Is Target Thinking About Going Internatinal Again
Business organization reporter Francine Kopun explains the impact of Target closures nationwide and why the U.S. giant was unable to profit in Canada.
Target's failure sends a message to international retailers
Target's shocking retreat reveals how difficult information technology is to succeed in the Canadian retail market place
Target Canada, in shuttering 133 stores, may be amidst the first retailers to announce this year that it volition close upward shop, but information technology won't exist the concluding in what is expected to be another year of retail upheaval in Canada.
"Retail is not encephalon surgery — it's more complicated. It'southward all about the details and it'due south every mean solar day," said Diane Brisebois, president and chief executive of the Retail Quango of Canada, reacting to the news that Target was pulling up stakes in this state.
Since 2011, when Target bought the rights to 220 Zellers leases from Hudson's Bay Co. for $i.82 billion, the Canadian retail landscape has been in flux, with former stalwart Sears vacating prime number locations in major cities, Nordstrom opening in Calgary and Simons in expansion mode.
Saks 5th Avenue is scheduled to open its commencement location in Toronto afterwards this year.
Retail capital expenditure in Canada jumped from $8.3 billion in 2010 to an estimated $10.21 billion in 2013, co-ordinate to figures from Statistics Canada.
"It'southward never a boring day in retail real estate," said John Crombie, senior vice-president of Triovest Realty Advisors.
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Women's clothes seems to be having a dampening effect at the moment, said Crombie. A couple of years ago it was dwelling house improvement stores that were suffering. That'south when Lowe'southward moved into Canada, dragging down profitability for all players in the sector.
Mexx is liquidating 95 stores beyond Canada after the brand, headquartered in Amsterdam, filed for bankruptcy. Mexx had a thirty-year history, said Gilles Benchaya, a partner at Richter Consulting Group, the firm treatment the file.
About 30 Mexx stores will close by the end of the month. The other 65 will shut by the end of February.
Bowring and Bombay & Co. filed for creditor protection last summertime, emerging with a slimmed-down portfolio of 80 stores, down from 120. In 2014, Jacob Inc. announced information technology would close all 92 stores in Canada and Reitmans Canada Ltd. pulled the plug on its Smart Set chain, converting 76 stores to other brands and endmost 31.
Sony Corp. announced Th it will close all fourteen of its stand-lonely locations in Canada.
"Unfortunately, there will likely be a couple more restructurings this yr. There has been a steady influx of new players in the market. There is a lot of volatility," said Benchaya.
"The outcome with retail is if they lose five to 10 per cent of sales, it's enough to put them in a serious liquidity crunch. You don't have to lose 50 per cent of sales to be in trouble."
Subsequently the U.S. economic system was shattered in 2008-2009, triggering a worldwide recession, American retailers seeking a rubber haven began looking to Canada, where banks and the housing market remained strong, said Crombie.
"In 2010-2011, Canada was the picayune darling as it related to retailers coming here," said Crombie.
Crate and Barrel met with success at Yorkdale, becoming one of the chain's highest producing stores, Crombie said. Victoria's Secret too did spectacular business when information technology launched in Canada.
But mall productivity in the U.S. has improved dramatically in the past 2 years, according to Canadian Apparel Insights, a newsletter published by the marketing research and consulting firm Trendex North America.
"I recollect what is really happening is the bounceback of the U.S. A lot of Americans are saying, 'Nosotros don't need to exist in a market like Canada,' " said Crombie.
A study issued by the commercial existent estate company CBRE Ltd. in late 2012 ranked Canada 6th amid countries attracting new retailers.
In CBRE's most contempo study, Canada no longer ranked among the countries attracting the most new retailers. It did not even have a metropolis that ranked among the top twenty virtually targeted markets.
The news hasn't been all bad for Canadian retailers. Aforementioned-24-hour interval motorcar trips to the U.Southward. have been dropping steadily since December 2013, equally the loonie drops in value relative to the U.S. dollar, co-ordinate to Trendex.
Canadian consumer spending rose by 3.8 per cent on a year-over-year basis in the 4th quarter of 2014 post-obit iii consecutive quarters of stagnant growth, co-ordinate to a report to be released Monday past Moneris, Canada's largest credit and debit menu processor.
New companies keep to throw open up their doors in Canada. The Japanese retailer Muji, known for its minimalist style in a range of goods, from clothing to abode role supplies, opened its doors off Yonge-Dundas Square to long lineups of eager customers on Nov. 29.
It has been reported that Japanese retailer Uniqlo is also interested in the Toronto market.
The Target closures are not an indication of the relative wellness or the future of the Canadian retail market, said Michael LeBlanc, senior vice-president at Retail Quango of Canada.
"On the surface it'due south a elementary market. But there are deep structural and other competitive differences to be taken into account.
"Measure twice, cutting once. I recollect that message has gone out."
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Source: https://www.thestar.com/business/2015/01/16/targets-failure-sends-a-message-to-international-retailers.html
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