The Migrant:The last seven years has seen a roller coaster within the retail industry both in Canada and worldwide. On one hand we had businesses exiting retail, such as Target which acquired Zellers and then exited Canada due to declining revenues, and Sears that was a go-to place for Canadians across generations, and on another spectrum, successful Canadian household names such as Hudson Bay & Tim Hortons being acquired by International investors.
In anticipation of such an inevitable fate, several companies set out to reduce their footprint, postponed or modified their expansion plans, and set up electronic platforms to support their sales to keep up with the global market, escalating the demand for storage space.
Conversely, more than 50 major companies opened their stores in Canada during the same period in the field of clothing or eyeglasses and most were associated with high-end or new products to the Canadian soil such as Nordstrom, Miniso and Richard Mille. While other companies thrived and expanded such as Canada Goose, in addition to numerous Canadian start-ups that spread globally but with an adoption to an innovative modus operandi, such as Freshii and Frank & Oak. Reasons may vary, and some may argue that this is business as usual, but rather accelerated.
Toronto market, which has seen a paradigm shift in a positive direction, due to an influx of distinguished and experienced entrepreneurs. New stores opening their doors, especially in the domain of food and cafes, that led to greater competition and perhaps better variety and quality for the communities, notably, the middle eastern. These market dynamics, if anything; are in sync with the global market.
Opportunities exist and created a negotiating environment between landlords and new retailers. The Canadian economy remains robust, yet we repeatedly observe retailers going belly up and capitals evaporating in thin air and ultimately those investors are losing faith in the Canadian economy. The key reasons impeding the success of new retail ventures are:
1. Systemic reasons: The global economy, of which Canada is a part, is not at its best and adversely affects the purchasing power. According to retail analysts, many global retailers reduced their footprint due to decline in sales volume.
2. Change in the retail landscape: As the online shopping experience continues to improve, and retailers increasingly moving into the retail 3.0, consumers, more so the millennial, focus on convenience and product accessibility. Today’s prudent retailers combine brick-and-mortar stores with e-stores to increase sales volume. In addition, some companies break the mold by going online first and then expanding through physical storefronts.
3. Local experience: Last but not the least is the local experience, one of the key factors underpinning the success or failure of any business. Challenges and pitfalls can be mitigated by conducting feasibility studies that would typically analyze the demographics, products, financial projections, and site selection, zooming in on the occupancy cost being a key item in the operating costs that could eat up the bottom-line and push business into the red.
Veteran investors are more likely to be aware of the key challenges in starting new business, but don’t have clear understanding of how the local experience combined with language barriers make it difficult to access key resources and to shore up a sound business plan.
Many investors have taken a gambit by overlooking this key step and started their business based on market canvassing, tell-tales and emotional decisions, that in many instances led to losses, business closure, bankruptcy or business still operating at a loss.
In a nutshell, the most pressing question: Is it time to move a motion to support those vulnerable businesses and explore ways to integrate them into the retail space and probably attract and encourage more investors to enter the market with clear line of sight?
By Sean Aslambouli
Business & Commercial Realty Consultant
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