Nordstrom Inc. is getting ready to ride the wave of retailers entering Canada.
This story first appeared in the September 12, 2012 issue of WWD. Subscribe Today.
According to sources, Nordstrom will convert at least three Sears sites — in Vancouver’s Pacific Centre, the Deerfoot Mall in Calgary and Ottawa’s Rideau Centre — and should start reopening the units in 2015 or 2016 after completing renovations.
Nordstrom is said to be considering about a half-dozen locations that could open through 2020. One possibility down the road is on the west end of Toronto, in the Sherway Gardens lifestyle center anchored by The Bay, Holt Renfrew, Sporting Life and Sears. Nordstrom would take either the Sears site or the Sporting Life site.
Nordstrom on Tuesday declined to discuss any details of its Canadian plan expansion, though officials previously confirmed designs on Canada. On Thursday, the Seattle-based company is expected to unveil a partnership with one of North America’s leading developers, The Cadillac Fairview Corp. Ltd. The announcement will take place in Toronto, where Cadillac Fairview is based. Cadillac Fairview owns the three Sears locations that Nordstrom will be moving into and reportedly spent $200 million to buy back various Sears leases in Canada.
“There’s lots of excitement about Nordstrom coming to Canada. Nordstrom has extraordinary brand perception,” said Toronto-based retail consultant Antony Karabus. “I can see Nordstrom operating six to eight full-line stores in Canada, with probably three in Toronto, a couple in Calgary, Montreal could handle one, Vancouver could handle one and Ottawa could handle one. And there could probably be about two dozen Rack stores.”
“This is a logical move for Nordstrom,” said Mark Cohen, a marketing professor at Columbia Business School and former chairman and chief executive officer of Sears Canada Inc. “Nordstrom has quite a few Canadian customers in the Pacific Northwest. I think they are going to do very well right out of the gate. Target, too, is going to make an enormous splash at the outset.”
Target Corp. is invading Canada by converting 125 to 135 Zellers sites in March and April and envisioning 200 stores in Canada in the next two years.
“Every Canadian is going to check those out,” said Cohen.
Along with Nordstrom and Target, Ann Taylor is planning its first international stores as well, in Yorkdale Shopping Centre and Eaton Centre, both in Toronto, this fall. Loft will open its first international store this fall, in the Yorkdale Shopping Centre. Loft and Ann Taylor are divisions of Ann Inc. Last year, J. Crew crossed borders by opening a store in the Yorkdale Mall, and is opening more in Canada.
The local competition isn’t standing still, either. Holt Renfrew is looking to increase its selling space in Canada by 40 percent by the end of 2015. Holt is expanding its Yorkdale store to double it in size to 120,000 square feet by August 2013.
The Bay is also aggressively renovating and modernizing its big flagships, seeking brand partnerships, advancing private brands and right-sizing assortments to favor fashion, food and shoes over furniture and home products. The parent Hudson’s Bay Co., which also operates Lord & Taylor in the U.S., is eager to go public and soon, before Target and Nordstrom arrive and the market share wars begin.
Retail analysts said Nordstrom in Canada will fill a wide-open niche between Holt Renfrew and Harry Rosen on the high end, and Sears Canada and The Bay in the midtier, though one retail executive in Canada expects Nordstrom to skew its merchandising to the higher side of its price spectrum. Aspirational luxury and beauty are seen as two of the strongest opportunities for Nordstrom in Canada.
The analysts also said they believe Target will most deeply affect The Bay, much more so than Nordstrom coming in with just a handful of locations, though they noted that The Bay’s ceo, Bonnie Brooks, is doing a good job modernizing the retailer. Last July, Richard Baker, governor and ceo of Hudson’s Bay Co., when asked about Target, said in America, Target’s impact on Macy’s Inc. is slight so he expects Target to have minimal impact on The Bay.
Moving into Canada won’t be cheap for Nordstrom considering it involves paying rent, renovating locations, and new logistics to operate cross borders and in two languages.
However, as Wendy Liebmann, founder and ceo of WSL Strategic Retail, said, “Canadians are very aware of Nordstrom and its high level of service, just as they are aware of Target. There is a gap in the market for something more approachable than Holt Renfrew but higher than The Bay or Sears.”
Asked why there is so much retail activity in Canada, considering its small population of 34 million, Liebmann responded, “The fundamental issue is that most U.S. retailers recognize that they can’t continue to open more stores in the U.S., but they are looking for growth and in markets [such as Canada] that are more accessible, feel more familiar and where they feel there is less risk.”