Outlook 20/20
h ot to pic s m a kin g h e a d lin es to day
In late 2010, Target announced it was expanding into Canada
Target Market Canadian Economy Lures International Retail Interests. By James Smerdon Target Corporation’s late-2010 announcement of expansion into Canada leaves Kroger,
Walgreens, and CVS Caremark as the only top-10 U.S. retailers who have not publicly announced plans to open stores in Canada. Target’s acquisition of up to 220 Zellers stores continues to be a huge story in Canadian retail, and could be part of the biggest story in North American retail for the next decade. 4
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knowledge leader Fall 2011
Strong Loonie One of the most compelling factors for U.S. retailers to open stores north of the CanadaU.S. border is the value of the Canadian dollar relative to the U.S. dollar. As the Canadian dollar strengthens, it’s increasingly worthwhile to establish Canadian stores rather than sell only to Canadian customers online or in the United States. For some U.S. retailers, Canada is the largest, closest, and/or most similar market to the U.S. market, and represents a logical move to maintain revenue growth. While not all retailers are compelled by the same macro-economic factors, the exchange rate plays some part in the spate of recent announcements of U.S. retailers opening shop in Canada. As recently as 2004, Canada’s retail sales per capita were US $8,000 compared with approximately US $12,000 per capita in the United States. However, with the appreciation of the Canadian dollar, per capita retail spending in Canada now approximates the U.S. By itself, this would certainly attract new interest in the Canadian retail market, but when one considers that the available retail space in Canada (on a per-capita basis) is substantially less than that in the U.S., it becomes even more attractive. Compared to the U.S. retail market, Canada represents a bounty of untapped potential. The United States has 38 square feet of retail floor area per capita, compared to only 24 square feet in Canada. This means that Canadian retailers’ average productivity is CA $530 of sales per square foot compared to only US $320 south of the Canada-U.S. border. If American retailers can maintain the same cost structure and operational efficiency in Canadian stores as they do in U.S. stores, there is the potential for significantly greater profitability. Drew Keddy, Vice President of Colliers International in Canada, leads the firm’s retail practice and notes that Canada is considered a very attractive destination for high-end retailers. “Canada is uniquely positioned in terms of market attractiveness to retailers. Our economy has bounced back faster than other markets around the world and our currency continues to strengthen. These factors, coupled with high sales per square foot and relatively low rent rates, create perfect conditions for international players to expand their presence here.” knowledge-leader.com