Retailers in Montreal are preparing themselves for the red and white invasion. Soon malls will be etched with the popular bull’s-eye logo as Target officially makes its arrival on Canadian soil in 2013. The discount retailer is planning to open 12 locations throughout Quebec, with at least three in the Greater Montreal Area (GMA).
“We have to take control and realize that the competition is there,” said Marie-Andre Boutin who is the Vice-President of Real Estate and Store Planning for the Aldo Group speaking at the Montreal Real Estate Forum on March 20, 2012. “We want to maintain a level of sales. We just need to make the right decisions.”
According to panelists at the session entitled “Reshaping the Retail Market,” this is not Montreal’s first tango with foreign competition.
“We are not so worried about U.S. retailers, because they are already here,” said Sal Iacono, the Senior Vice-President of Development, and the Eastern Portfolio Manager at Cadillac Fairview. “We are always trying to introduce new retailers and differentiate from the competition. We focus our research on international business to make sure to offer something different by inviting retailers from other countries.“
While bigger chains and real estate companies may welcome competition from the discount giant, there is a consensus that smaller retailers and large ones that fail to reinvent themselves might experience a negative impact.
“I think Sears will be affected,” said Iacono.
Jean Laramée, the Senior Vice President for Eastern North America with Ivanhoé Cambridge, agreed saying commercially Sears is kind of stagnant and needs to reposition itself.
The Bay is repositioning,” said Laramee, “and it’s doing a good job in downtown Montreal.
It’s going to really affect some of the smaller retailers, but it’s excellent news for some of the bigger ones.”
Exciting yes, and from a developer standpoint there will be opportunities for builders to create retail developments around Target outlets, said Iacono.
“When people go to Costco they often shop and leave,” said Tyler Harden, the Vice-President of Leasing at Harden Group. “At Target, people on the other hand go to shop and hang around. This will be very attractive to developers.”
Weather and online competition
While some Canadian retailers find themselves bracing for the U.S. invasion, others find themselves battling to meet sales targets due to challenges created by unpredictable weather coupled with the growth in online shopping.
“Retail sales dropped due to weather,” said Mare-Andre Boutin of Aldo, noting that the weather has forced the store to adapt its spring and summer inventories to deal with the new phenomenon. “The weather factor is becoming real, and it’s puzzling as the seasons seems to be a mixed up. It’s created a decrease and negative impact on figures. “
Online competition continues to keep retailers on their toes. The cross-channel trend is seeing some sales taken away from some physical stores.
“Most retailers do 5-10% of sales on the web,” said Boutin, noting that whatever medium a consumer chooses to use while shopping needs to be perfect. “Retailers are now providing a total experience to clients with web access and physical access.”
Sales on the web are not expected to gain a high percentage of shoppers, according to Boutin, because while consumers check out items online they often purchase in a store. Although in some cases it important to remember that as their online productivity increases it shouldn’t result in decrease in terms of their physical space.
“Retailers have a hard time understanding the costs of being online,” said Boutin, noting that returns, shipping etc., are tough to measure. “Better balance will need to be created in the future.”
Despite a growing online shopping population, Boutin maintains that A and B class malls will continue to prosper because customers prefer the in-store experience. However C class retail properties might face more hurdles.
Mixed-use development and the burbs
According to panelists at the Montreal Real Estate Forum, the crisis of 2008 had a large impact on the operational policies of many companies. Now 35% of companies have contingency plans if vacancies go below a certain rate. The common feeling now is that it is healthier to be wise.
It’s difficult to justify single purpose commercial buildings, said Iacono, who predicts that mixed-use developments will become the future of retail developments. “An example of a mixed-use development is the former Maple Leaf Gardens in Toronto. This type of development becomes more useful because of what it offers.”
According to Tyler Harden, the Vice-President of Leasing at Harden Group, retail needs to become more partnership focused. In more densified suburban areas – where new municipal plans now allow for mixed-use projects – developers need to re-think things, as residential and commercial organizations could benefit from partnering together.
“A lot of developers are responding to demand in the suburbs,” said Harden in reference to Montreal. “The market is growing, and people want to live, work and play in the same areas. They are also seeing the value that having these properties close by adds to their home.”
The future of the Montreal retail market
While the Montreal retail market isn’t experiencing monumental growth, experts predict it will continue to hold its own as retailers recognize the importance of being versatile in a constantly changing market. Mixed-use partnerships, adjusting to cross-channel operations, and an ability to re-position will enable retailers to thrive as consumers motivated by price and efficiency continue to dominate the market.