Mar. 3, 2023 "Nordstrom followed a familiar path to failure: too big, too fast — and not Canadian enough": Today I found this article by Pete Evans on CBC:
Nordstrom's decision to close all its stores in Canada and seek protection from its creditors is just the latest example of a U.S. retailer setting up shop to much fanfare, only to have it all fizzle out.
Less than a decade after launching in Canada, the U.S. chain announced Thursday it will shutter all 13 of its department stores across the country in the coming weeks as it puts its focus on its domestic operations and jettisons a Canadian division that has never managed to eke out a profit.
Court filings show that in 2022, Nordstrom's Canadian division sold about $515 million Cdn worth of goods. But it lost $72 million while doing so.
The news came as a surprise for many shoppers and employees, but it wasn't a shock for Liza Amlani, principal and founder of the Retail Strategy Group, because she saw it coming.
"When Nordstrom came into Canada, they scaled way too quickly," she told CBC News in an interview.
The chain launched in multiple cities,
and then brought its discount offering Nordstrom Rack to the marketplace too, before the parent stores had even found their footing.
"The challenge with scaling too quickly is that it's very difficult to understand truly what that customer wants," she said.
"Because a customer in Alberta is very different from a customer in Toronto, who is very different from a customer in Vancouver."
Amlani says many American retailers make the classic mistake of assuming that whatever they do in the U.S. will work just as well in Canada — and they often pay the price.
Perhaps the most well known example of that phenomenon in action was Target, which launched in Canada to much fanfare in 2013, only to shutter all 133 locations barely two years later.
Canadians who travel to the U.S. were very familiar with the chain, so she says when its offerings in Canada ended up being a strange mix of higher-than-expected prices and a lot of empty shelves, Canadians rejected it.
Nordstrom fared a little better, but Amlani says in retrospect the chain should have simply opened two stores, perhaps one each in Vancouver and Toronto, while it learned about the market. "Then they would have really been able to build something," she said.
While the chain made many mistakes along the way, retail consultant Bruce Winder says the main one was that Nordstrom simply misjudged the opportunity presented by the Canadian market.
"They probably just overestimated how rich we are and how much we spend on luxury goods," he said in an interview. "We just don't have as many people who would desire that kind of merchandise they needed to break even."
The pandemic has brought about major upheaval in the retail sector in general, but department stores face even more challenges than most because they are under siege from all sides, Winder says.
Discount stores are eating away their value-oriented customer base from below,
while luxury brands are increasingly going direct to consumers instead of through retail channels.
And they're often saddled with legacy costs like rent and store maintenance for their huge storefronts, which makes it hard to pivot on the fly.
"I think the department store is on its last legs," Winder says. "The business has been under fire through everyone from J.C. Penney to Macy's and in Canada ... Sears, Eaton's closing years ago, and the Bay is starting to wind down stores carefully too."
"The department store is probably at the last leg of its life cycle."
That may well be the case, but the chain isn't pulling its department store model everywhere. The news of the Canadian closures came as the U.S. parent revealed quarterly earnings this week, numbers that showed the chain took in more than $4 billion US in revenue over the busy holiday shopping period, and booked a profit of $119 million.
Those figures topped expectations, but the company has faced pressure from activist investors seeking to reverse a two-year slide in the company's stock price, which is why Winder speculates that the chain basically gave up in Canada to focus on problems at home.
"What companies do normally when they're under siege like this, is they start to jettison any assets they can," Winder said. "Like a ship that's sinking a little bit, they throw things overboard and ... they probably looked at Canada and said, hey, it's about three per cent of our business, we're not making money yet, let's just cut this off."
Professor Nicole Rourke, who teaches business at St. Clair College in Windsor, Ont., says the rise in online shopping is hurting chains like Nordstrom that have an extensive brick-and-mortar presence and associated costs.
"It's a tough time to be in the department store industry," she said in an interview. "E-commerce has really made it very difficult to stay in business and be profitable."
The chain couldn't manage to make any more money selling online than it could in its physical stores, and as part of its wind-down in Canada, the chain has actually halted all of its online sales at Nordstrom.ca, even as the physical stores will soon be offering liquidation sales to entice shoppers.
Nordstrom's inability to make online shopping work for them says a lot about why they went under, because Rourke says the Canadian marketplace is uniquely positioned to be ideal for those who can excel at e-commerce.
"Because we're so geographically dispersed, we are the perfect setting to do e-commerce in," she said. "That's something that's often overlooked by a lot of American retailers."
Ultimately, Nordstrom may be destined to be just the latest in a long line of American chains that came north with great expectations, only to fail. "They looked at their product lines, and they just said, You know what, we're not going to make it in Canada. It's just not profitable enough for us," she said.
"They gave it a good old college try but they just couldn't see the growth potential."
Jun. 7, 2024 "Canadian retailer Simons is expanding. Can it succeed where its peers couldn't?": Today I found this article by Jenna Benchetrit on CBC:
Standing between the racks at a Simons store in Mississauga, Ont., Luke Gillet was on a mission to buy his dream wedding suit.
"They have a crazy colour that I want to wear," Gillet explained. "There's a pink suit here that I was really hoping to find and it matches my fiancée's dress, which has sort of a blush pink."
Gillet is happy to support a Canadian-owned business, but that's only one part of the retailer's appeal, he said: "The selection is great. The fashions are current, the prices are really good."
The Canadian fashion and homeware retailer is betting on happy customers like Gillet as it continues its gradual expansion.
With a 10-store presence in Quebec,
and a handful of others sprinkled between Vancouver,
Edmonton,
Calgary
and Halifax,
the brand is opening two locations in Toronto next year at Yorkdale Shopping Mall and the Eaton Centre —
in addition to its Mississauga
and Ottawa stores.
Yet, as the company relocates to a space haunted by the ghosts of big retailers past
— Nordstrom, Eatons and Sears are all former tenants of the Eaton Centre space
— it's a stark reminder that department stores have struggled to gain a foothold in the Canadian market.
The aforementioned brands (and Target) have each met their demise in this country over the last two decades, some because of the challenges posed by transplanting a U.S. business into Canada.
Even as
rising costs,
picky customers
and online competition
roil an unpredictable retail industry,
Simons says it's doing things differently. Can it beat the big retail curse?
'The reality is we have to stay competitive'
"I would not say that ... because other department stores have failed in those places, that necessarily means that Simons is going to fail," said Joseph Aversa, a retail management assistant professor at Toronto Metropolitan University.
"Simons went through a lot of challenges, right? In 2022, they experienced a fair bit of difficulty," he noted. The retailer was family-run until that year, when it appointed its first outside CEO in Bernard Leblanc to steer the company out of the shadow of the COVID-19 pandemic.
Since then, the company has been "very calculated in terms of their expansions," Aversa said.
"They've grown relatively organically across across the country."
Simons has seen steady growth in the last few years coming out of the pandemic, CEO Leblanc told CBC News in an interview, seeing a three per cent bump in sales growth from 2022 to 2023.
But the executive is well aware of the challenges that its forebears experienced in the Canadian market. The retailers that succeed in a market plagued by failure are the ones reinventing themselves by refreshing the customer experience, he said.
"That's very much what we're about … listening to our customer, being sure that we're evolving, that we're offering what they're expecting," Leblanc said.
While Simons stores in Toronto, Montreal, Quebec City and Vancouver will have the same inventory, the company will adjust its offerings based on buying behaviour.
He says it also tries to cater to its shoppers, which he says range from younger teenagers to mature adults, by bridging quality fashion and reasonable prices. Whether that will resonate as the company expands is yet to be seen, he acknowledged.
"I guess you never know, right? The reality is we have to stay competitive.
We need to listen to what the clients are asking for.
We need to continue to be obsessed in serving them and exceeding their expectations."
'The customer is changing'
Liza Amlani, the principal and co-founder of Retail Strategy Group, said that Simons does well
in tailoring its products to suit customer tastes and sizes,
understanding their shopping habits in-store and online,
and having salespeople who know the product well.
U.S. retailers like Nordstrom made a fatal mistake in assuming that Canadians shop the way that Americans do, she said.
"We are different. We are not another state out of the U.S., we are another country. And across Canada, we're very different: The Vancouver customer is very different from the Toronto customer," noted Amlani.
She said the chain expanded too quickly in Canada, spreading itself thin instead of investing in one or two flagship locations that could draw in commuters — unlike the U.S., where Nordstrom locations are clustered together.
Other analysts have noted that the chain overestimated how much Canadians would spend on luxury goods.
And, without a Canadian distribution centre, Nordstrom was pulling stock from the U.S. — costing money from freight and duties — or from its Canadian stores, which meant its stores were low on certain styles or sizes, Amlani said.
Simons' foremost competitor, Hudson's Bay, has significantly cut down its footprint, announcing the closure of its Regina location after exits from Quebec, Alberta, Manitoba and Ontario.
Almani says Hudson's Bay has fallen behind the times and dropped the ball on customer experience.
"The customer is changing, but the department store is not evolving with them," she said.
For a brand like Simons, there are other risks when expanding into Canada's retail market, Amlani said.
"We have a lot more choices as customers today.
We have digital shopping, we have Shein and Temu — ultra fast-fashion players,"
she said, referring to the Chinese online retailers, whose enormous inventory and low prices have upturned the industry.
Customers are also shopping on Instagram and other social media sites, she said.
But she says she expects Simons to succeed in its expansion because it "has the trifecta down — the trifecta being
product,
customers
and marketing.
And what they're doing is they are connecting all the dots," Amlani said.
"Unless there is another department store that's going to serve the needs of gen X and gen Z, we are going to see Simons thrive and succeed."
https://www.cbc.ca/news/business/simons-expansion-continues-1.7196907
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