Dollarama, Amazon 'forces to be reckoned with' in Canada in 2017
Shoppers take a seat as crowds visit Toronto's Eaton Centre shopping mall on December 26, 2015. (Chris Young/THE CANADIAN PRESS)
Karolyn Coorsh , CTVNews.ca
Published Monday, December 26, 2016 7:00AM EST
Where will you be shopping in 2017? More importantly, how will you be shopping?
If 2016 is any indication, discount chains such as Dollarama, and online retailers such as Amazon will be forces “to be reckoned with,” as retail expert Bruce Winder puts it.
“The Canadian economy is rough and tumble, and it’s not going to get better for a while,” Winder said in an December interview with CTVNews.ca. “So consumers will be even more frugal in 2017 than they have been in 2016, if that’s possible.”
With that in mind, CTVNews.ca takes a look at some of the retailers expected to make a splash in 2017.
Discount chain Dollarama ended its year on a high note, by all accounts, with profits and sales in the third quarter up from a year ago.
“Dollarama is a force to be reckoned with,” said Winder, co-founder and partner at Retail Advisors Network. As they continue to roll out new stores, Winder suggests Dollarama will see continued growth beyond the industry average in 2017. “They’re perfect for the Canadian consumer right now,” as middle- and lower-income class consumers search for savings on their basic-product needs, Winder said.
“It’s fun to shop there, things are cheaper,” Winder said. “You can walk out of there with a lot of stuff for $20.”
But Winder said it may not all be good news for discount shoppers. He expects that, if the Canadian dollar continues to weaken, Dollarama will have to pay more for their products.
“They’re going to have to pass on those cost increases to consumers, so I wouldn’t be surprised if, over the next year or so, they sneak up to $5 or $4.50, ” Winder said.
Dollarama recently defended their decision to increase the price of chocolate bars, saying it could no longer absorb the higher cost of raw materials, The Canadian Press reported.
On the heels of a year that saw a major shakeup among their leadership, Canadian Tire may be poised to roll out dramatic changes, particularly in relation to e-commerce – a sector in which the retailer has been lagging behind, Winder said.
“They have new people in there now, so you’re going to probably see them at least trying to float some new ideas and get out there and try to make more of a meaningful difference in e-commerce.”
In August, re-installed CEO Stephen Wetmore said that the company is working on 30 initiatives to improve its presence in digital retail.
Winder said he expected the company will have to make a “drastic change” in e-commerce to “make up some ground in 2017.”
While there may be some “challenges” with digital, director of retail and digital insights at Kantar Retail Robin Sherk said Canadian Tire still has time to catch up.
“I think the piece that’s working in their favour is just the fact that e-commerce as a whole is a little bit behind in Canada, so they still have time,” Sherk said.
She said they’ve also taken big steps to review and redesign not only their online presence, but their in-store experience.
Nordstrom, a U.S. department store chain that opened its first Toronto stores this year, has rolled out its Canadian presence in a “smart” way, Winder says, perhaps taking cues from the hasty launch and eventual demise of Target Canada.
Nordstrom, in contrast, appears to be taking its Canadian introduction at a more measured pace. The chain first entered the Canadian market in 2014, starting with a store in Calgary. Nordstrom’s apparent plan for just six stores across Canada is a far cry from Target’s rollout that saw all its 133 stores close after two disappointing years fraught with logistical problems and customer dissatisfaction.
“They haven’t gone too fast,” Winder said of Nordstrom. “They’re smart, they’re humble enough to take it slow, to learn and adjust as they go, versus going in, like Target did, with 120 stores ASAP.”
Nordstrom wasn’t the only Canadian debut of a big-name U.S. retailer, as Saks Fifth Avenue opened two Toronto stores in February. The luxury retailer plans to open its next Canadian store in Calgary in 2018, and Saks President Marc Metrick has said considering a total of seven locations in Canada.
“We’re in this for the long haul,” Metrick said in an interview with The Canadian Press last May.
When it comes to e-commerce, online retailer Amazon is considered one of the most successful retailers globally, and that includes Amazon.ca.
“Amazon is the competitor in this space,” Sherk said. “They are the disruptor.”
She added that Amazon is always adding benefits, such as same-day shipping, “so they’re continuing to accelerate that immediacy and doing it in a way that you feel like you’re getting a good deal when you’re shopping on their site.“
Winder said Amazon is a “thorn in everyone’s side” in the Canadian marketplace.
“If you went into the boardrooms of Canadian Tire and Wal-Mart, and maybe Loblaw, I would bet that one of the things they talk about a lot is Amazon,” Winder said, adding they are “very difficult” to compete against, “because they don’t have the overhead of brick-and-mortar stores.”
Winder said U.S.-based Amazon stands out because it is innovative. And, “every year they’re adding more to their arsenal on the Canadian website.”
But Winder said as the shift to e-commerce continues to be refined in 2017, it’s no surprise that Amazon is doing well.
“If you look at Black Friday and Boxing week, every promotion now is becoming online-focused.”
It’s no secret that Wal-Mart has already made inroads in the grocery sector, with the rise of their “supercentres” giving traditional grocery chains a run for their money in recent years. “The challenge they’re going to have, is food prices are going up in 2017,” said Winder.
A Dalhousie University report released earlier this month suggested that food prices overall in 2017 are expected to rise between three and five per cent. “Look for Wal-Mart to get more competitive, and they’re going to have to swim against the cost tide,” Winder said.
The rising cost of food will be a good and bad news story for all grocery retailers, said Winder, because cost increases tend to boost average sale prices and average margins. Retailers may not be able to raise prices as much on select items due to competitors trying to gain marketshare, and customers may buy cheaper foods “to compensate for the inflationary effect,” he said.
With files from The Canadian Press