Despite ongoing Canadian store closures, numerous luxury brands are entering the Canadian market. Brokers and other sources say that at no time in recent history (or possibly ever) have so many luxury brands been interested in coming to Canada. To learn more on the Canadian luxury shopping phenomenon, we spoke with retail expert Farla Efros, Executive Vice President and COO of HRC Advisory, a retail advisory firm based in Toronto and Chicago, IL.
Although Canada's population of affluent shoppers is relatively small, the group packs a powerful punch. Some of the country's wealthy spend tens or hundreds of thousands of dollars annually on luxury goods and if they're not shopping at mono-brand designer boutiques, Holt Renfrew or Harry Rosen, they're buying online or traveling internationally. Ms. Efros says that luxury retailers are increasingly recognizing Canada as a lucrative market, and are opening stores accordingly. Luxury shoppers are a discerning group and as a result, successful retailers will need to create a compelling, personalized experience in order to effectively compete.
True luxury consumers are looking for a 'customized' experience and as a result, brick-and-mortar retail will thrive in the luxury category. Personalization is key, be it exceptional customer service, deep, often-decades long personal relationships between Harry Rosen sales staff and their customers, a hand-written thank-you note, or an afternoon spent in a private shopping salon at Holt Renfrew (and soon, Saks Fifth Avenue). Technology will play an increasingly important role for luxury brands, as client preferences are tracked to ensure even more personalized experiences.
Canada's wealthy continue to become even wealthier, and it's reflected in our real estate and stock market values. Multi-million dollar homes are selling in record numbers, both to Canadians as well as to international buyers. Speaking of international buyers, tourism is playing an ever-increasingly important role in Canadian luxury retailing as well, especially in Vancouver -- where in luxury stores, the availability of Mandarin-speaking store selling staff are a real plus.
Even the non-wealthy are buying luxury. According to Ms. Efros, there's a trend among many women, especially those in urban centres, to splurge on luxury footwear and handbags – even more than on pricey ready-to-wear. Luxury brands have recognized this trend and have started opening locations at places like Toronto's Yorkdale Shopping Centre.The new generation tends to view luxury differently. Many Millennials now seek the luxury experience, emulating what they see in popular culture. As a result, many Canadian luxury cars are now being leased, and now even high-end fashion can be rented for a night on the town. The awareness of luxury accessories and footwear among Canadian men is growing rapidly, a trend Ms Efros expects to continue with the new luxury retailers arriving in Canada.
A number of global luxury brands have and will continue to open additional free-standing Canadian locations over the next few years. Large multi-brand luxury stores are now entering Canada. Nordstrom plans to open as many as 10 Canadian stores within the next several years. Nordstrom provides a unique breadth of brands at a wide variety of price points, from “ best-priced” luxury brands to aspirational and accessible price points and boasts an un-paralleled level of customer service. Saks Fifth Avenue is planning to open two Toronto locations next year, and sources say that negotiations are ongoing for Saks locations in Montreal and Vancouver. But don’t write off the incumbent Canadian luxury chains. They are both spending substantial amounts on protecting (and hopefully expanding) their customer bases with significant store expansions and remodeling. Harry Rosen continues to renovate and expand its store fleet, as witnessed by the recent re-opening of Rideau store and addition of a dedicated Harry Rosen shoe store. Holt Renfrew has embarked on its largest expansion in history, spending $300 million to grow its square footage by about 40%, while closing three smaller outlets in Ottawa, Quebec City and Winnipeg. Even New York City-based Bloomingdale's is rumoured to be looking for Canadian retail space, according to sources familiar with the company.
But is it too much? While Ms. Efros believes that there will be a fierce battle for market share in luxury due to this substantially increased competition in Canada, Canadian luxury consumers have typically spent large amounts outside of the country. The entry into Canada of these luxury mono and multi-brand retailers will repatriate some of the dollars currently spent on luxury outside the country and will also increase the visibility and awareness of luxury retail. Holt Renfrew is Canada’s only existing luxury women’s chain and it will face significant competitive pressures from Saks, Nordstrom, the Canadian outposts of the global luxury brands that continue to open stores in Canada. Nordstrom is expected to take market share from the Canadian luxury chains, and to provide fierce competition for Hudson's Bay, Saks, La Maison Simons, and smaller upscale retailers such as Leone in Vancouver, Henry Singer in Alberta and Ursula B. in Montreal. Nordstrom’s opening price points will attract aspirational shoppers, that were formerly not shopping in luxury and we expect that this will further grow the size of the Canadian luxury market.
While luxury continues to grow in Canada, mid-priced retailers continue to struggle. Ms. Efros points to Abercrombie & Fitch, Aeropostale, American Eagle, Ann Taylor, J. Crew and the Gap as examples of American brands which are struggling to differentiate and regain their former mojo. Several Canadian retailers fall into this same situation including those such as Le Chateau, Reitmans and RW & Company.
It will be interesting to watch Canadian retail in the next several years, as luxury brands and retailers compete for a finite amount of spending. Competition will be fierce and fallout is likely. At the same time, luxury shoppers will experience an enhanced experience within retail stores, especially as technology allows for greater customization and more personalized experiences.
About our Expert: Farla Efros is the Executive Vice President and COO of HRC Advisory. She previously worked with Office Depot, where she served as the Executive Vice President and Chief Merchandising Officer responsible for transforming the merchandising operations of its 1,170 locations across the U.S.
Farla has consulted with many leading retailers and consumer packaged goods companies across multiple sectors, including the Grocery, Mass Merchandise/Discount, Drug, Value, Convenience, Pet Supplies, Automotive, Office Specialty, Home furnishing and Department Store sectors. Farla has coached executives at numerous leading retailers and consumer packaged goods companies in the area of category management and assortment optimization, two areas where she has a unique depth of specialization.
Prior to joining Office Depot, Farla Efros was Senior Vice President at PwC Retail Consulting. Previously, Farla spent 10 years at The Partnering Group, where she was a partner responsible for the development of best practices category, customer, and trade promotion management working with clients such as Universal Studios, Campbell's Soup Company, and Wal-Mart. Prior to that, Efros spent nine years in the consumer packaged goods industry. Farla has broad experience in merchandising and category management, having worked with many of the world's leading consumer packaged goods companies and retailers. She has developed and implemented category business strategies and tactical plans across a variety of retail sectors.
Farla has been published as a thought leader in numerous retail industry and business publications, as well as speaking at leading retail associations.
About HRC: HRC Advisory is a specialist boutique retail advisory firm. Together with its predecessor firms, it has been assisting Canadian and US Retail Chains to improve their profitability and strategic positioning for more than 25 years. Many of HRC’s senior advisors were previously at Senn Delaney Retail Consultants and Karabus Management following retail leadership roles. Other senior advisors at HRC have a mix of retail leadership and retail consulting experience gained with other leading firms
HRC has significant retail depth in strategic planning, buying, merchandise planning and inventory management, indirect procurement, store operations and omni-channel processes, supply chain/logistics and fulfillment, and comprehensive cost optimization services. HRC has worked extensively with both healthy top performing chains as well as developing and executing turnaround mandates at a number of retailers in difficult situations. For more information, please visit www.HRCadvisory.com.