MEMORABLE MOMENTS IN ONTARIO RETAILING

 

© John Winter Associates Limited

Two Wheeler Avenue, Suite 201

Toronto, ON, M4L 3V2

416-691-1870, fax: 416-694-6258

 

 

MILLENNIUM

 

2000    Ontario hits 11.6 million people, double the population of 1958. Now only about ten percent of the non-auto, non-food sales are conducted downtown. Only a small fraction of the population, however, can remember the way it used to be, and this proportion is getting smaller.

 

demographics.gif

 

2000    In terms of Ontario sales per capita, we have finally passed the former peak personal expenditure year of 1988. When per capita consumption gets going in Ontario, it really gets going. Not for long: Ontario would show no real growth in per capita expenditure for the next decade; the province survives the coming recession better than the wholesale closures of the early 1990s.

 

onretail.jpg

 

2000    Dylex sells Thriftys and Braemar.

 

2000    June. Downtown Hamilton’s Eaton Centre, 20 years old, 386,000 square feet, 3.54 acres, is sold for a paltry $9 per square foot.

 

2000    We plan Ontario’s first Lifestyle Centre, an upgraded strip, with plenty of landscaping, and good parking. Ease of access for affluent shoppers plus lower occupancy costs for retailers. The frequency of shopping trips has declined steadily over the 1990s, while the portion of trips resulting in a purchase rose, as time-starved consumers make less efficient (though not shorter), more efficient shopping trips. More people now head for a specific store each time they shop.

 

2000    New SEC rules prohibit CEOs from talking freely to analysts. The upside is that most analysts’ meetings are now broadcast on the internet (webcast) for everyone too see.

 

2000    July 7 is Harry Potter IV day. One of the big box booksellers only gets their delivery the day before due to payment problems.

 

2000    The Ontario government does what no other government has ever done, sends rebates to all taxpayers, just in time for the holiday buying season.

 

2000    Fifty one percent of Canadian households have at least one member who is a regular internet user, according to Statistics Canada (they interviewed me), an eight percentage point increase since 1999. Despite high levels of usage, Peapod in the US dot.com meltdown, said they serviced 2,000 food customers a day—a hundred million dollar investment to get less customers than one typical supermarket.

 

2000    Wal Mart moves from central Kapuskasing to a suburban site while Canadian Tire occupies the old, two-storey Woolco mall space.

 

2001    January Paul Walters abruptly leaves Sears. He has engineered the "coup of the century" in buying a big block of the defunct Eaton's chain for $180 million, but in the process has received a $250 million write-off for Eaton's past losses. The Canadian taxpayer essentially pays Sears to take over Eaton's. The write-offs can be used against any Sears business, not just the new seven store eatons chain.

 

            The 2000 eatons re-launch (in downtown and in Yorkdale) is Mr. Walter's second attempt to bring upscale retailing to Ontario. He had tried the same thing as president of the downtown Simpson's store. It didn't make any profit, nor did the upscale retrofit of Eaton’s in 1998. Preliminary results with the re-launched eatons are not too promising. The ads promoted the colour of the walls (aubergine, “eggplant”, a kind of beige), not the advantages of the chain. Mr. Walters departs suddenly. The new Sears president promises more affordable merchandise ("there aren't enough truly upscale customers in Canada for half a million square feet of upscale goods"). Customer traffic drops 15 percent for each higher level in the downtown store.

 

            The upscale, high-service concept has failed four times: Bretton’s in the mid-1980s (Comark, 1985-1996); Simpson’s in the early 1990s; Eaton’s in the late 1990s; and eatons in 2000. They gave up volume dollars by going too high. All you need is about 20 percent of the sexy merchandise to convince shoppers that there’s something upscale about your store, not 100 percent. Actually five failures, if you add in Les Ailes de la Mode (see 2003, below).

 

 

2001    In an interview with DSN Retailing Today, June, vol. 40, page 41, the President of Wal-Mart Canada says that "supercentres aren't a matter of if, but when". When Wal-Mart arrived in 1994, they asked both the Oshawa Group and then Loblaws to distribute their food, and got a resounding "no".

 

2001    Bracebridge gets a new Home Depot. Wal-Mart had been refused four years previously on the irrelevant grounds that Bracebridge did not have a coherent official plan (R940406).

 

2001    February: Indigo buys Chapters for $121 million (for 77 superstores and 204 mall stores, a blended average of  $430,000 per store). Two years previously the prevailing wisdom was that there was room for 125 big box bookstores in Canada. Now it’s down to 65, cut in half. With 77 Chapters and 15 Indigo, even with the stores they must divest to please the Competition Tribunal, there are too many. Boom and bust, all over again.

 

            Chapters lost $84.5 million on sales of $686.5 million (12 percent) and Indigo lost $31.7 million on sales of $94.8 million (33 percent) in the previous year. Each Indigo store did some $6 million annually, or some $250 per square foot. The losses are partly explained by the time it takes for a new unit to achieve targeted productivity. Indigo only began in 1997.

 

2001    Zellers finally recognizes the inevitable: it will now not be undersold on some 500 commonly-purchased items. It was this issue, among others, that led to the resignation of the President Paul Walters almost a decade earlier. With every-day-low-prices, there is no choice but to compete cent for cent on the most sought-after merchandise.

 

            Now all Zellers needs to realize is that the store design is crucial. If the proverbial man from Mars came down to Earth and visited a Big-K-Mart and a Wal-Mart, he/she/it would have difficulty in telling them apart in terms of adjacencies. Their identical racetracks lead the customer smoothly past all key merchandise in a continuous circuit of temptation.

 

2001    Les Ailes de la Mode (“Fashion Aisles”) opens in Bayshore SC in Ottawa and looks like a clone of Brettons. Les Ailes out of Quebec reputedly was one of the bidders for the defunct Eaton’s chain. The Eaton’s store in Bayshore is re-boxed and the former two-level Zellers store (which had left Pinewood when it was boxed) becomes Les Ailes de la Mode.

 

 

            The Bayshore store closes after two years and the Montreal flagship (the former Eaton's store) is downsized. No more all-day piano players!

 

2001    Dylex sells Jimmy Kay’s Fairweather and Bi-Way to Hardolf Wolf ($70 million for 170 stores, some $400,000 per store). The new owner wants to reformulate Bi-Way as a dollar store as it is uncomfortably positioned between the dollar stores and the junior department stores. Bi-Way went through five Presidents in six years (including Marc Chouinard, now President of The Bay). Store manager turnover rivaled that of a fast food restaurant. Ten percent of the stores had no managers.

 

            The idea appeared to be that Fairweather would be sold which would pay for the purchase of both chains, and Bi-Way (then free and clear of any costs) would become a McCrory-type dollar store chain, with wide aisles and well stocked. The new venture goes bankrupt within four months.

 

 

2001    Migration to the GTA is averaging 100,000 per year, resulting in an annual demand for more commercial space of at least 5 million square feet per year. Big boxes now consist of 17 percent of GTA retail space.

 

2001    Best Buy will not build its Canadian network from scratch. It offers $580 million for the 83 stores of Future Shop (a hefty $7 million per store). Here are some prices for takeover stores in their historic dollars.

 

Chain

Date

$Millions/Store

Store Size (sq.ft.)

 

 

 

 

Simpsons

1979

14.0

150,000

Zellers sold

2011

8.2

90,000

Future Shop

2001

7.0

25,000

Towers/ Bonimart

1990

3.6

67,000

HBC sold

2008

3.6

90,000

Miracle Food Mart

1990

3.4

25,000

Woolco

1994

2.9

120,000

HBC bought

2006

2.3

90,000

Dominion

1984

1.5

25,000

Zellers

1980

1.2

65,000

K-mart

1997

1.2

85,000

Mr. Grocer

1984

0.6

25,000

BiWay

2001

0.4

5,000

Chapters

2001

0.4

n/a

 

2001    9/11 All air space shut down for three days. That would never have happened if the attack were in a Canadian downtown.

 

2001    Wal-Mart’s Retail Link programme instantly tracks every sale. The company released the following sales profile for the few days after the World Trade Centre catastrophe:

 

            -           Tuesday:          System wide sales down ten percent; New York and Virginia sales down 40 percent. “Pantry Loading” effect for staples (bottled water, canned goods) and for emergency items (gas cans up 900 percent, antennas up 400 percent, televisions up 70 percent).

 

            -           Wednesday:     The “CNN effect” left stores empty in the afternoon and evening. Flags, candles, T-shirts and ribbons were big sellers. Flag sales over the two days, 316,000, which emptied inventory.

 

            -           Thursday:         normal sales.

 

            -           Friday:              comp store sales standard five percent up.

 

            -           Saturday:          comp store sales up 25 percent. With cocooning, electronics was big (Wall Street Journal, September 18, page B-1).

 

            In the United States, 100 million people shop Wal-Mart each week. That’s about equivalent to the population of the world visiting once a year.

 

2001    The revenge of cross-border shopping in Windsor is the "kiddie bars", catering to the U.S. youth 19 and 20, who cannot drink legally in the United States. Entertainment uses now comprise a half of the Windsor downtown (and the restaurants spin off collateral sales) and 25,000 young people hit the streets every evening.

 

 

            This entertainment is based on the greatest magnet known to man: young American girls, 19 and 20, who just wanna have fun, who cannot drink in their own country and so they go to Windsor to be treated like adults. When the clubs close, and if they are not too drunk, their identification also works in the downtown casino.

 

 

2001    Hespler downtown, once one of the three centres of Cambridge, has been bypassed by traffic and trade; at public meetings, the seniors reminiss of the tea dances held in the past. Now it is a convenience centre.

 

2002    We suggest to Public Works Canada that their office blocks should contain retail and service tenants on the ground floor to meet the enhanced expectations of contemporary employees. Like the old public housing projects, Tunny's Pasture is almost devoid of commerce for the lunch time crowd.

 

2002    Best Buy and Krispy Kreme enter the Ontario market. Quebec's leading distributor RONA takes over The Building Box.

 

 

2002    OMB turns down a redevelopment of a planned community centre, Thornhill Square, because it would contain a big-box home improvement centre, and thus change the planed function of the complex. They preferred more housing instead.

 

 

2002    In an article for the Toronto Board of Trade, we show the Toronto downtown being the third largest in North America (behind New York and Chicago). Retail sales in Toronto total some $46 billion, but if they were calculated on the US basis (which includes restaurants, home improvement, office depots, etc.) the total would be close to $52 billion. If the GTA definition were included, the 2002 sales would be north of $60 billion, far outstripping all the other major centres in Canada. Indeed, on a North American scale, the GTA is larger (and wealthier) than Detroit-Ann Arbour, to be the fifth largest consumer market, behind New York, Chicago, Los Angeles and Mexico City.

 

2003    Canadian dollar starts to rise against the American but, unlike the late 1980s, cross-border shopping does not increase. Many of the alternative chains are in Ontario, and the line-ups with enhanced security have become more severe. In 2009, six percent of Canadians went over the border per month; in 1991, the ratio was 16 percent.

 

 

2003    Sam's Membership Warehouse Club arrives in six locations. Price Club/Costco has been active in this market for 15 years, so d the additional potential is somewhat limited. Sam's will soon exit and Wal-Mart will launch its supercentres ("Main Street in a Box") with a large component of discount food.

 

2003    Sparks Street Pedestrian Mall The O'Neil report shows the three eastern Ottawa blocks as satisfactory, but the two western ones "so overwhelmingly unsuccessful that any attempt at improvement may be done in vain ... converting ... into a vehicular street with generous sidewalks appears to be a more appropriate approach." Blocks 4 and 5 were typified by a lack of sunlight, limited activities, no diversity, poor maintenance, (and particularly deadly) a lack of accessible retail.

 

2003    Our estimate of department store market shares in Canada: Wal-Mart 45 percent, Zellers 22 percent, Sears 20 percent and The Bay 12 percent. In terms of productivity in 2003, Wal-Mart $413 psf, Sears $260 psf, Zellers $168 psf and The Bay $151 psf.

 

 

2003    Competition Tribunal (CT2002004) heard a complaint against Sears Canada's pricing strategies, for its use of "two-for" pricing (average price for a tire quoted on a two purchase basis; one tire would cost more, and 10,000 such tires were sold per year, against all advice from the car dealers!) In paragraph 201, CT rejects my use of Statistics Canada data because it contained tires and batteries; CT preferred a badly done historic telephone survey on seasonality, which only covered tires. After the negative hearing, Sears drops out of tire depots, effectively decreasing competition in the market. Tires were not a particularly profitable venture, being a commodity.

 

2003    The leading supermarket chain in Ontario fights the new Shoppers Drug Mart module that features convenience foods. They choose exactly the worst example, in Stouffville, for their stand. It is easy to show (a) a convenience store operated in the mall ten years earlier with no detrimental effects, and (b) no detrimental effects were alleged with the current SDM module.

 

2003    The dream consulting contract: did the expropriation of a Windsor Ballet outlet (aka. strip club) for the construction of the Chrysler Head Office on Riverside Drive and Ferry Street, cause a detrimental effect on the business relocated one block away on the Windsor Ballet "strip" (pun intended)? What were the effects of increased surveillance at the border (after 9/11) on the young Michigan students who can drink openly in Ontario (and partake of cultural exhibitions), which they cannot do legally in their home state?

 

 

2004    Vaughan Mills, 1.2 million square feet, 193 stores one level, opens on November 4. Gridlock for miles. Someone forgets that the adjacent Canada's Wonderland 10,300 parking spaces could also have been used during the opening weekend!

 

            Vaughan Mills is the first enclosed shopping centre built in the province for over a decade. There appears to be no limit for the market to absorb entertaining new retail projects.

 

 

            Five years later, we survey North York: every respondent has been to Vaughan Mills in the previous three months (the economy was in recession). Only a fifth had been to the fashion leader, Yorkdale, and they were mostly young female respondents.

 

            We find a remarkable effect: ladies' groups shop Yorkdale and spend freely; next day they go back to the nearest chain outlet (in a competing mall) and get a secret refund. Yorkdale (percentage) rents reflect this phenomena; and so do the competing malls.

 

            In terms of trade area, we found 20 percent of the customers coming from within five kilometers, 19 percent from five to ten km, and 61 percent from elsewhere (the comparable ratios on that day for Yorkdale were 19 percent, 21 percent and 60 percent).

 

2004    The Retail Council comes up with a "national pricing" concept, presumably to justify the higher prices.

 

2004    ICSC statistics suggest the convergence of productivity of US and Canadian malls in 2004. Then with no further regional mall expansion, productivity increases considerably in the Canadian outlets. According to ICSC (which specializes in enclosed regional malls and is notoriously poor on Canadian statistics) each US citizen supports 23.9 square feet, compared to 13.8 sf here in Canada.

 

 

2004    A major retailer, who should have known better, takes the Ministry of the Attorney General to court over a recent expropriation that allegedly decreased sales (and therefore value of the property). It was shown that the sales decline matched the opening of their competitive store. What was surprising was not that sales began declining immediately, but they decreased gradually over the first year, indicating that some buying patterns, when ingrained, change only slowly.

 

2004    Markham, we re-measure the commercial space in the municipality: each affluent resident is served by 53.6 square feet per capita (think of a square, each side 7.4 feet long) in retail, service and local office space. For every new six residents, one new commercial job appears.

 

2004/5 Canada's Leading Retail (Chain) Corporations in Canada may be summarized as follows:

-          Highest sales per square foot, jewellery $943, lowest $103 (average productivity, $407 psf);

 

 

-          Highest annual sales per store, membership warehouse club, $126 million; lowest dollar store, $678,000 (average sales per store $6 million, click here);

-          Highest sales per employee, membership warehouse club, $660,000/worker, lowest home furnishings 68,000/worker (average $181,000/employee, click here),

-          Highest employee per thousand square feet, photography store 8.3, lowest furniture 1.1 (average 2.3 employees per 1,000 square feet, click here);

-          Largest store average size, membership warehouse store, 155,000 square feet, smallest cosmetics, 1,000 sf. (average 14,900 sf, click here);

-          Largest category supermarkets (113 million sf), department stores full and limited line (98 million sf) and home centres 29.5 million sf (see table above);

-          Largest number of stores clothing (5,158), followed by supermarkets (4,344) and drug (3,458), smallest number membership warehouse clubs and toys (both at 63), and home furnishings 57 (click here).

 

2005    Only small Ontario communities such as Dunnville, 6,000 population, have a downtown to protect (with a retail share of 80 percent); all other communities have seen such market shares evaporate, and now there is less attention throughout the Province on retail studies.

 

2005    The "new format" big boxes have won the market: they draw further than the competition, including the regional shopping centre (ten percentage points of inflow more than the regional mall and adjacent corridor). In 2010, Home Depot which formerly located beside the regional mall, moved to the benefits of the power centre.

 

 

2005    Yorkdale expands to 260 stores and renovates the former location of the Eaton's department store. First Apple store in Canada, does $6,050 psf in 2011, double that of second most productive, Tiffany's.

 

2005    Warden Woods Mall, lately the Warden Woods Power Centre, is demolished. It was the last of Cadillac's 'Ten Percenter' malls, and one which should never have been constructed in 1970.

 

 

2006    February Investor Jerry Zucker buys the entire Hudson Bay empire for $1.13 billion. Forbes says about 500 stores (some $2.25 million per store).

 

2006    March Loblaws launches Joe Fresh clothing line. Loblaws' lines of kitchen wares were not successful, and allegedly the Joe lines in 300-odd supermarkets would be more profitable.

 

2006    Mississauga refuses a modest zoning change to make the Fram Starchworks redevelopment a commercial success. An art gallery on the ground floor of upscale apartments wanted to add an in-house painter. No go!

 

2006    Caledonia has First Nations problems, about a 40 acre residential property. The demonstrations and dispute kill the Caledonia Commercial Park proposal and damper any development within five miles on both banks of the Grand River. Nobody from First Nations answers the Census questionnaires.

 

2007    Lowes enters the Canadian market, first with home improvement centres in Hamilton, Brampton and Brantford. Next year, four new ones opened in Toronto, East Gwillimbury, Maple and another in Brampton.

 

2008    The Commons, a 720,000 square foot Lifestyle Centre is proposed in Niagara on the Lake, beside St. Catharines. Historically, it has been difficult to attract American tourists away from The Falls (the Niagara Falls regional centre gets a 2 percent share of its market from US tourists, the Factory Outlets a one percent share; the Factory Outlets' Fashion Centre in Niagara Falls, New York gets 45 percent of its market from Ontario consumers).

 

            In the 2011 Census, St. Catharines and various other Niagara towns showed population declines. St. Catharines planned its retail based on absurdly-high population projections, and ended up with a vast oversupply (some 70 sf per capita).

 

2008    Gas prices soar in the financial meltdown: consumers no longer travel very long distances to purchase at retail (such as in the 1980s). Our research shows inflows to major trade areas down. American tourists also down.

 

 

2008    July NRDC Equity buys HBC for 1.8 billion.

 

2008    August Tragedy strikes Maple Leaf Foods, 22 people die of listeriosis poisoning. Court in 2012 orders a 'pro rata reduction' of all entitlement (93.04 percent of the original agreement).

 

2008    A US developer has bought up most of the historic Niagara Falls downtown centred along Queen Street, and has upgraded the facades and brought Art to the downtown. Under coordinated management and marketing, Main Street flourishes.

 

 

 

2008    Shoppers Drug Mart So keen to get the leading drug chain, Simcoe defines it as a 'convenience store' so the 17,100 square foot store can enter the market without any zoning changes.

 

2009    March The OMB (PL0513`4) turns down a 693,000 square foot redevelopment on 18.5 acres between Lakeshore Boulevard and Eastern Avenue, Toronto, citing (in the middle of a severe recession) the possibility of "retail contagion" elsewhere in the vicinity. That is, it would create too many private sector jobs! Meanwhile taxpayers were bailing out the auto industry with $10.6 billions to protect those union jobs ($2 million bailout per job).

 

2009    April Don Mills Lifestyle Centre is opened, a de-malling of the previous 430,000 square feet enclosed centre, to 512,000 sf and 72 stores. Compared to The Commons, Don Mills serves 1.4 million consumers within a ten kilometre radius (who earn 13 percent above the Ontario average income), whereas The Commons (which is not built) would serve only 215,000 people in the same radius, earning 12 percent below the Ontario average.

 

            While Lifestyle Centres have not been a success in Canada, Don Mills LC survives because it is a good retail location, in spite of the format. Few consumers want to visit in a blizzard or during a thunderstorm, as many downtowns can attest.

 

2009    Barrhaven, formerly of Nepean and now in the new City of Ottawa, grew from a quarter of a million square feet in 1996 to 1.5 million today. But personal and professional services lag, it takes some time to change one's doctor and dentist; easier and quicker to change the supermarket where one shops every week.

 

 

2009    We find the consultant for a major retailer is 'cooking the books', amending market shares of weak competitors to show that no detrimental impacts would occur. A number of municipalities have been duped.

 

2010    February Even though the hockey team did splendidly at the Vancouver Olympics, retail sales increased in February. This is strange, because for Salt Lake City, the TV diversion was just as great and sales fell.

 

2010    June Downtown Toronto hosts the G20 meeting, with $3+ million in riot damage. The 10,000 police don't seem to be prepared and don't seem to know what to do! Kettling anyone?

 

2010    July GST becomes HST.

 

2011    January Zellers sold for 1.8 billion to Target (some $8.2 million per store, plus another $10 million per store in renovations). The opening of some 15 million square feet spooks the market + retail has not fully recovered from the recession = much vacancy and not much new construction. With up to 18 million square feet of Zellers off the market, General Merchandise sales in 2012 were only 0.1 percent down in Ontario compared to 2011, which suggests that the other everyday low-cost department store picked up the available share.

 

            By comparison, Wal-Mart paid $353 million for 122 Woolcos in 1994, or some $2.9 million per store, or some $30 psf. Seventeen years later, Target paid much more: $8.2 per store (182 percent more), or about $80 psf (about 167 percent more). Somebody got a bargain; someone was taken for a ride!

 

2011    Statscan releases its survey of Ontario ‘Electronic and Mail’ sales, $1.7 billion, almost exactly one percent of Ontario’s total 2011 sales, $160.6 billion for 2011. Internet shopping is not a very large component of total sales, yet.

 

2011    Windsor Talbot Road access to the new bridge will cost some $1.4 billion for a six lane sunken highway. 878 parcels already expropriated, including all the former commercial and three acres at the front of LaSalle's Windsor Crossing Outlet Centre.

 

 

 

2011    May The Census registers 13.5 million Ontario residents. Some municipalities do not accept its results: it was carried out the day after a federal election and there was no advertising.

 

2011    July Cadillac Fairview announces a future Nordstrom for the previous Eaton and then Sears space of the Rideau Centre. Another store, new this time, will be built in Sherway Gardens.

 

2011    Following rapidly after Kitchener's Sports World Drive commercial redevelopment that contained a major component of office space, The Boardwalk opens half in Kitchener and half in Waterloo, one million square feet (including a 200,000 square foot Wal-Mart with solar panels that follow the sun) and a 200,000 square foot component of office space. Office and retail parking peaks occur at different times. Only four years previously, the same developer's Sunrise SC (anchored by Home Depot, Canadian Tire and Wal-Mart) had no office space.

 

 

2011    October Wal-Mart opens its supercentre on Eglinton Avenue East on the site that the OMB had turned down as a Knob Hill Farms in the 1970s. The vacated discount department store on Warden is re-used as a Lowes home improvement centre; big boxes like predictable costs and leases.

 

2011    Black Friday is promoted strongly for the first time in Canada: consumers need such a wake-up call at the end of November to get them thinking about the holiday season. The (formerly) Eaton's Christmas Parade in mid-November, held then because children were a primary marching component, is too early to begin serious holiday shopping!

 

2012    February After another disappointing holiday sales season, Sears Canada reduces prices on 5,000 items (of up to 30 percent). It does not stop the slippage of same-store sales, which were down 7.5 percent in fiscal 2011 and another 5.6 percent in fiscal 2012.

 

2012    June An old poorly-constructed and poorly-maintained Elliot Lake (population 13,500) enclosed mall (with parking on the roof) collapses.

 

2012    June/July AMC theatres wishes to sell its portfolio, Yonge-Dundas, Courtney Park and Oakville go to Cineplex, Empire Theatres buys Whitby 24 and Kanata 24. Not a peep from the Competition Tribunal.

 

2012    October HBC IPO, the stores are doing $124 per square foot, considerably less than their historical performance. They did $124 psf in 1992, and the inflation rate has been 42 percent since then.

 

 

2012    November Yorkdale expands 145,000 square feet and 800 underground parking spaces. First Canadian Microsoft store (6,800 sf). Apple relocates next door at 14,000 sf.

 

2012    In Statscan's survey of the 80 largest retailers, over the 2008 to 2012 period on a per capita basis, sales of automotive fuels increased 33 percent, food sales (due to all the new supercentres) increased by 14 percent, but toys were down 17 percent, electronics were down 22 percent and pre-recorded CDs and DVDs by a mammoth 42 percent. The boom in their food sales is solely due to the Wal-Mart supercentres: each of the 209 supercentres has about 45,000 sf of food that competes on an equal basis with the supermarket chains.

 

 

2013    January Best Buy to close eight stores in Canada, Future Shop seven. The replacement cycle of analogue TVs is 85 percent over, and the new toy, 3D has not yet caught on.

 

            Wal-Mart has an astonishing conversion rate of browsers to sales of 94 percent (online the conversion rate is only 36 percent).

 

 

2013    January Wal-Mart announces another 1.4 million square feet in Canada and 7,000 more jobs. Mostly in supermarket expansions to form their supercentres (each supercentre has about 100,000 SKUs). They now have 379 stores in Canada, up from 230 a decade ago. Supercentres bring people in for the discount food once a week, and collateral sales occur in general merchandise in the "Main Street in a Box".

 

            Our estimate pre-Target: Wal-Mart with a dominant 78 percent of the Canadian department store market (up from 45 percent in 2002, up 33 percentage points, that is 45 + 22 from Zellers + 11 from food ), Sears 13 percent (down from one-fifth), The Bay 8 percent (down from 12 percent), and the remnant Zellers' stores, one percent. What The Bay and Sears have going for them is low-historic rents, of another world (such as the $1 psf of a million square feet for Sears in downtown Toronto).

 

2013    High rise condos have rediscovered the need for retail in downtown locations (like the railway lands, where the population density is tremendous, and where food stores are willing to downsize.

 

2013    March Target "soft" opens three "pilot" stores to test reaction. Disastrous: (1) they claim their line ups will be shorter (claiming failure?), but the TV shows 200 persons in line; (2) the media focus on the prices, being higher than the US. Target Canada should be able to source at the same price (buy in Outer Mongolia, slow boat from China, rail to the DC, etc.). The operating costs (particularly the minimum-wage labour) may be somewhat higher, but for a high-volume retailer, this should be a relatively insignificant effect. (3) Of course prices will be higher, Target has $3+ billion investment to recoup. (4) They probably paid much too much to buy Zellers. (5) The demand provoked outages (with three out of some 25 stores about to open, all within an hour or so truck transport between them and the presumed DC, this is total incompetence!)

 

            The initial three store opening should have been handled differently: prices set so that they were equal to or below US levels; that would have engendered wonderful press. To pay for that: fewer stupid TV ads about the silly dog (that says nothing about quality and price), particularly during the (expensive to advertise in) Super Bowl telecast.

 

            Wal-Mart did it differently in 1994: it kept open the Woolco stores and upgraded at night. Target closed the Zellers and renovated over the next year. There was not the great disappointment with Wal-Mart that prices were different from the US, there was tremendous comment about this with Target.

 

 

 

 



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