The first quarter of 2015 has been the best and worst of times to be a retail consultant. With a seemingly endless amount of bad news, our phones were ringing off the hook because almost every news outlet wanted to do some kind of feature on Target closures, Smart Set closures, Future Shop closures. Very few reporters were interested in covering the strong results for Hudson’s Bay and Canadian Tire or the announcement that Uniqlo will be opening stores. The general tone was that “the sky is falling.”
Taking a step back from the hysteria, it is easy for us to see that retail is doing what it always does―change constantly. In our shop, we use the term that retail is Darwinian. If a retailer does not change, they will become extinct. The big difference now is that retail is changing faster than ever driven by technology and a consumer that is restless.
So does this mean that Canadian retailers will become extinct because of the relentless competition from larger international players? The answer is―not necessarily.
The departure of Target was not just a story about an international retailer who mismanaged their entry. It is also a story about how current retail incumbents such as Canadian Tire, Winners, and Loblaws stepped up their game and created a very competitive environment that ensured that Canadian consumers would be unimpressed unless Target delivered a superior product and experience. They did not!
It is true that larger international players such as H&M, Forever 21, and Zara are wreaking havoc on the Canadian apparel retail category. Banners like Jacob and Smart Set are just two of their Canadian casualties.
The other factor is the issue of technology, which is forcing change in retail around the world. E-commerce is the most visible change, with Amazon and Apple driving a whole new way of buying. They are literally forcing most of the book and music retailers to either change or die; trends like mobile and omni-channel are increasing pressure everywhere.
It is true that Canadian retailers were slow to respond to e-commerce with many assuming that it would be a very small segment that they could ignore. Once it became clear that e-commerce and its sister trend omni-channel would not go away, most Canadian retailers have jumped on board. If anyone has bought from Aldo lately, you will know that this Canadian retail success story has proven why they are so strong both here and internationally. Even late-comers like HBC and Canadian Tire are spending millions to ensure that their online channel is as good as or better than their stores.
So does this mean that only the largest retailers will survive? What Darwin said was that the ability to adapt was far more important than size. This notion rings true for retail. While huge retailers like Sears struggle, agile players like Dollarama thrive. So when you see a new retailer open in your neighbourhood and think that there is really no room for any more retailers, remember that it is agility and the ability to read the environment that counts.