MONTREAL – Canadian apparel exports to the U.S. have shown a steady decrease in the last three years as the nation’s currency has strengthened against the U.S. dollar and competition from Europe has grown.
In those three years, the worth of the Canadian dollar increased from about 62 cents to 86 cents, as of Friday. Apparel exports to the U.S. in that period declined 13.1 percent in 2003, 8.1 percent in 2004 and another 14.4 percent in 2005, according to research from Trendex North America in Toledo, Ohio.
That translates into a decline from a high of $2.7 billion in apparel exports to the U.S. in 2002 to an estimated $1.9 billion in 2005, converted from Canadian dollars.
During that period, the U.S. share of Canadian apparel exports has also declined, to 91 percent from 96 percent. The most successful exporters to the U.S. include Parasuco, Silver Jeans, Nygård, French Dressing, Mac & Jac and Tribal Sportswear.
As the value of U.S. currency declines against the Canadian dollar, apparel exports from Canada face stiffer competition from Europe, according to Trendex president Randy Harris.
“The Italians and other European countries were caught napping and have finally woken up to what Canada was doing by offering a less-expensive product than their designer labels,” Harris said. “Canada is doing a good job in the U.S. market, but they are finding it difficult to compete against companies with high brand recognition. They shouldn’t abandon the American market, but I believe their long-term success lies in tapping other markets such as Japan, which is less price sensitive than the U.S. market, and the Japanese economy has turned around after a dismal 10-year performance.”
He said Canadian apparel manufacturers have done well with U.S. independent specialty retailers that emphasize quality and styling, and are less price sensitive than department stores and specialty store chains.
“The problem with the department stores is that they’re huge conglomerates, and Canadian manufacturers don’t have the production capacity or price advantage to supply them,” Harris said.
On the retail side, U.S.-based chains and other foreign stores that have moved into Canada now account for 13 percent of the market, up from 7.4 percent in 2001. Harris predicted that traditional Canadian stores would continue to lose market share to foreign retailers such as American Eagle, Zara and H&M.
“Competition will grow, but at a much slower pace because most of the big names are already here,” he said. “Chico’s and Abercrombie & Fitch will have an impact, if they’re coming, which they have both announced, but neither one is here yet.”
Harris predicted Target might finally open in Canada, but only if a major chain such as Zellers were to fail and Target could take over its prime sites, as Wal-Mart did in 1994 when Woolco went under. To maintain market share, Harris said Canadian retailers must improve their supply chain management, a difficult task in the face of players like Zara, which changes merchandise every two weeks from a world-class supply chain.