From The Desk: Polarized retail growth, evolving formats and AI-driven customer engagement

It’s becoming increasingly clear that Canadian retail is moving in different directions depending on the customer. Value remains important as households watch their spending, while premium and luxury retail continues to see investment and expansion. The middle is a tougher place to be, particularly for retailers that haven’t given customers a compelling reason to choose them.

We’re also seeing retailers become more creative about how they grow. New store formats, expanded services and franchising are helping some brands enter markets or expand without simply repeating the same model everywhere. That has implications for landlords as well, particularly as large spaces are subdivided and demand varies considerably from one market to another.

Technology is becoming another important part of the equation. AI-powered tools are starting to change how retailers communicate with customers and operate internally, while tariffs, supply-chain uncertainty and changing consumer behaviour continue to add complexity to the business.

There’s a lot happening across the industry right now. Here are some of the stories and developments that caught our attention this week.

Retailer News

Toronto’s waterfront retail market is developing unevenly as established central and western areas experience low vacancy, while the eastern district faces higher vacancy amid ongoing construction and an expanding inventory. This eastward expansion is driven by major residential projects, upcoming transit infrastructure, and growing demand for businesses that operate year-round, creating distinct opportunities for retailers and commercial landlords across the district.

Tsawwassen Mills marks a shift from its original outlet mall model by adding entertainment and recreation through concepts like TM Wander and The Nest indoor sports facility, raising weekend traffic by 10% since TM Wander’s opening and targeting a new 30,000-square-foot H Mart anchor to boost visit frequency by Christmas 2027. In Calgary, CF Chinook Centre is securing major new tenants including Old Navy, SportChek and Winners as part of a redevelopment to strengthen its standing among Canada’s top-performing malls, reflecting robust leasing demand and an effort to refresh shopping options by mid-2027. Meanwhile, Montreal-based Quartz Co. is expanding its Canadian retail footprint with an upcoming boutique on Notre-Dame Street and plans to enter Toronto, while maintaining local manufacturing despite challenges from U.S. tariffs and growing its women’s product lines.

Retailer Financials / Trends / Reports

Retail trade activity in Canada fell 1.0% in July, reflecting a contraction mainly in gasoline stations and fuel vendors where sales dropped 3.5%, reversing gains seen in June. This decline signals cautious consumer behaviour amid economic uncertainty and rising energy costs, impacting sectors reliant on discretionary spending and challenging landlords dependent on steady retail sales.

Aritzia’s financial results show the company absorbed significant U.S. tariff costs without compromising profitability thanks to strong sales growth and improved margins in its expanding American market. This ability to offset tariff pressures demonstrates how Canadian retailers with growing U.S. operations can manage trade-related risks through strategic pricing, sourcing and operational efficiencies.

Retailer Op-Eds

Canada’s retail market continues to show clear signs of polarization between value-oriented and premium offerings, leaving retailers positioned in the middle to rethink their competitive approach. This shift demands that mid-tier retailers sharpen their differentiation and clarify their customer proposition to avoid losing ground to either end of the spectrum.

In response to labour shortages and cost challenges, many Canadian retailers are adjusting their expansion strategies by exploring franchising models and experimenting with store formats to better control operational expenses and meet changing consumer behaviour. These adjustments affect retail real estate, as landlords increasingly convert larger vacancies into multi-tenant spaces to accommodate the evolving needs of retailers. Retailers and landlords must tune their strategies to localized market conditions and operational requirements to sustain growth in this uneven but active environment.

Editor’s Take

Canadian retail is becoming increasingly polarized. Value-focused retailers continue to benefit from consumers watching their spending, while premium brands are investing heavily in stores and experiences. The middle is becoming more difficult, particularly for retailers without a clearly defined customer or reason to visit.

Some of this week’s stories show what appears to be working. Aritzia is putting more emphasis on larger, highly productive stores as it expands in the U.S., while Tsawwassen Mills is adding food, entertainment and other uses that broaden the property beyond its outlet roots. Sports Experts’ $8 million renovation at CF Carrefour Laval is another example: the investment is designed to make an existing location more productive while better supporting e-commerce and changing how customers shop.

Growth itself is also changing. Franchising is helping brands including Tommy Gun’s and Craig’s Cookies expand without relying entirely on corporate stores, an increasingly attractive model as labour and operating costs rise. For landlords, changing store formats and the subdivision of larger spaces are creating opportunities, although demand varies significantly by market and location.

Technology will increasingly sit alongside these physical changes. AI is moving into customer communication, inventory, checkout and other parts of retail operations, while tariffs, labour disruptions and supply-chain uncertainty are forcing companies to pay closer attention to costs and risk.

The common thread is selectivity. Opening more stores is not necessarily the objective; opening the right stores, in the right markets, with a format that works for the customer increasingly is. The retailers and landlords getting that equation right appear best positioned for what comes next.