Retail

Nordstrom Is Venturing North

The department store market is booming in Canada. Nordstrom is about to open its first store in Toronto, and the nation’s Hudson’s Bay has just spent $1 billion renovating stores. How will the competition in the Canadian retail market unfold?

Nordstrom is soon to have four Canadian stores, and two more are planned. According to The New York Times, Holt Renfrew has invested $300 million in redesigning its nine outlets, and La Maison Simons is opening new locations after 175 years of operating only in Quebec.

In the U.S., however, department stores are struggling, and Macy’s, the largest store in the U.S., recently announced that it was closing 100 stores. What’s going on in Canada?

The reasons for this department store growth are fewer department stores on a per-capita basis in Canada. Online shopping has been limited because of the high cost of shipping compared to the U.S., and U.S. retailers are attracted to a stable market.

But Target’s experience did not have a happy ending north of the border. Target’s move into Canada met with store closures, bankruptcy of its subsidiary early last year — only two years after entering the Canadian market — closure of all 133 Canadian stores and a $5.4 billion write-down.

In Target’s case, supply chain logistics left empty shelves, and customers perceived Target’s products to be more expensive than the same products in the U.S.

Most of the current store openings and renovations stem from decisions made before Target’s failure. Canada emerged relatively unscathed after the 2008 financial crisis, buoyed by major commodities, such as Alberta’s oil sands, and U.S. retailers were eager to move north.

Nordstrom, as with other U.S. department stores, has struggled to attract customers, and since 2011, the company has closed stores in the U.S., where consumers are shopping more online and at discount stores — T.J.Maxx, for example.

The approaches of Nordstrom and Target to the Canadian market differed. Nordstrom is opening up six stores over a three-year period, while Target opened hundreds of stores in just over a year.

According to Jamie Nordstrom, president of Nordstrom stores: “I think there are examples out there where a retailer would open 100 stores on one day in a new region or a new country. Every one of our stores is a big investment for us, and we open them one at a time.”

Nordstrom’s stores are in upscale malls, and the Toronto store includes four bars and concierge services.

Unfortunately, Nordstrom cannot simply supply its new stores from warehouses in the U.S., and its successful brands, such as the U.K.’s Topshop, which has been a huge attraction for younger shoppers, are only available at Canada’s Hudson’s Bay.

Let the battle begin.

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