February 5, 2016 | Paul Thompson

Retail Update: Observations from ICSC Whistler 2016

 

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After several years out of the country, I had the opportunity to attend ICSC Whistler last week. Having spent the last four years in the UK, it was great to reconnect with past clients and friends.  It was also interesting to see that some of the challenges faced by UK and European retailers are also prevalent in the Canadian market – such as the role of ecommerce. But, it was also a reminder that each market is unique.

 

In recent years, Target definitely learned a hard lesson about the Canadian market, as did Sam’s Club. Canadian’s definitely feel loyal toward local brands. That’s not to say that Canadians are averse to international brands – having welcomed retailers like Home Depot, American Eagle and H&M with open arms. It’s just important to understand Canadian consumers – something some international retailers have overlooked.

 

Aside from the obvious cultural differences, I was reminded that the Whistler conference is more about relationship building than just deal making. Relationships are paramount to success in this industry. My colleagues and I had the opportunity to meet with existing customers – and some prospective ones – and everyone agreed that the show presents a terrific opportunity for industry leaders to get together, connect, resolve issues and chart their way through the year.

 

Our customers continued to bemoan the boom-bust cycles in Alberta and Saskatchewan.  Average weekly earnings in Alberta and Saskatchewan have dropped 2.4% and 1.2% respectively.  Contrast this with an increase of 2.6% in Ontario and 1.4% for Canada as a whole.  When you no longer see long lunch time queues in Calgary QSRs, you know this is having a tangible impact on retailers.  This macro-economic decline, depending on how long it lasts, will need to be incorporated into retailers’ capital allocation programs.

 

Another topic that was foremost on everyone’s mind was digital disruption – in particular, the relationship between ecommerce and physical locations.

 

Ecommerce and/vs Bricks & Mortar

 

This has been a common refrain in recent years, with everyone weighing in on what the impact of ecommerce will be on bricks and mortar stores. At first, ecommerce was really seen as the death knell for the physical location, but with a better understanding of how they can in fact elevate each other, there is less an “us versus them” mentality.  As we can see in Tesco’s Click+Collect initiative in the UK and Ikea’s strategy to open 10 new smaller format ‘pickup’ stores across Canada where customers can retrieve items ordered online, you can see that ecommerce is changing the way consumers shop and how retailers manage real estate investments.

 

I attended a session by Robert Mongeau, SVP of Real Estate for Canadian Tire, who spend some time talking about the macro economic issues being faced by Canadian retailers as a result of falling oil prices. But, he spent the bulk of his session talking about the state of disruption being caused by ecommerce, and the future impact it would have on space requirements and rents. In fact, Canadian Tire is hiring hundreds of new digital positions to focus on the online experience. They still see their customers going to the store to try out the goods they are interested in but they may then go online to purchase.  There needs to be a seamless shopping experience across the physical and digital realm and I wish Robert well in Canadian Tire’s quest to be the world’s most innovative retailer

 

This trend raises questions. If stores shift to a more experiential role, will there be a need for such large spaces? What will that mean for the space that is in the market? How will landlords adjust? Should landlords be focusing more on attracting retailers who understand the importance of the experiential part of buying?    

 

An article in the Vancouver Sun on the first day of the show, also addressed the challenges of this relationship. Entitled “Online shopping won't kill bricks-and-mortar stores, Whistler conference told”, the article quoted James Smerdon, the director of retail and strategic planning at Colliers International as saying:

 

“In fact, smart retailers who have a strong presence online are finding themselves in better shape than many stores that stick to a traditional model. Development and store expansion is still going on despite losses to online. What that tells me is that that stores that are expanding have online presence and they are capitalizing on online sales as well as bricks & mortar.”

 

With online retailing making up 7.4% of total retail sales now, it will be interesting to see what happens when ecommerce reaches 20%.  

 

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