Round Table: Surge of Global Retailers in B.C.

The surge of global retailers opening their doors in B.C. has the tongues of shopaholics wagging, but consumer demand isn’t the only factor at play in their arrival. From U.K.-based TopShop to American homewares giant West Elm, these chains are here to capitalize on what they see as Canada’s roaring yet accommodating economy and their presence is a call to action for independent retailers.

With monoliths like HMV and Sears no longer a visible presence in downtown Vancouver and American giants Nordstrom and Target preparing to open their doors, B.C.’s retail landscape is clearly undergoing a seismic shift. Added to the incursion from the south are such forces as the continued strength of the Canadian dollar, the pervasive acceptance of online retail and the lingering recession. Despite – or perhaps because of – such evolutionary forces at play in the industry, retail remains a cornerstone of B.C.’s economy: it is the largest employer not just in B.C., but in Canada, representing some 300,000 jobs in our province alone.

Some claim forces closer to home have left shop owners unprepared for the new reality, citing a lack of adequate training and oppressive government policies. Others place responsibility squarely on the shoulders of retailers themselves to adapt to changing times. To unravel the complex forces at work, we tapped into the expertise of three industry insiders: David Ian Gray, principal of DIG360 Consulting Ltd.; Shafiq Jamal, vice-president of the Western Canada division of the Retail Council of Canada; and David Goldman, owner of Boys’ Co men’s clothing store.

Retail is a hot topic, particularly with the news of Nordstrom coming to Vancouver. Is the influx of American retailers something that you expected?

David Ian Gray: We’ve seen the influx of American retailers into Vancouver and Canada for many, many years. There’s been a little bit more talk lately because there are more prominent and established stores coming in, but it’s no different than a number of years ago when the Gap first came to Vancouver. The big chains become category killers, and while it’s tougher for independents – and there are fewer independents these days – it’s a cycle. So they’ve always been around.

Shafiq Jamal: For U.S. brands it’s an easy transition. There are no language issues. It’s culturally seamless. As an international market, Canada wasn’t viewed, previously, as having critical mass. I think as these brands look around and see where growth can come from – yes, there is the Asia-Pacific market and a lot of consumers in that region – but the easier transition is into Canada, so I think a lot of them are now paying more attention to Canada’s market.

Gray:: I’d agree with that. You can work the kinks out as it’s in the same or similar time zone. Canada is also largely under-competitive compared to other Western economies. So the fierceness of competition and the amount of retail selling, square feet per capita, is lower. So even though it feels competitive, it’s not at the same level as being in Seattle, let alone New York or San Francisco.

What effect does this competition have on independent retailers?

Gray: The more competition, the more the good rises to the top. Boys’ Co is a great example of an independent that has raised its game and can compete with anybody, but there’s a lot of struggle.

David Goldman: We’re almost forced to [raise our game], but we should be doing that anyway. When you get these outside forces coming into this market, it makes you think about how you’re doing things.
 
How can Canadian retailers gain a competitive edge?

Jamal: Putting on my policy hat for a second, we need to see the government step up and enhance the ability for Canadian retail to compete. I have two recent examples in B.C. that are counter-intuitive to the levelling of the playing field. One would be Family Day, the new provincial holiday that was brought in without business consultation. On average, that’s going to cost an independent store owner anywhere from $3,500 – just for that day – in terms of increased cost. For a mid-sized to large retailer, it could be up to hundreds of thousands. We’re not anticipating that foot traffic or online traffic is going to offset the increased cost that they’re going to face on this day. That’s one example. The second is the minimum wage increase that was a significant spike. Many retailers don’t pay minimum wage, but some do, especially if they’re independent.

With more retailers coming into Vancouver, will there be enough workers to fill the jobs being created? Are retailers competing against each other for staff?

Goldman: We have an environment and a culture that has allowed us to maintain most of our staff. Half of our staff has been here for six, eight, even 10 to 15 years, and my right-hand guys have been with me for 28 years. We’ve been fortunate in that regard. Certainly it’s a young industry and we have kids that go to school and move on, but I would say that more than half our staff has been with us for a very long time. We’re able to do that because we’re a small company and that’s one of the benefits an independent company has. [Our staff members] are never a number; they’re an individual. We sit down with them, we listen to them and we ask them their opinion. And I think we can do that better than an international department store because that’s the environment that we’ve created.

Gray: I think David doesn’t have the frame of reference to see that he really is an exception to the rule on this topic. There are a lot of retailers out there that are not as family oriented or don’t offer the staff the same kind of workplace environment, let alone the compensation that Boys’ Co does. And I think for them, just as we see that there’s more and more competition for the shopper, there’s more and more competition for jobs.
    
How large an influence is culture on the type of retail that takes root? Does our laid-back West Coast style determine which stores are successful here?

Goldman: Up to a certain point. There is certainly a West Coast lifestyle that differs from Toronto and their corporate environment. We’re a smaller market and I think we have pockets of what they have, and they have pockets of what we have. But as a result of being West Coast, there is a definite, specific bend to the way we think and buy products for our stores. We have products in our stores that do very, very well that embody the West Coast lifestyle.

Jamal: From some of the retailers we hear about niche players coming in. Especially if it’s luxury or just on the edge of luxury, it’s the Asian influence that facilitates Vancouver being a more appealing place to open a shop because you have that opportunity. There’s the luxury outlet that’s planned right near the airport. I think that’s indicative of the fact that they know there’s a market and a demographic that they can cater to.

David, as a store owner, do you feel pressure to buy Canadian brands?

Goldman: I don’t know that there’s pressure. We are inclined to want to buy Canadian brands if they are appropriate to our business, but there are not as many. Canada used to be a very big manufacturing centre, particularly in Montreal and a little bit in Toronto, but there’s not so many anymore, as everything went offshore. There are a few Canadian manufacturers who make goods that are good for us and we do buy them. Fidelity Denim is one; it’s actually a company that makes its goods in the U.S., but is Canadian-owned and operated. There’s another one called Naked & Famous, a Montreal jean-maker, that’s shipping to 35 countries right now. If there were more Canadian manufacturers, particularly in menswear, we’d be inclined to buy them because it’s great to keep it local, but unfortunately there are not a lot of men’s clothing designers in Canada. Women’s is a different story and there’s somewhat more, but not a lot, and that’s mostly centred in Toronto. But we certainly would if we had more opportunities.

What role does education play? Is retail a focus for our business programs in B.C.?

Jamal: In Canada, the University of Alberta and Ryerson are the two main universities or institutions that offer programs in retail, but part of what we are working on is to enhance the linkages between the academic institutions and retail. We’re working with the government in this regard, as well as the academics, just to increase that dialogue and understanding. We constantly face the perception that retail is a stepping stone, whereas it can be and it is a very successful and rewarding career. There are a lot of graduates and people with MBAs who come over to retail. Retailers tend to spend a fair amount of time, energy and investment in training and developing their staff, so there’s a lot of opportunity. For people who think that retail is only a stepping stone, we need them to think again. If you want to become an entrepreneur and open up your own shop, this is a great training ground because you gain diverse skills from HR, IT, to operations to marketing, to supply chains, to logistics to warehouse distribution.

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From your perspective, David, what role does formal education play?

Goldman: While you can get an education and study various aspects of business as it relates to retail, I don’t think anything really replaces practical experience. That said, there really aren’t a lot of post-secondary institutions offering courses. There are courses you can take in fashion that discuss retail at Kwantlen  and what have you – they actually have a four-year program, which is great – but I think it’s more for the manufacturing or wholesale side of the industry. Otherwise it’s up to us to train our people, and that’s where they do get an education. They get practical, hands-on experience. We bring in people that discuss product knowledge with them at different times of the year, get motivators to talk to them and keep them up to date and more accountable to themselves and each other. With that they’ll continue an ongoing, organic process of being more educated within the industry and within the environment we provide for them. But if there were courses they could take to study retail, of course we’d be inclined to hire those people, particularly if we’re in a growth mode.

Technology is changing the way consumers and retailers interact. Where is Canada on the curve with regard to adapting to these changes?

Jamal: One of the things that the Retail Council of Canada has undertaken is the first of its kind: research with International Data Corp. in Canada to examine the level of penetration of new technologies like mobile in Canada’s retail industry. One of the things we have found is that Canadian retailers lag behind their U.S. counterparts in terms of production of technologies like Wi-Fi and mobile. But the encouraging sign is that they are investing. I think they are realizing that it’s a game-changer and realizing that to engage with the customer they need to fund mobility.

Gray: There’s a lot of Americans that also are behind, but when you think of the scale of the United States, both in terms of number of retailers evolving in Darwinian fashion and the resources they have to play with innovation, it’s not exactly a level playing field. We’re one-tenth the size, and we don’t have the culture; we’re a little bit more risk-averse. We tend to not want to be the front-end leader in retail; we tend to wait to see what others have done. A lot of the innovations happening are not just in the United States, but Asia has also leapfrogged in technology, so they have more incentive to try new apps and tech solutions.

Have retailers adapted to the continually growing Asian community in Vancouver? Are they doing anything to specifically target that buyer?

Gray: We’re taking the money as it finds us, for the most part. A couple of exceptions are the local general manager for Tiffany, who has made inroads in that community, as has the manager at Harry Rosen, who has been doing events with HSBC around Chinese New Year. Our response generally has been very basic: let’s take a program or sales promotion we’re running for an English-speaking audience and get a translator to translate. Rogers and Telus have run some very specialized promotions within some of these communities, but by and large when you’re thinking of a shopping centre or street retail, they’re not being very sophisticated about really understanding the market and the opportunities. An example is Chinese New Year. It gives Canadian retail a huge boost in these markets in a time that is generally a lull after the holiday season.

Statistics Canada recently published a report saying that retail sales were down this past June. Is this of concern?

Gray: Stats Canada has a thing called seasonally adjusted figures and they’ll compare June with May. But retail doesn’t do that. What retail does is look at the sales in May of this year compared to the sales in May of last year. When you do that and you look at B.C. and Vancouver, we were actually up. Not wildly up, but we’ve been up every month this year in low single digits. It’s not exciting growth, and I don’t foresee us going back to those double-digit growth days in the foreseeable future. There’s been a real shift in how people are looking after their budgeting, I’m told, for the first time in the last few years.

What are your predictions for the industry? Will this modest growth continue?

Gray: I think there’s going to be regional variations in B.C. that are going to hinge around economic opportunities. So up in Fort Nelson, especially if the pipeline goes through and you’ve suddenly got people making money up there, you’ll see a boost. Vancouver will always be B.C.’s economic centre and I think we’ll see a couple steps forward and maybe half a step back. No boom, but some persistent, incremental growth.

Jamal: With the arrival of some major American brands, I’m interested to see the impact on retail. We’re living in a redefined environment, so I think that for consumers the message is: “Stay tuned. There’s more coming. There are deals to be had.”  Retailers are stepping up to the game and hopefully we’ll see growth. Maybe not the same growth we saw pre-recession, but hopefully, year over year, incremental, gradual growth. And I think that’s where supporting your Canadian retail company comes into play because they’re employers and they contribute to the community. And by supporting them, you are enabling this.

Goldman: You have to be optimistic. The good part is we love what we do and as a result of that we’re committed. Being committed means being competitive and being competitive means doing whatever it takes to compete with the big boys. We’re dealing with competition from nationals, multi-nationals and international retailers that enjoy economies of scale we could never dream of. It’s more about numbers; we almost call it the “science of retail” these days. We need to utilize these numbers and come up with systems and analytics and metrics that give us a leg up on the competition. We want to do better than we did last year, not just from a numbers point of view, but a fiscal point of view. We want to look better all the time. We want to continue to train our people better. We’ve almost changed the way we think about everything we do and as a result we’re a little bit smarter than we were three or four years ago when we weren’t employing the systems that are available to us today. So I’m optimistic. Yes, the future looks bright.