By Farla Efros, President, HRC Advisory
 
The retail industry has been on a tumultuous ride over the past few years, and there’s no signs of it slowing down. Retailers around the world continue to experience challenges which include an uncertain fate for brick-and-mortar, growth of e-commerce, and adoption rates of mobile commerce. Not to mention, there are the continually developing, emotionally erratic, and often fixated generations X, Y and Millennials, who are putting the squeeze on new and well-established retailers, alike. 
 
Canada is no exception to these trends. In the last several months we’ve seen many retailers declare bankruptcy, file for protection, downsize, put stores up for sale, or exit Canada altogether. Yet we’ve also seen a lot of new entrants boldly make their way to Canada at both the high-and low-ends of the retail spectrum including Saks Fifth Avenue, Nordstrom, and Uniqlo, just to name a few. 

The Canadian retail market offers its own share of challenges. Our population is seeing very slow growth and our dollar is struggling. In fact, Statistics Canada recently revealed that retail sales dropped .01% in April, a sharp contrast to the .07% increase that had been forecast. Add to this the fact that inflation was stronger than expected, and we have a renewed recipe for uncertain times that directly affects the retail industry, as conservative Canadian consumers pull back on discretionary spending.  

So what does it take to thrive in this turbulent market? Below, we identify five Canadian retailers, in five different sectors, that stand out as having the right strategic combination to thrive in this time of change. By establishing parameters for experimentation, creating a differentiated environment, building a cult around quality, pushing and testing digital, and understanding and catering to their customers in unique ways, these retailers are ensuring current and future relevance – and success. Each of the retailers, below, are listed in alphabetical order. 

Aritizia 
The ultra-hip, style-savvy Vancouver based retailer bridges the gap between upscale boutique and fast fashion, catering to the highly desirable market of women and girls ages 15 to 45. Aritzia is a cult favourite with strong ties to the hearts and wallets of Canada’s ‘coolest kids’. In contrast to the recent struggles and closures of many Canadian retailers, particularly those experiencing the “middle squeeze,” Aritzia’s positioning is decidedly fashion-forward and based on quality, not price (a step up from J.Crew and Banana Republic, but not as high-end as Barneys New York). With a wide assortment of both branded and private label merchandise that appeals to multiple demographics from the teen and tween set to modern working women, Aritzia has carved out a strong and unique niche that differentiates it from the competition and is driving U.S. expansion. The company recently opened a store on the corner of upper and lower Fifth Avenue in New York City – literally and figuratively positioning itself as a destination for style-savvy U.S. shoppers who can’t quite afford a closet full of luxury garments but aren’t satisfied with the disposable fare offered by global mega-chains like H&M and Zara.

Canadian Tire 
A beloved Canadian icon, Canadian Tire defines and caters to its Canadian consumers like no other. With its highly successful evolution from the old Canatire business and acquisitions like Marks and FGL Sports, Canadian Tire continues to grow and expand the brand’s brick-and-mortar reach. What sets the business apart is how it is pushing the needle in the digital space. Canadian Tire believes that the growth of e-commerce has fundamentally shifted the in-store shopping experience from being ‘needs driven’ to ‘event driven’. To that end, Canadian Tire has created a destination experience for the entire family, offering ‘something for everyone’. Furthermore, the company recently reduced its flyer to feature digital much more significantly than before.  As a result, sales are up across the board and this iconic brand continues to surprise us all. It continues to be laser-focused on, and tied to, the Canadian consumer and says expansion into the U.S. is not in the cards, as it would only be a distraction. Canadian Tire has built a reputation from an early age that is carried throughout a lifetime.

Couche-Tard 
Couche-Tard has grown into one of the top convenience store players in the world. Based in Laval Quebec, Couche-Tard is not only the clear leader in the Canadian convenience store industry, it is also the largest independent convenience store operator in the U.S. and a leader in convenience store and road transportation fuel throughout Europe’s Scandinavian and Baltic countries, as well as having a significant presence in Poland. With the acquisition of American retailer The Pantry, Inc. in March, 2015, more than 1,500 additional stores were added to Couche-Tard’s network in the United States, bringing its total to 7,815 convenience stores throughout North America — including 4,870 stores with road transportation fuel dispensing. The secret to the company’s success may lie in its very nature as a small format convenience store. In a time when the overall retail industry is struggling and many retailers are dealing with large, unproductive real estate, Couche-Tard operates small format locations that drive incremental neighbourhood growth and keep operating costs low. While space limitations prevent the stores from going deep into product categories, the choice to go broad ensures ability to capture the sale. And while convenience stores typically operate off of a higher cost base than bigger stores, they are likewise able to sell goods at higher prices than grocers – a fact that consumers are both aware and accepting of, in exchange for the ease of making quick, local pick-ups. Once known only for cigarettes and beer (depending on the province), today’s convenience stores seamlessly satisfy ‘fill-in’ trips for urgent essentials, as well as quick lunch or snack trip for consumers on the go. With thousands of locations, efficient formats, and a broad base of products to satisfy the needs of time-starved consumers in need, Couche-Tard is a retailer whose growth trend shows no sign of slowing down.

Dollarama
Leading the charge among value chains in Canada, Dollarama’s broad assortment of paper products, food, and accessories hits just the right note for those seeking great quality goods at $3 and under. Although it packages itself as a dollar store, Dollarama is quite different from others in the space. Catering to the pre-teen/teen market, the company focuses on what its customers ‘want’ versus only what they ‘need’, making it a treasure hunt for kids that also appeals to parents. But what makes Dollarama truly unique is that it doesn’t look like a dollar store — its stores are exceptionally clean with wide aisles, great site lines, and a large array of both branded and unbranded products that appeal to any shopper. It has built a strong reputation for party products, summer essentials, loot bags, back to school and crafting, not to mention the exceptional holiday business it has created —  notably around Halloween and Christmas. The company has also been strategic when it comes to picking its store locations, both urban and suburban, and alters its assortment to satisfy the different needs of customers in each area. With its compelling value, pleasing shopping environment and convenient locations, Dollarama continues to exceed the expectations of its everyday consumer. Sales are up 13% on average with checkout rates rising +5.9%.  In a time when many retailers are shuttering doors, Dollarama is in growth mode, having opened 17 new stores in its first quarter of fiscal year 2016. 

Indigo Books 
Toronto-based Indigo is the largest book, gift and toy specialty retailer in Canada, and it is also a story of reinvention. Take a declining book business; add in lifestyle, gift giving, accessories, toys and stationery, and you’ve given it a whole new reason for being. It’s been well documented that books have been among the retail categories hardest hit by the growth of technology. The competition that started with Amazon quickly escalated to include e-readers, tablets, digital movies and music. In the U.S., we saw Borders file for bankruptcy and are watching Barnes and Noble struggle to hang on. Indigo took the lessons and quickly changed strategy to stay relevant to the Canadian consumer by reinventing its business with a product assortment that goes well beyond books. Building on this momentum, the company created a joint venture to bring American Girl doll shops into several of its stores. Next, they sought to increase traffic by replacing existing coffee shops with consumer favourite, Starbucks. They have also become a Canadian favourite for teachers gift and a go to for stationery and truly have a very strong seasonal business that helps to keep them active. The results of such an innovative and fluid strategy are clear: same stores sales are up 6.8%, with significant growth in each category including double-digit growth in toys and a win for American Girl, which is exceeding growth goals and expectations. 
 
Other standouts, which have been mentioned before, include Lululemon, Hudson’s Bay, Harry Rosen and Longo’s.  Each of these retailers have thrived by pushing the edge and creating exceptional experiences that build loyalty, drive sales and separate them from the pack. Although times are tough for many retailers, some Canadian companies are thriving through innovation while addressing relevant consumers. 

Farla Efros is President of HRC Advisory, a leading retail advisory firm. She previously worked with Office Depot, where she served as the Executive Vice President and Chief Merchandising Officer. She has coached executives at numerous leading retailers and consumer packaged goods companies in the area of category management and assortment optimization, and she has broad experience in merchandising and category management, having worked with many of the world’s leading consumer packaged goods companies and retailers. Ms. Efros can be reached at: fefros@hilcoglobal.com.