending locals and tourists (many of Asian background) are spending a fortune at standalone luxury stores as well as at Vancouver’s Holt Renfrew, which is #1 in the company. We can’t wait for Hermes to open a two-level flagship at the southwest corner of West Georgia Street and Burrard Street. Wealthy Montreal shoppers will be in for a treat as some new luxury brands open in the massive 250,000 square foot “Holt Renfrew Ogilvy” (which will finally be completed in 2020, though some of it opens this spring). Luxury is also expanding in Alberta — CF Chinook Centre in Calgary recently added a Louis Vuitton boutique, and West Edmonton Mall will be adding several standalone luxury stores that will be announced publicly this spring (spoiler, Louis Vuitton will be one of them).
For those of us with less money, off-price shopping continues to expand in Canada as well.
Nordstrom Rack opened its first six Canadian stores in 2018, and more are on the way this year as Nordstrom Rack plans to eventually operate as many as 15 stores in this country. TJX Group’s Winners, HomeSense and Marshalls continue to open stores rapidly, which is being made possible in part as landlords repurpose boxes formerly housing Target and Sears stores (both of which exited Canada).
Plenty of more off-price retailers will be on the way. Remember BiWay? Co-founder Mal Coven says he’s opening a revived concept called “BiWay $10 Store” and the first location will be opening in August in a strip mall on Bathurst Street in Toronto. Many more could follow if the concept takes hold. Dollarama continues to open stores and Japanese-themed retailer Oomomo will open several this year as well — watch for a 25,000 square foot Oomomo flagship to open in Markham this spring, which will be its largest to date.
For those looking for some of the best bargains, there’s warehouse sales. Imagine thousands of items deeply discounted in a huge space — you can get an entire wardrobe for a LOT less than you’d pay at a full-priced retailer. Companies like StyleDemocracy host warehouse sales across the country, and the company will be doing even more as shoppers seek out bargains. You get an extra 10% off if you’re a “StyleDemocracy Insider” — sign up for big savings (editor, add hyperlink for subscription).
Amazon continues to gain market share in Canada, and Amazon Prime memberships are way up.
While online shopping represents less than 10% of the Canadian retail market, it’s growing much faster than sales at physical stores, signaling a shift as well as challenges and opportunities. Loblaw recently introduced a loyalty program similar to Amazon Prime where groceries can be delivered free of charge, and we predict others will quickly jump on the bandwagon.
Speaking of grocery retail, it’s never been more competitive than it is now. Ottawa-based chain Farm Boy was recently acquired by Sobeys, following several other mergers in the margin-tight grocery industry. Concepts such as Organic Garage, Nations Experience and Filipino concept Seafood City continue to open stores rapidly. At the same time, shoppers are looking to meal kits for dinner — that is, if they’re not ordering via Foodora or Uber Eats. We predict grocery delivery will be huge in 2019 while at the same time, online grocers such as Fresh City Farms open physical stores in Toronto.
We also predict some stores will be closing in Canada this year.
We’re told that several US chains are looking at pulling out of Canada this year, and several Canadian retailers could declare bankruptcy. Things are changing quickly — this month, for example, Town Shoes and Jean Machine will close all of its stores while Lowe’s will shutter more than 25 stores in Canada, most of which are branded ‘Rona’.
And finally, there’s cannabis. Despite being legalized in Canada in October of 2018, retailers are finding it difficult to keep it in stock. While Alberta has quite a few cannabis retail locations, Ontario won’t be getting any until April of this year. Even then, only 25 will be opening in Ontario in April and the government will be holding a lottery to determine who’s one of the lucky winners. If lineups at other cannabis retailers in other provinces are any indication, supply will continue to be an issue unless a lot more becomes available.
Featured image: Instagram/ @flips4evr