Some major players in Canada's retail market have been hit with bad news as of late, with Target Canada announcing losses of nearly $1 billion in its first year of operations, and Sears Canada's U.S. parent company contemplating a sale of the ailing retailer.
Meanwhile, a number of high-end U.S. retailers are gearing up to set up shop north of the border, including Saks Fifth Avenue, Nordstrom, as well as luxury labels Versace and Jimmy Choo.
Retail analyst Doug Stephens said he's not surprised that certain mid-tier venders are struggling in Canada, as the retail landscape becomes increasingly polarized between luxury and discount.
"It's the middle players: Sears, The Bay and a lot of chain stores, that sit at the mid-tier of the market that are having a tough time," Stephens told CTVNews.ca in a phone interview.
He said there were signs a few years ago that the retail market was beginning to slow down when companies such as Target, Marshalls and J.Crew announced moves into Canada.
"We were starting to encounter some slowing of consumer spending, we had high consumer debt levels," Stephens said. "It's not a complete surprise to now be in 2014 and find indeed it鈥檚 a tough market. And now we have all this additional competition in the market, which is making it that much tougher."
While middle-income shoppers looked for "one-stop shopping" offered by big box stores through the 1990s, those shoppers are increasingly looking online for steep discounts, greater selection and high convenience, Stephens said.
Consumers looking for steep discounts or luxury: analyst
He said middle-income spending power has remained stagnant since the 1980s, while high-income earners have seen their spending power grow.
"For the last 30 or 40 years, there's been a polarization of income in the country, polarization of wealth and a real stagnation in the middle," he said. "With that, brands like Sears, which really depended on mid-tier customers have been waning."
Stephens said more and more, consumers are looking for two very different types of shopping experiences.
"It's between popping online for five minutes, ordering something on Amazon and having it at your door the next day, or going and having a really great, rich shopping experience in a more high end mall."
Nordstrom, Saks coming to Canada
Upscale American fashion retailer Nordstrom is set to open five stores in Canada, with the Calgary location slated to open in fall 2014, and Stephens said he expects the retailer to see success.
"In the Canadian marketplace鈥hat鈥檚 becoming really more of a have, have not market, I think Nordstrom has a wonderful opportunity within that provided they just stay true to themselves as a brand that delivers an impeccable service experience."
Meanwhile, reports have been circulating that cheap-chic Irish chain Primark and Japanese-owned Uniqlo, which also sells affordable fashions, could be looking to expand into Canada.
Stephens said bringing something unique to the market will be central to these chains' success in Canada.
"The problem is most retailers don't bring a unique experience," he said. "They find themselves slugging it out in this increasingly competitive market and usually defaulting to the things retailers default to most of the time, and that price promotion and price cutting."
