Trendex Canadian E-Commerce Apparel Update

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By Randy Harris, President of Trendex North America 

Amazon Turns Up The Heat In Canada

  Photo:  Jewel 88.5

Photo: Jewel 88.5

Three recent developments should insure Amazon’s continued place as Canada’s largest e-commerce retailer. The first involves the company opening its seventh facility during 2018. The new 600,000 sq. ft. warehouse will be just north of Calgary. Currently the company operates warehouses in Ontario and British Columbia. The retailer also announced in mid-November 2017 that both its Alexa service and Echo devices were available to Canadians and that it was expanding its Prime Now service. 

During the first half of 2017 Amazon Canada’s best selling apparel categories were men’s bottoms, women’s intimates and women’s denim.  

Canada’s E-commerce Growth In Q3 2017 Exceeds That For The U.S.

Canadian retail e-commerce sales increased (y/y) by 33.4% during the third quarter of 2017. For the same period U.S. retail e-commerce sales increased 15.4%. During the third quarter e-commerce accounted for 2.4% of total Canadian retail sales vs. 9.1% in the United States. 

Canada’s E-commerce Sales Were Highly Concentrated During 2016

A study released by Boston Consulting in the third quarter of 2017 revealed that six Canadian retailers accounted for an estimated 60% of the country's total  e-commerce sales during 2016. There is no reason to belief that the collective e-commerce share of these retailers will not have increased during 2017.

Walmart.ca Update

  Photo:  Sault Online

In an attempt to jump start its e-commerce sales Walmart Canada in the second half of 2017:

  • Added 30 third-party sellers to its Marketplace. It planned to quadruple the products available on its site by the end of 2017. The third-party sellers offer products ranging from apparel to sporting goods. The retailer plans to invite third party sellers currently on Walmart’s U.S. marketplace to join its Canadian marketplace.
  • Cancelled the C$2.97 fee it previously charged customers that ordered online for pick up at a Walmart Canada’s dedicated “online only grocery pick up parking spots”. Currently Walmart stores in Ottawa, the greater Toronto area, Calgary, and Edmonton offer online pick up, along with seven locations in the Greater Montreal area.

Walmart Canada’s e-commerce initiatives during the second half of 2017 should position it to better compete during 2018 with the e-commerce efforts of Amazon, Canadian Tire, Loblaws, Best Buy and Home Depot.

Four Canadian Companies IPO’s  Call Out E-commerce Growth As  A Growth Objective

Over the past 12 months, four Canadian apparel companies have gone public. Three of them, Aritzia, Roots and LXRandCo are retailers, while the fourth, Canada Goose, is basically an apparel manufacturer. One of the key growth strategies detailed in each company’s prospectus was doubling their e-commerce sales over the next four years. In 2016, e-commerce accounted for between 11.4% and 12.8% of three of the company’s sales. The fourth, LXRandCo, a retailer of vintage purses, has less name recognition, so it is not surprising that e-commerce only accounted for 5% of its sales during 2016. 

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Don’t Forget About The E-commerce Return Process

While Nafta apparel retailers have continued to refine their e -commerce prices and delivery processes, less attention has been paid by these same retailers to their process of handling e-commerce returns. The NRF reported that in the U.S., 30% of items bought online end up being returned, compared to 9% of items bought in a store. Optora, an ecommerce software company, has forecasted that between Dec. 26 and Jan. 31, 2018, 45% of American’s will try to return a gift. 
To date, no consensus among retailers has developed as to the optimum procedure for handling online return purchases. However, an in-person return to a store costs a retailer half the amount ($3) of a return sent to a distribution centre ($6). In store returns also allow a retailer to return the product faster to its inventory. Lastly, 62% of consumers prefer the option of returning their online purchases to a store, while 33.6% expect a full refund as opposed to store credit. 

Recognizing the importance for consumers of having a stress-free return process, Amazon has expanded operations for in-person returns, with a network of 2,000 U.S. locker locations, including 400 at its Whole Food stores. Walmart and Target have also set up return kiosks in their stores. Truly, according to Tobin Moore, CEO of Optero, “Returns have become a battleground among online retail".

E-commerce Increases  114% For LXRandCo In Q3 2017

LXRandCo, a Montreal based retailer of vintage purses and accessories, reported that its net revenue increased by 82% during the quarter ending September 30, 2017. For the same quarter, the retailer’s e-commerce sales increased by 114% and accounted for 4.1% of its net revenue vs. 3.5% a year earlier. The retailer recently indicated its Q4 2017 ecommerce sales increased 85%. 

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E-commerce Growth Slows For Two Canadian Specialty Apparel Retailers

The good news for Canadian apparel specialty retailers, Reitmans (Canada) Ltd. and Le Chateau was that their ecommerce sales during Q3 2017 increased at a rate significantly greater than their comp store sales. The disappointing news was that the rate of increase for both retailers ecommerce sales slowed significantly from a year earlier. Specifically in Q3 2017 the e-commerce sales of Reitmans increased by 29.7% while Le Chateau’s increased by 14.0%. Both retailer’s e-commerce sales a year before increased by 40.1% and 55.1% respectively. 

During December 2017, Reitmans e-commerce sales increased by 20.9% vs. 60% during December 2016. 

Indochino Steps Up Store Expansion

Canadian headquartered Indochino, which as of the end of December 2017 operated 19 showrooms, plans to open up to 18 new locations during 2018. Currently the made-to-measurement retailer operates 8 stores in Canada and eleven in the United States. During 2017 the retailer doubled its sales for the second consecutive year. This publication is speculating Indochino will float an IPO during 2018.

Roots Targets 20% Of 2019 Sales From E-commerce

Canadian outdoor apparel/footwear retailer, Roots, has set a goal, according to its CEO Jim Gabel, of securing 20%-22% of its sales from e-commerce by 2019. In 2016 E-commerce accounted for 12.8% of Roots’ sales. All of the retailers iconic extended size fleece is available only online.

Carter’s Canada — E-commerce Once Again Saves The Quarter

Carter’s Canada and Children’s Place Canada during the third quarter of 2017 saw their sales negatively affected by Gymboree Canada’s liquidation. However, in the case specifically of Carter’s Canada, Gymboree had seemingly little effect on the retailer/wholesale’s e-commerce sales, which increased by almost 61% during the quarter. 

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A New “App” Assists Simons In Ramping Up Its E-commerce Efforts

Quebec based Simons, with 15 stores across Canada, historically had an underdeveloped e-commerce business. Undoubtedly, this should rapidly change as the retailer in October 2017 introduced a new proprietary app. In addition to allowing a customer to shop and purchase online from the retailer, the app has two unique features. The first allows a user to snap a picture of an item and then search Simons’ inventory for a similar product. The second feature allows a Simons customer to have a truly omni-channel shopping experience, including determining/using their loyalty card’s point balance.  

Industry watchers have indicated that early in 2018 Simons will begin construction of a highly automated distribution centre that will serve as a platform for its e-commerce business. In doing so, Simons will be emulating HBC, who in 2016 spent C$60 million to automate its Toronto e-commerce distribution centre. 

This article has been excerpted from the current issue of Trendex’s NAFTA Apparel E-commerce Insights newsletter. For more information contact info@trendexna.com

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Randy Harris is president and owner of Trendex North America, Inc., one of North America’s largest marketing research and consulting firms specializing in the Canadian and Mexican apparel markets.  As owner of this Toledo, Ohio based company; his area of specialization is the NAFTA apparel market. Follow Trendex North America, Inc. on Twitter at @Trendexnainfo

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