2017 Canadian Retail Forecast [Analysis]

Though some are predicting that 2017 will be a slower year for retail expansion in Canada, there’s still plenty on the way for various regions of the country. In 2016, a number of major international retailers entered the country, and 2017 will see some of these brands expand into various other regions of Canada. As well, a number of new international brands will enter the Canadian market this year, further creating competition for homegrown and other retailers doing business in this country. Industry insiders tell us that this will be a busy year of reporting for Retail Insider, and the following is a discussion of some of the trends that we expect to see for Canadian retail in 2017. 

Expanding Recently-Entered International Brands

A number of international brands opened stores in Canada in 2016 and will expand into new markets into 2017 and onwards. Toronto saw the openings of Canada’s first Sandro and Maje locations, with both expected to move into the Vancouver market as early as 2017, as well as possibly Montreal. Trendy NYC-based eyewear retailer Warby Parker opened its first two Canadian stores in Toronto in 2016 (Queen Street West and Yorkdale) and in 2017, it’s expected to expand westward. We’ll also see further expansion of beauty brands in 2017, with new stores for names such as Urban Decay, NYX, Kiehl’s, and a first-to-market fragrance concept that we’ll reveal in a separate article this month. 

Two popular Japanese retailers will also be expanding their Canadian store counts. Minimalist Muji, which currently operates three stores in the Greater Toronto Area, will announce its first two Vancouver locations in early 2017, with a goal of operating between 15 and 20 Canadian stores by the year 2020. Fast fashion retailer Uniqlo is also expected to make Canadian store announcements in 2017, and it remains to be seen where they’ll land next (the company says that Vancouver is the likely next target market, as well as further GTA expansion). 

Swiss luxury conglomerate Richemont Group is making a big push into Canada in 2017, particularly in the Toronto and Vancouver markets. Both cities will see Richemont’s Van Cleef & Arpels nameplate open stores this year, and other Richemont brands such as Piaget, Officine Panerai, Vacheron Constantin and IWC Schaffhausen will also open stores. Established Richemont brands such as Cartier will also be making movements in Canada, including a new Vancouver flagship that we’ll discuss at a later date. 

An entire essay could be written on expanding international brands alone, so we’ll keep it brief and discuss these throughout the year. We can expect expansion announcements for brands such as Reiss, BonLook, Mackage, Aritzia‘s Babaton, Uno de 50, and various others. Dutch suite retailer Suitsupply will open a large Montreal location next month, and will also announce the location of a Vancouver store this year. Coffee retailer Nespresso will continue opening Canadian store locations, with Vancouver’s Oakridge Centre being its first target for a freestanding store in Western Canada. 

A number of entirely new brands will enter Canada in 2017, and we’ll hold off on discussing those in this article so that we may reveal them in individual articles throughout the year. What we will say is that 2017 will be another exciting year for retail in Canada, as international players evaluate the market prior to opening stores. 

Grocery

Rumour has it that value-priced, super-efficient German grocery retailer Aldi is looking at entering the Canadian market. If so, it stands to disrupt Canadian grocery retailing in a big way, particularly among price-sensitive consumers. Aldi’s floor plates are small and much of its product is private-label, giving it the opportunity to grow quickly into various parts of the country. It’s surprising that Aldi isn’t already in the Canadian market, given that it has had stores in the United States since 1976.

Walmart will continue to make a push into Canada with an expanded grocery assortment, while homegrown Shoppers Drug Mart continues to add expanded food assortments at selected locations. Grocers are also increasingly targeting Canada’s growing downtown cores — a trend particular for central Toronto and Vancouver. What’s resulting is unprecedented competition in the grocery sector, which is partly responsible for challenges that some retailers are seeing, including Sobeys. As well, American retailer Whole Foods appears to have halted its Canadian expansion, if only temporarily, forgoing opening planned stores in Edmonton, Calgary and Toronto. It did, however, open a store in Victoria BC in November of 2016. In 2013, Whole Foods said that it planned to open more than 40 stores in Canada and, at the moment, it only has 12 stores. 

Even Sears Canada is getting in on the grocery game, as it is looking to partner with a vendor to open grocery components in some of its stores. It might be a smart move for the retailer, as food purchases are usually more frequent than buying fashion or other hard goods, such as appliances. It also presents challenges for some existing real estate that may require modification for grocery. 

‘Hot’ Streets

If it isn’t already, Toronto’s ‘West Queen West’ (Queen Street West between Bathurst Street and the Gladstone Hotel) will establish itself as Canada’s ‘hippest’ retail street this year. Two trendy U.S. brands are set to open their first Canadian locations on the street this year, and we’ll discuss both in separate articles soon. The street recently saw the addition of retailers such as NYC-based eyewear retailer Warby Parker, Detroit’s fashion brand Shinola, Australian skin brand Aesop, and quirky Canadian beauty brand Deciem, among others. Adjacent Ossington Avenue also adds to the area’s hip quotient, with the country’s first Lululemon men’s store joining new entrants including Reigning Champ, Peace Collective and soon, J.J. Wilson’s Ride Cycle Club concept. 

Vancouver’s Gastown isn’t far behind, with a number of interesting retailers set to open on the street this year. H&M’s pricier minimalist fashion brand COS will open on Water Street, as will brands such as Filson (a first for Canada), Herschel (another first, spanning 5,000 square feet) and a number of others to be discussed soon as well. Australia’s Aesop opened in the area last year and so did Lululemon Lab, joining innovative upscale retailers that include Secret Location and Roden Gray. 

We’ll be further diving deeper into Canada’s ‘hottest’ and ‘trendiest streets’ this year in various articles, examining what’s happening in Montreal, which boasts several remarkable high streets (including Laurier Avenue West and Westmount’s Sherbrooke Street West) that continue to add new retailers. Edmonton and Calgary are also seeing new retailers and other amenities opening on Whyte Avenue and 17th Avenue, respectively. 

Enhanced Shopping Malls

Canada’s top shopping centres will continue to improve, becoming social gathering places as well as entertainment centres. Renovations, expansions and new stores have characterized almost all of Canada’s top malls over the past several years, with momentum expected to move into 2017 and onward. Farla Efros, President of HRC Retail Advisory, says that malls and retailers will continue to add experiential elements to their properties, in order to address increasing competition from brick-and-mortar as well as online retail. Entertainment will increase in some malls as Cineplex-owned The Rec Room announces Canadian shopping centre locations, for example. Canadian shopping centre trends are discussed at length in a newly released study by Retail Council of Canada.  

Pop-up and curated retail will be a hot trend for Canadian shopping centres this year, with one major landlord set to announce ‘permanent’ dedicated pop-up areas at several of its properties. Linda Farha, Founder and Chief Connector of pop-up go (an online platform that helps pair retailers with available temporary retail spaces) said, “Customers can expect a growth in ‘permanent’ pop-up store locations with a rotating portfolio in shopping centres and beyond in 2017. Brands and property managers alike are keen to utilize prime, unused leasable space for short-term physical brand interactions, and are taking advantage of the resources available to them to improve their leasing and marketing experience from start to finish. While pop-ups may be for temporary use, the phenomenon is here to stay.”

Toronto’s Yorkdale Shopping Centre, which is both the highest-selling mall as well as Canada’s most productive, will continue to add first-to-Canada luxury retailers in 2017. We won’t discuss names at this time, except to say that in a recent article, Woolwich confirmed that it was negotiating for a 2,000 square foot retail space at Yorkdale — one of several stores that the brand could open as it targets stores for Toronto, Montreal and Vancouver. Yorkdale will also open a westward expansion wing this year that will be anchored by RH (Restoration Hardware) and Sporting Life, as well as multiple CRU’s to be revealed in the coming months as the wing is completed. 

We’ll be covering various shopping centre expansions and renovations here on Retail Insider for 2017, and will discuss these further in more detail. 

Luxury Retail Expansion

A number of luxury brands will expand their operations in Canada in 2017. Chanel’s new 8,700 square foot Toronto flagship, set to open this spring at 98 Yorkville Avenue, will be the latest retailer to open on what’s quickly becoming an important luxury street. Tiffany & Co. will unveil its substantially expanded downtown Vancouver flagship this spring as well, with luxury brands Sefano Ricci and Van Cleef & Arpels set to open nearby in Vancouver’s Alberni Street/Thurlow/West Georgia ‘luxury zone’ corridor. Prada will substantially expand its Bloor Street store in Toronto to become Canada’s largest, and Hermes is about to commence building one of its largest stores, measuring almost 12,000 square feet, at 100 Bloor Street West in Toronto. Bloor Street will continue to see big things when Christian Dior opens a 10,400 square foot store at 131 Bloor Street West this year, making it the brand’s largest store in North America. Moncler will open its second Toronto store this year as well, a few doors down from Dior. We’ll be reporting extensively on luxury retailers as they expand in Canada this year.  

Nordstrom Continues Canadian Expansion

Seattle-based Nordstrom has opened six Canadian store locations since September of 2014, and it has confirmed a third Toronto store will open this year. On September 15, 2017, Nordstrom will open a 140,000 square foot store at CF Sherway Gardens in a southward expansion of the popular west Toronto mall. While there are no further confirmed Nordstrom store locations set to open in Canada, the company has said that it could eventually open up to 10 Canadian stores. Speculation has it that a store could eventually open in Edmonton, as well as additional stores in Vancouver and the Greater Toronto Area.

Off-Price Retail Continues Rapid Expansion

One of Canada’s fastest growing retail categories is off-price, dominated by TJX’s Winners and Marshalls nameplates. Saks Fifth Avenue’s off-price Saks OFF 5TH will continue opening Canadian stores in 2017, including 30,000+ square foot stores in various retail formats such as traditional Canadian shopping centres, outlet malls, power centres, and even within existing Hudson’s Bay stores. In early 2018, Nordstrom Rack will open its first Canadian stores, with plans for between 15 and 20 locations towards the end of the decade. 

Farla Efros, President of HRC Retail Advisory, says that off-price will continue to expand in Canada, driven by Canadian consumer culture that sees value in these stores, as well as the newness of entrants such as Saks OFF 5TH.

Outlet Malls

Canada has seen several U.S.-styled outlet malls open over the past several years, with growth continuing into 2017. New centres will include Outlet Collection Winnipeg set to open this spring, as well as the Premium Outlet Collection at Edmonton International Airport, expected to open in late 2017. Existing centres in Vancouver (McArthurGlen Designer Outlets and Tsawwassen Mills) are both set for expansions, while some existing centres in Ontario and Quebec will also see expanded retailers and new concepts. We’ll be reporting on these throughout the year. 

Alberta Hoping to See Retail Recovery

Some retailers have been struggling in Alberta over the past couple of years, with low oil prices affecting the economy. Things will hopefully improve in 2017 with increasing oil prices and a recent pipeline announcement. Quebec’s La Maison Simons will open a multi-level store in downtown Calgary this year, and Edmonton’s Londonderry Shopping Centre will also complete a mall overhaul that will create one of the country’s most attractive centres, also anchored by Simons. Downtown Edmonton’s Edmonton City Centre continues to renovate and add retailers, as the downtown core is seeing a renaissance led by the adjacent Rogers Place-anchored ‘Ice District’. Fire-devastated Fort McMurray is expected to see an economic surge as it rebuilds and oil prices (hopefully) continue to move upwards, with increased exploration potential from oil companies such as Suncor Energy. 

E-Commerce

Canadians are increasingly shopping online, though not as much as some had expected. Nevertheless, the country will see new e-commerce operations emerge, as well as enhanced websites for retailers such as Holt Renfrew, and innovative e-commerce fulfillment solutions from Hudson’s Bay. Digital disruption will continue into 2017 onwards, as growth in online sales continues to outpace brick-and-mortar. 

HRC Retail Advisory President Farla Efros says that e-commerce will continue to see growth in Canada, as it is still relatively underdeveloped compared to that in the United States. Amazon will continue to dominate by continuing to expand into more categories, according to Ms. Efros. 

Kyle Tomlin, Senior Director of Education and Events at Retail Council of Canada, discussed how retailers are now understanding the true impacts of omni-channel commerce within their day to day operations. He noted that most Canadian retailers are still working quickly to improve their supply chain logistics by enhancing teams and upgrading systems. 

“A growing trend within Canadian retail in 2017 is the continued focus on and improvement of ‘The Last Mile’.  The best retailers will provide the widest choice, fastest service, and most convenience within their fulfillment models.  Whether it’s click and collect, click and deliver, ultra-fast premium delivery, reserve in store, or bricks & mortar check-out, retailers who offer the highest level of cross-channel convenience will continue to gain market share.  Unfortunately, this could lead to some additional volatility in 2017, as retailers who are unable to evolve & improve their Phigital experience & fulfillment promises will continue to find a tough road ahead,” said Mr. Tomlin. 

Retail Closures

While there will be plenty of retail expansion for Canada in 2017, there will also be some store closures. HRC Retail Advisory’s Ms. Efros says that she expects more retailers to close their doors, while others that are less competitive will see reduced sales that could see eventual closures in the years to come. She noted teen/tween focused retailers and some department store retailers are particularly at risk. For the purposes of this article, we will hold off naming specific retailers that some are predicting should shutter their Canadian operations in 2017, though American Apparel is an obvious guess as it continues to liquidate its Canadian stores. 

Looking Ahead Towards 2018

2017 will also see preparations for a luxury retail-filled 2018, which will again see major luxury department stores open in this country. So far, Saks Fifth Avenue has confirmed that in early 2018, it will open two stores — a 115,000 square foot location at Calgary’s CF Chinook Centre, and a 200,000 square foot flagship contained within the downtown Montreal Hudson’s Bay building. In Montreal as well, a 220,000 square foot merged Ogilvy/Holt Renfrew is expected to open in 2018, set to fiercely compete with Saks, Harry Rosen and Simons for the city’s limited luxury dollars. Carbonleo, the same developer building the new Ogilvy/Holt’s, is also expected to break ground on a massive $1.7 billion mega-mall in Montreal in early 2018, to be completed in 2021. 

We’ll be reporting on these topics in greater detail throughout 2017, as well as forecasting into 2018 and onwards. Although growth may be slower for some retailers doing business in Canada, it will nonetheless be an exciting year for retail in Canada, and we’ll do our best to report on it. If you have any information on retail expansion that we should be reporting on, feel free to contact Craig Patterson at craig@retail-insider.com.