Canada and the U.S. – different retail realities

Posted By

As Canadians, we are fortunate to live next to the largest and most vibrant market in the world: the United States. Our countries have been intertwined economically and culturally for more than 150 years.

Canada is often the first place that American retailers expand, and most of them are household names like Nordstrom and J. Crew. Our economies share so many similarities that there is a tendency amongst retail pundits, the media, and industry participants to assume that Canadian and American retail must be similar. Often times, macro trends are the same, but there are still many structural differences between our retail markets. Take, for example, some recent headlines:

U.S. department stores are rapidly declining — This is because the U.S. has too many of them. In Canada, two of our three major department store chains (Eaton’s and Sears Canada) have already disappeared, leaving only Hudson’s Bay. The rest of middle-class shopping in Canada has already been dispersed across Walmart, Costco, and Canadian Tire.

Amazon is growing quickly and grabbing market share — That’s also true in Canada, but e-commerce share of retail sales is typically lower (around 8% in Canada versus 12% in the U.S.). Amazon has an advantage across the border that it doesn’t in Canada, and that’s a patchwork of little-to-no state level sales tax. In Canada it’s much simpler — our harmonized provincial and federal sales taxes affect every Canadian e-commerce sale, levelling the playing field somewhat with brick-and-mortar retailers.

Mall traffic is down — Yes, mall traffic is also down here in Canada, but the U.S. is frankly, overstored. With about 40% less space per capita, we don’t have as much excess square footage to shed. Another difference is that mall ownership in Canada is highly concentrated among a few big pension funds — the sort of investors who act conservatively and won’t overbuild like developers did in the U.S.

So, will e-commerce continue to grow? Will malls continue to lose their relevance? Will our retail space in Canada decline over time? Yes, yes, and yes. But, we probably won’t land with as big of a thud compared to the U.S.

Contact us for more information on BDO IT Solutions, or to speak with our retail experts.

BDO eBook - The Cloud Changes the Game

There are times in the course of your business when you have the opportunity to dramatically accelerate growth and improve day-to-day efficiencies. Recognizing