Welcome to the second installment of our Expert Interview Series. Our series is dedicated to interviewing relevant industry experts – from fashion bloggers and influencers to CMOs of various top brands. As always, the purpose of the Expert Interview Series is to foster a knowledge share amongst our colleagues, clients, and partners.
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Craig Patterson is the founder and editor-in-chief of Canada’s most-read retail industry news publication, Retail Insider. We recently sat down with Craig to hear his thoughts on the current state of the Canadian retail market, and learned how e-commerce and online marketing are changing the way that Canadian companies do business.
Since you’ve studied the Canadian retail landscape for the past quarter century, could you tell us how it has changed during that time?
Canadian retail has changed substantially over the past quarter century. We’ve gone from a primarily homegrown brick-and-mortar society to one where we can order online from almost anywhere. Competition is also unprecedented, with many international retailers having entered Canada over the past several years. To address all of this competition, brick-and-mortar retailers and shopping centers are enhancing their stores and overall value proposition to attract consumers. We’ve also seen a considerable number of homegrown Canadian retailers shutter their operations as competitors have moved in, and we’ve also seen some Canadian retailers significantly improve their operations and become world-class as a result.
What are the major differences between the Canadian and the American retail markets?
There are a few differences between the two markets. Canada has traditionally been a few years behind the United States in terms of offerings and brands, and Canada is only beginning to build the type of large outlet malls that have been popular in the United States for years. Canada has less retail space per person than that in the United States, and Canadian retailers are generally three to four years behind the U.S. in e-commerce. As a result, there’s less online shopping in Canada than in the U.S.
Canadian luxury retail was primarily served through two retailers – Holt Renfrew and Harry Rosen – and U.S. competitors like (Saks Fifth Avenue and Nordstrom have recently entered the market to potentially dethrone them. Off-price retail was also limited in Canada until recently, with U.S. behemoths Saks OFF 5TH and Nordstrom Rack coming into Canada to shake things up.
Traditionally, overseas retailers had entered the United States before coming to Canada, but now some are first choosing Canada since it has become an established market.
What retail sectors are currently performing well in Canada? Which ones are struggling?
Sectors performing strongly include high-end and lower-end retailers. At the high-end, retailers such as Holt Renfrew and Harry Rosen continue to see success, as well as individual luxury stores in markets such as Vancouver and Toronto. At the lower-end, dollar stores like Dollarama are doing well, as are off-price retailers such as TJX’s Winners and Marshalls. Also, tech is doing very well in Canada, with many Apple Stores doing in excess of $50 million annually.
Some mid-priced retailers are struggling for a variety of reasons. Sears Canada and Le Chateau have failed to address the Canadian consumer in light of competition and changing tastes; and as a result, their days as retailers in this country are numbered. Fast fashion could also be partly to blame, with retailers such as H&M, Zara, Forever 21, and now Uniqlo potentially taking market share from mid-priced retailers and seeing success as a result.
Have you noticed any patterns relating to how much focus that Canadian retailers place on growing e-commerce sales vs. brick-and-mortar location sales?
We’ve seen Canadian retailers place an increased emphasis on e-commerce to address competition from both Canada and the United States. Some Canadian retailers are beginning to find it expensive, however, and are again focusing on stores or are attempting to integrate the online with the in-store experience. As well, we’re seeing former pure-play online retailers opening physical stores in Canada, such as Frank + Oak, Indochino, and Clearly Contacts.
Free shipping and e-commerce fulfillment can be expensive, so some retailers are instead choosing the “click and collect” model where you order online and pick up the purchase in store.
What are some of the online marketing trends that you’re seeing right now in the Canadian retail industry?
I’m noticing more curated content that’s targeted to individuals based on Google searches, and am also seeing more “advertorial” content on some sites to promote companies and products. For the last several years, marketing through social media (including Facebook, Twitter, Pinterest, and more recently Instagram) has been popular. “Influencers” and celebrity endorsements are also a relatively new thing, with fame helping to sell products like never before.
How can smaller retailers leverage the power of digital marketing in order to compete with the major players in this marketplace?
Smaller retailers may benefit from having e-commerce sites, if even just to show their product. Shopify, for example, has made it fairly simple for smaller retailers to get online, and some government agencies are looking to assist retailers in getting online as well, if even just to have a web presence.
There may even be an advantage to being a smaller retailer. Less product is less overwhelming, and there’s the opportunity for more one-on-one interaction. As well, a smaller retailer may better showcase wares online that may also be purchased in the store by curating to cater to a focused demographic.
How can retailers utilize social media to maintain or strengthen customer loyalty?
Social media may help provide awareness, including top-of-mind awareness, for some brands. Social media can assist in personalizing messaging to consumers, which may enhance loyalty. Retailers should utilize social media to enhance branding and promote products and services, while being mindful that some messaging can be misinterpreted and even be offensive to some.
How do you see the Canadian retail market evolving over the next five to ten years?
It’s difficult to predict what will be next in terms of technology. I suspect that product and service customization, as well as immediacy, will be big for retail over the next 10 years. I also think that physical stores and retail centers will evolve to become more “entertainment centers” than just places to sell product, thereby addressing competition from both e-commerce and new brick-and-mortar retailers. People may seek convenience by purchasing some items online, though they’ll also head to stores and malls for social and entertainment experiences.
Competition is increasing online, so how will you stand out? Check out this case study: “Helping TravelStore Become an Online Entity” to learn how one company in the face of a lot of competition managed to gain visibility.