By Andria Cheng
Nordstrom Inc. (JWN) this week announced its plans to enter the
Canadian market in 2014, joining discount retailer Target Corp.
(TGT), which aims to open its first store north of border next
year.
Limited Brands Inc.'s (LTD) Victoria's Secret chain in 2010 also
opened its first store in Canada. Wal-Mart Stores Inc. (WMT),
Costco Wholesale Corp. (COST) and Sears Holdings Corp. (SHLD)
already have operations there.
U.S. retailers are battling a saturation of domestic store
footprint and competition from online retailers led by Amazon.com
Inc. (AMZN). With U.S. brick-and-mortar retailers in a defensive
mode, Canada, which has enjoyed a more sound economy and a rising
currency in recent years, looks like a more appetizing a growth
opportunity, analysts said.
According to the most recently available data from Retail
Council of Canada, the direct contribution of retail trade to the
Canadian economy was about 74.2 billion Canadian dollars in 2009,
representing 6.2% of Canada's gross domestic product. (Canadian
dollar and U.S. currency are almost at parity.) Retail employment
represented about 2 million, or 12% of Canada's total working
population in 2009, the report showed.
The Retail Council study also indicated the rate of Canada's
retail sector GDP growth was 34% faster than the U.S. retail sector
and 96% greater than the Canadian economy between 2004 and
2008.
By comparison, a separate National Retail Federation report
showed U.S. retailers support one in four American jobs with a
total of 41.6 million retail jobs. The industry has a $1.2 trillion
direct impact on the U.S. GDP and is directly and indirectly
responsible for 18% for the U.S. GDP, the NRF report showed.
"Canada, albeit a smaller market, provides a way for retailers
to grow internationally that feels more comfortable and
affordable," said Wendy Liebmann of consulting firm WSL/Strategic
Retail, in an interview. With the saturation of U.S. stores,
"retailers can't grow by continually adding stores in the U.S. (The
trend) is driven by the reality check."
Canadian shoppers also may prove to be a lot more profitable
demographic.
A WSL survey of about 1,500 shoppers each in the U.S. and Canada
in May showed Canadian shoppers weren't as aggressive as American
consumers when it comes to coupon usage or scouring the Internet
for promotions. Fewer sales translate to fatter profit for
retailers.
For instance, while 68% of American women use coupons when
shopping, 55% of Canadian women do, the survey showed. While 61% of
American women search online for deals, 50% of Canadian women
do.
The survey's finding also showed 71% of American women pick up
circulars in stores, versus 57% of Canadian women.
"America is a very aggressive promotional market," said Ms.
Liebmann. "American shoppers have been taught by retailers to use
coupons and shop frequent sales. In most other markets around the
world, they don't have sales for every holiday."
The survey also showed that retailers may have less to worry
about online shopping in Canada.
Half of Canadian women said they shop online, compared to 75% of
American women, the survey showed. While about half of Americans
have the ability to download apps onto their mobile phones that may
allow them do things such as price comparison, only 26% of
Canadians are able to do that on their phones.
Retailers "don't have to go in and create this highly
price-sensitive promotional market," Ms. Liebmann said. Target and
Nordstrom "have found a gap in Canada. There's a relevant
opportunity."
Nordstrom plans to open its first store in Canada in 2014.
-Write to Andria Cheng at acheng@marketwatch.com
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