Failing US Retailers In The Canada Market: Retail Expert, Explains Why
The Canadian economy is dynamic and ever-evolving. Retailers need to be able to adjust to the needs of Canadian customers in order to succeed. Retailers in the US who are accustomed to working in a different market may find this challenging. US retailers have been facing challenges in the Canadian marketplace for a number of years. In fact, some of the biggest names in US retail – including Target and Nordstrom – have failed in Canada. Several factors contribute to this, including variations in consumer behaviour, the high cost of a retail business in Canada, and the difficulties associated with cross-border logistics.
In recent years, we have seen several high profile U.S. retailers have abandoned the Canadian market, including Nordstrom and Target. These retailers are not only having trouble in Canada; they are also having trouble in the US. This is an international issue, not just one that affects Canada.
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The well-known American retailer Nordstrom announced in 2014 that it would be coming into Canada. With high intentions for its Canadian foray, Nordstrom had already launched stores successfully in Mexico and the United Kingdom. They opened five locations in short succession in Ottawa, Vancouver, Calgary, Edmonton, and Toronto.
These shops were praised for their upscale appearance and atmosphere, as well as the wide variety of upscale goods they offered. They invested a lot of money into building a Canadian e-commerce platform and developed new outlets in Halifax and Mississauga.
” Canadians prefer to buy in-person rather than online, with e-commerce only representing about 4.5% of total retail sales in Canada compared to the U.S. where online shopping is more prevalent. Nordstrom errored by focusing on their e-commerce .ca website instead of investing in the in-store shopping experience.” said Retail Expert, Jeanel Alvarado.
Nordstrom’s expansion into the Canadian market ultimately failed and by first quarter of 2023 Nordstrom (including Nordstrom Rack stores) made the decision to completely exit the Canadian market and close all of its stores there.
Why did Nordstrom’s experiment in Canada fail? Nordstrom failed to adequately research the Canadian market before expanding, they did not have in-depth knowledge on how to market luxury goods to Canadian consumers, both in-store and online to drive traffic and sales.
Secondly, they committed various expensive merchandising errors, including failing to provide competitive pricing, promotions and loyalty programs to compete with both local and online competitors. They failed to appropriately market their merchandise offerings, with new designer collections only available in the U.S. or online.
“In the U.S., retailers often have massive distribution networks, but the same is not true in Canada, making it challenging to keep shelves stocked and prices competitive. Many Canadians may see a new fashion campaign on social media, and then when they check in stores they are not available, and redirected to shop online.” said Retail Expert, Jeanel Alvarado.
Shipping products from the U.S. to Canada can also be more expensive and complicated than shipping products to other markets, such as Europe and the U.K.
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Retailers have struggled to adapt to changing consumer behaviour. The most egregious instance of an American retailer failing in Canada has to be Target. The big-box retailer was tremendously upbeat about entering Canada just a few years ago. Many Canadians were excited with the thought of buying all their favourite Target products without crossing the border.
Sadly, things didn’t work out the way they had hoped. The corporation invested millions of dollars and opened 133 outlets in Canada, yet they were still unable to earn a profit.
“Target’s entry into the Canadian market in 2013 was unsuccessful due to extensive renovation needs, a flawed merchandising system, tight time frames, and inadequate leadership.” said Retail Expert, Jeanel Alvarado.
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Another US company that has had difficulty in the Canadian market is Walmart. Although the large retailer has a considerable presence in Canada, it has long struggled to turn a profit there. Many variables, such as increased labour costs and various consumer behaviours, are to blame for this.
Despite these challenges, Walmart became successful in the Canadian market, which was established in 1994 and now operates over 400 stores in the country. However, retailers must understand the market they are entering and be willing to invest in long-term value offerings to appeal to Canadian consumers.
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The closure of Sears Canada is a well-known failure in the Canadian retail sector, that was Canadian owned and operated. The beloved department store chain struggled for a number of years before closing every location and dismissing every employee. This was a major setback for the Canadian retail industry because Sears Canada was a national retail icon who left behind a lot of empty department store space. This goes to show that it’s not just U.S. retailers who have struggled, even Canadian owned businesses have struggled to keep pace with the needs of local shoppers.
@zellersofficial We’re not much for living in the past, but on National Retro Day, we do as we’re told. So for our first-ever TikTok we jumped on latest trend. This is the latest trend, right? Trying to be cool is exhausting. #retro #retroday #zellers #zeddy #oldschool #blastfromthepast #zellerscanada #zellerscomingback #tiktok #tiktokcanada #trend #teenagedirtbag ♬ teenage dirtbag – sunsetzaudios
Zellers, owned by HBC, was a Canadian discount department retail chain that operated stores throughout Canada for 82 years. Founded in 1931 in London, Ontario, and later based in Brampton, Ontario, the company was purchased by the Hudson’s Bay Company in 1978. Zellers ceased operation in 2013 and its stores were closed.
Now, Zellers is set to reopen stores in Canada, with oneof it’s first stores reopening a new store in Toronto this month. HBC plans to resurrect Zellers, and plans for a retail comeback with plans to open 35 brick-and-mortar stores across Canada to start expansion plans. Customers will also be able for the first time ever to shop from Zellers.ca ecommerce site, to shop from Zellers selection of home good products, that are mostly created in-house under their new private label.
Major reasons for failing retailers (and examples on how to avoid them)
While there are a number of reasons for failed expansions or store closers that are out of a company’s control, if you’re thinking of expanding your business into Canada, keep these things in mind:
- Canadian market is the high level of Canadian pride and loyalty for local businesses. International retailers entering the market must focus on collaborating with influencer who are proudly Canadian, create Canadian focuses advertising content and support local Canadian charities and initiatives if they want Canadians to support their global brand. The brand must have a clear understanding of the Canadian traditions, values and lifestyle.
- Do a thorough market analysis of the local markets in Canada. An in-depth look at the competitive landscape, shopping behaviour, and potential country difficulties should all be included in this research. This will provide insights on where the company’s competitive advantages lie and enable the company to tailor its offerings to better meet the needs of Canadian customer
- Companies need to make sure they have the tools at their disposal to effectively market their products online and in-store. This can entail developing a solid country-specific website, participating in country-specific social media channels (ie. @brandCanada) to reach country-specific audiences with latest brand campaigns, promotions, and in-store events.
- Understand that Canadian’s view luxury different than U.S. customers, Canada is one of the cleanest places in the world, highly-educated and well cultured. Many Canadians are use to receiving top tier service and products, at budget prices. It’s important that international and U.S. retailers review their pricing strategy to determine if they can be competitive in the Canadian market.
- Pop-up shops may not be very successful, it often takes a long-time for Canadians to come around to a new brand so any retail expansion strategy should be looking to build this new relationship over the long term.
Nonetheless, the retail industry in Canada is not doomed as a result of these mistakes. The country has seen great success for Canadian retail companies like Lululemon, Aritzia, Canadian Tire, Best Buy and Mountain Equipment Co-op. This shows that demand for products and services produced in Canada is still strong. What these failures do indicate, however, is that US merchants need to be cognizant of the specific difficulties posed by entering the Canadian market.
I have 15 years of experience in the retail industry including expertise in marketing, operations, merchandising, buying, shopping and technology. I am a speaker, consultant and former senior managing director of The School of Retailing, University of Alberta. My education includes a Bachelor of Commerce Degree from The University of Alberta in Marketing, Certificate in Real Estate and a Diploma in Fashion Merchandising and Buying from LasSalle College, a Canadian private school founded in 1959 by fashion designer Jean-Paul Morin.