Canadian Retailers Could Be Doing More To Be More Competitive With US Retailers

CF Toronto Eaton Centre. Image: Cadillac Fairview

If you had a chance to choose between the US and Canada for your retail operations, which country would you pick? Canadian retail market seems to be at its best while the US is still struggling to remain afloat in a world characterized by woke customers. Let us explore some of the reasons why the Canadian retail market is at its best while the US seems to struggle

Canadians crave quality

There is always the question of whether to buy locally or import when it comes to the retail market. Canadians are known to offer what they advertise, and no wonder Americans outsource some of their services to them. Some argue buying precious jewelry such as diamond rings from local retailers will save on the long process of paying for taxes and waiting for shipping. Those who like importing argue that you get a wide variety of products and sometimes they are cheaper.  However, you need to understand several things when importing a diamond or engagement ring. The ideal retailer is one that gives you a quality product at a competitive price. You need to evaluate both sides to understand, which is likely to benefit you best.

Canadians prefer physical retail experience

It is projected that the global retail sector will hit USD26.07 trillion in 2020. However, USD 22.13 trillion will go to the physical retail sector, which is a clear indication that the physical retail sector is still dominant. Online shopping seems to be growing every day, but Canadians still prefer physical shops. 2019 Summer Dining Habits Survey and 2019 Summer Shopping Habits Survey both found out that 47% of Canadians prefer physical shopping when compared to 36% of Americans.

Even though Americans seem to have higher net-adjusted disposable income per capita than the Canadians, the latter still wins when it comes to the retail market. The Retail Council of Canada made a comparison in 2017 that indicates that the Canadians average sales of $744 per square foot while the US is at US$466. The same report found out that the biggest shopping mall in Canada, the Eaton Center in Toronto, registered 9,000 more visitors when compared to the Mall of America.

Only 4.5% of total retail sales in Canada are from e-commerce platforms, while it is about 7.7% in the US. People who prefer physical shopping are looking for a personalized experience where they can even try out the product in question. Such customers are also looking forward to benefiting from loyalty programs that mostly occur with physical shopping setups. A retailer who wants to make it in the Canadian retail market should thus invest in a brick and mortar business model as the customers seem to enjoy the touch before they buy a product. A recent study indicates that Canadians eager to visit eateries and malls again once the Covid-19 pandemic is over.

An insular market in Canada

The value of the US dollar is always superior to the Canadian dollar. However, that is not the only factor to consider when evaluating the performance of retail sectors in both countries. Canadian sales tax is one of the factors that explains the disparity in these two countries. This tax varies by province and can reach an upward of 15% in some areas. The import duty and 11 dollar minimum wage are also other factors that come into play.

Import duty fluctuates based on weight but can reach up to 35%, which explains why most retailers refrain from doing business overseas. The Canadian market has developed its products to cushion them from high import duty. You will thus find various unique brands ranging from clothing, gas stations, and restaurants that are serving the Canadian market. On the other hand, American brands find it hard to penetrate this market because of the high costs, such as import duty.

Canadian malls are attractive

Landlords in major cities have been working very hard to refurbish their malls to make them more accommodative to customers. Even though the Covid-19 pandemic has slowed down activities in malls, various players such as Diane Brisebois, RCC president, are instilling hope to retailers during this pandemic. New-to-Canada restaurants and retailers are thus finding a new home while Americans are closing down their underperforming outlets. People want to be associated with where there is traffic and that explains why Canadian malls have high traffic. Retail stores have been performing well even in cities such as Calgary, which was characterized by growing unemployment and economic slowdown in 2017 as one of its most productive malls, the Chinook Centre, registered sales worth $1,057 per square foot in the same year.

The Canadian retailers seem to be performing better than their American counterparts due to some structural as well as economic reasons. The retail sector will always play a major role in the global economy as it employs a big portion of the working population.