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Shopping Centers Today -> June 2003
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WAL-MART SHAKES UP CANADIAN RETAIL SCENE
Wal-Mart Canada has a lot to smile about.
The company, created through the 1994 purchase of 122 Woolco stores, has more than doubled its initial 14.2 percent share of national department store sales. The same goes for its total merchandise assortment, which now stands at 80,000 different products. There are 213 Wal-Mart stores in Canada, and 15 to 20 new ones are planned for the next 12 months. In addition, the Sam’s Club concept will be introduced to the Canadian market this fall, with four to six stores entering Ontario.
Wal-Mart’s presence has had a great impact on the practices of other Canadian retailers, particularly with respect to pricing.
“All stores are reassorting their price points to keep up with Wal-Mart,” said John C. Williams, a partner at Toronto-based retail consulting firm J.C. Williams Group. He adds that this has meant increased sourcing from Asian suppliers for many apparel retailers.
The Bay, Sears and Zellers, Wal-Mart’s department store rivals, have all adopted everyday low pricing to varying degrees over the past two years, which observers have interpreted as an attempt to compete with the U.S. giant (SCT, May 2002).
Downward pressure on prices has led Laval, Québec-based Laura Group (a national women’s wear chain) and other fashion retailers to adopt a private-label approach to maintain margins, says L. Peter Sharpe, president and CEO of Toronto-based mall developer Cadillac Fairview Corp. “The development of ‘own brand’ has given the fashion industry some flexibility,” he said.
Though price deflation has been less pronounced overall in Canada than in the United States, footwear and clothing prices declined by 0.7 percent in 2002, according to Canada’s consumer price index. In certain cases, price drops have been precipitous. Data from Toledo, Ohio, market research firm Trendex North America show a 19 percent decrease in the average price of women’s pajamas in Canada since 1998, for example, and a 20 percent drop in men’s sweater prices. Under such conditions “the only way the retailer can get sales increases is by increasing the number of units sold,” Williams observed.
Another trend Wal-Mart appears to have sparked is the move by certain retailers to become one-stop shopping destinations by offering broader merchandise selections. The 830-store Shoppers Drug Mart chain, for example, is adding a big-box format with expanded grocery and office supply inventories. The Home Depot now carries appliances, while Loblaw has become Canada’s third-largest retailer of children’s clothing, points out René Tremblay, president and CEO of Montréal-based regional mall developer Ivanhoe Cambridge. If you can’t beat ’em …
— S.T.
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