Our Thinking

February 2015. It’s a new year for Canadian retailers. A year that will see continued expansion of US and other foreign retailers into Canada’s retail heartlands. Last year saw the first opening of a Nordstrom this side of the border, and this year sees the arrival of Saks and Chico’s, and Uniqlo has recently announced store openings in Toronto in 2016.

The rise in the number of foreign retailers has coincided with the loss of many well-known Canadian retailers. Jacob closed all its stores, and Reitmans is in the process of removing the Smart Set brand from its women’s apparel portfolio. US retailers are taking increasing premium mall space from Canadian companies and many paint the future of Canadian retailing as bleak, fuelled by increased competition and an inability to compete with the supply chains of their competitors.

It does appear that Canadian retailers have failed to continue to innovate and meet the needs of Canadian shoppers. A staggering statistic is that almost $7 out of every $10 spent by Canadians shopping online go to retailers headquartered out of Canada, and $4 out of every $10 spent actually go to non-Canadian ecommerce sites.

These numbers do not take into account the impact of omnichannel and its role in Canadians’ purchasing decisions at each point along their path to purchase. One reason cited for Target’s failure in Canada was its inability to provide an online shopping experience in the Canadian market.

Commentators often excuse Canada’s lack of innovation in omnichannel and online retail as a result of delivery costs and Canada’s dispersed population. However, this argument becomes more difficult to make when delivery costs from the US are higher and typically involve additional import charges.

The reality is that foreign retailers are making delivering to Canada a worthwhile business model, despite issues with currency exchange rates, import charges and cross-border delivery costs. And among the few Canadian retailers who do offer online shopping solutions, very few make ecommerce available outside Canada. According to a study by L2 and Google, just 13% of Canadian retailers offer full international ecommerce.

When developing an omnichannel experience, there are two potential courses of action. The first is to expand on a module-by-module basis, gradually introducing each element of an omnichannel solution. Growing digitally piece-by-piece presents the opportunity to learn from best practice, but deprives a retailer of first-mover advantage. The second approach, then, is to develop a best-in-class solution from the ground up. And though building a best-in-class solution requires accepting a significant level of risk and capital investment, it has the potential to deliver Canadian retailers first-mover advantage, leading to an increase in market share and revenue.

Most important of all, however, is to act – and to begin to regain revenue that Canadian retailers are losing to multinational retailers who are not afraid to compete in a global market for Canadian shoppers’ dollars.

So, as a Canadian retailer, what should you do? It is vital that you invest in meeting consumer needs at all points on the path to purchase. This means integrating the in-store and online shopping experiences, for example by enabling customers to explore your product portfolio online and offering them the choice of having products delivered and returned across multiple points. A shopper should be able to order online for home or store delivery, and likewise be able to return a product by post or to the store itself. Since competition in Canadian retail will only increase, the need to evolve from ‘bricks and mortar’ to ‘clicks and mortar’ is now glaringly apparent.