Global Retailers Eye Canadian Market

Canadians could see foreign retailers doubling their presence in the country over the next 15 years, potentially taking about 70 percent of all retail sales, according to a report by the Center for Study of Commercial Activity at Ryerson Polytechnic University in Toronto.

The report states that about a dozen retailers, most of them U.S. firms, are looking to establish stores north of the U.S. border. Plus, those already doing business in Canada, such as Old Navy and The Gap, are planning to expand.

Based on a survey of 125 international retailers doing business in Canada, the report concludes that the country is being used as an incubator and starting point on the road to global expansion for many of the world's major retailers. The respondents account for 18 percent of Canada's overall retail space, and represent more than half of the country's foreign-controlled retail space.

The rapid growth of international retailers in Canada can be traced primarily to NAFTA and globalization, noted Marco Biasiotto, geographic information system analyst for the Center for Study of Commercial Activity. U.S. retailers first looked at Mexico, with its larger population, for expansion, but then opted for Canada, which offered a similar language and higher disposable incomes, he observed. (Retail sales in Canada, including automotive, are approximately US$246 billion.)

Although foreign-owned stores have penetrated about 35 percent of the Canadian retail scene, in some categories, such as the discount and department store sectors, non-Canadian retailers, led by Sears and Wal-Mart, account for more than 50 percent of the market.

Some Canadian nationalists may be worried, but consumers are getting better prices in the post-NAFTA market. Wal-Mart may be largely to thank. A section of the report that deals specifically with the world's largest retailer describes how Wal-Mart has disrupted business as usual in Canadian retailing since its incursion five years ago. The report indicates that Canada has become a leading performer of Wal-Mart's international division, almost meeting its parent company's U.S. productivity levels.

One Canadian department store company that couldn't compete in the new environment was old-line T. Eaton Co., which fell into bankruptcy, and then was acquired by Sears, which is operating some stores under Eaton's banner, and some as Sears. However, while there was talk that the venerable Hudson Bay Co. would follow Eaton's fate, Biasiotto offered: "They seem to have turned things around."

Who will be next to compete in the Canadian retail realm? "There are a series of American retailers lined up, including Federated," Biasiotto stressed. "We'll see more U.S. stores coming in, and they are looking at Toronto initially."

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