TODAY CANADA, TOMORROW ... THE U.S.!
If the U.S. is opening night, international retailers see Canada as the dress rehearsal
By Dees Stribling
Tell me, how did you find America?” a reporter asks John Lennon in the movie A Hard Day’s Night. “Turned left at Greenland,” quips the sharp-witted Beatle.
Similarly, retailers from Europe and the Pacific Rim are “finding” America too — by turning left at Canada.
As these retailers seek expansion into the United States, Canada is often the entry point of choice, a stepping-stone from Europe or Asia into one of the very largest markets in the world.
“It’s a little less overwhelming than the United States, but there are still sophisticated markets such as Toronto and Montréal in which you can get your feet wet,” said John C. Williams, founder of the Toronto-based J.C. Williams Group.
Of course, Canada is a hot destination for international retailers in and of itself. According to research by Montréal-based Ivanhoe Cambridge, a leading retail landlord, roughly 110 retailers from 28 countries, including the United States, currently operate in Canada.
There are sound economic reasons for this. With a highly urbanized population of about 32.5 million, the country is wealthy by virtually any measure. The CIA World Factbook reports that Canada’s gross domestic product was just over $1 trillion in 2004, ranking it 13th in the world. Even on a per capita basis, Canada was No. 15, the Factbook says, with GDP at $31,500, placing it ahead of the U.K., Japan, France and Germany, in that order.
Indeed, some European retailers come to Canada and stop there. The country’s long-standing and deep ties to France, for example, concentrated mostly in Québec, have attracted French retailers such as women’s clothier Axara and Fly Furniture, both of which have yet to venture into the U.S. Shoe purveyor Gino Rossi (Poland) and children’s clothier Lapin House (Greece) have similarly crossed the Atlantic to Canada though not, as yet, the border with the U.S.
Many others, however, have followed that exact trajectory. Swedish retail giant Ikea did so as long ago as 1976, when it opened its first store outside Europe in the Vancouver suburb of Richmond, British Columbia, nearly a decade before opening its first U.S. store, near Philadelphia. “My understanding is that Canada offered a smoother transition into the North American market for Ikea,” said Laurence Martocq, a spokesman for Ikea Canada. “Management felt that there were certain similarities between Sweden and Canada so that it was a good place to test the North American waters.”
In 1980 Body Shop, a British retailer nearly as notable for its corporate conscience as for its lines of body care products, pursued a similar strategy by entering Canada eight years before venturing into the United States. “We started in Toronto because it’s our hometown, but that wasn’t the only consideration,” said Margo Franssen, who started Body Shop Canada with her husband and sister as partners, later handled the expansion into the eastern United States and then sold the chain last year for about $22 million. “Canada is a nice jumping off point to the United States, to see how hungry people are for the concept and what kind of people are feeding.”
More recently, a variety of European fashion retailers have taken, or are planning to take, the same path into North America. Dutch retailer Mexx entered Canada in 1995 and the U.S. in 2003 (though, technically, it became an American company when Liz Claiborne purchased it in 2001). Mango, a Spanish clothier, opened its first three North American stores in Toronto last spring and two in Montréal last summer.
Franssen, whose new venture is building Accessorize Canada, a brand of U.K.-based Monsoon, says Monsoon is likely to enter the United States, depending in part on how things go in Canada. Another British retailer in Canada, Next, is also reportedly planning to venture southward. Then there is Daiso. A dollar store with its roots as a ¥100-store in Japan, Daiso established a beachhead in Richmond, British Columbia, in 2003 and is now rolling into California and other U.S. markets.
“The larger markets here [in Canada] are competitive, but not quite like Chicago or Dallas, say,” said retail consultant Williams. “That’s the nature of Canadian retailing. There is competition, and not every brand is going to make it here, but the country isn’t as over-stored as the United States.”
Nurit Altman, manager of national retail at Cushman & Wakefield in Canada, agrees. “The competitive landscape in the United States is more fierce,” she said. “Canada’s a good place to come and not be devoured by your competition right away. If you come to Canada and then the United States, you come to the United States from a stronger position.”
And sources say Canada presents a slower-moving target from a marketing standpoint. Robert Boyle, director of market research at Ivanhoe Cambridge, points to Canadian demographics to prove the point. “One in three Canadians lives in Toronto, Montréal or Vancouver,” he said. “In that sense, market penetration is easier. In the United States, the top three markets represent perhaps 15 percent of the population.”
Not to say that retailers get everything right when entering the Canadian market, not even world-wise Ikea. “Selling in another country always involves that kind of learning curve,” Martocq said. “Ikea didn’t understand that beds are differently sized in North America than in Europe, so selling bed sheets was problematic at first.”
But coming to Canada is about more than just finding a less cutthroat market than the U.S. Retailers cite other reasons, mainly involving cultural factors. It is often said that Canada, culturally speaking, has a more “European” character than the United States. Or perhaps it is more fitting to say “international” character, considering Canadian demographics. According to the Census of Canada, 19 percent of the country’s residents were born elsewhere, a higher number than the 11.5 percent south of the border, according to the U.S. Census Bureau.
“Canadians’ taste for fashion as well as aesthetics in art and culture in general have closer affinities with Europe than, perhaps, other countries around the world,” said José Gómez, Mango’s vice president for expansion in Canada.
“Canada’s more of a mosaic, the United States a melting pot,” said Franssen.
Nevertheless, as attractive as Canada is for that and other reasons, the U.S. is no less appealing to those same foreign retailers — many of which have not taken their eyes off the prize to the south.
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