TORONTO (Reuters) - Canada’s retail market is en route to absorbing a “second wave” of U.S. entrants, suggesting the consumer landscape is in transition and could see some of Canada’s most familiar retail names disappear, Colliers International said in a report on Tuesday.
In its spring retail report, the real estate services firm said economic conditions are ripe for more U.S. retailers to set up shop north of the border.
There are lots of appealing reasons for U.S. stores to bring business to Canada, particularly with a stronger Canadian dollar and healthy economy and brand recognition in a market that is in close proximity to the huge U.S. market.
“What we’re seeing now is what I’d call the second wave,” said Drew Keddy, vice-president, Canada, at Colliers International.
Wal-Mart, Home Depot, Sears and Best Buy have long operated in Canada. New entrants are rumored to be J. Crew, Kohl’s and Dick’s Sporting Goods, among others.
The Canadian retail property market has been abuzz for about four months ever since Target Corp, the No. 2 U.S. discounter, confirmed it was expanding north through a C$1.83 billion ($1.9 billion) deal with Hudson’s Bay Co.
Target’s approach to Canada -- in buying up the leases of discounter Zellers from HBC, a chain with similar locations and size preferences -- may be copied by other U.S. retailers. To grow organically, that is store by store, is a difficult way in to gather critical mass.
“I think you’re going to see some other companies come in, like Target, and they’re going to acquire a Canadian brand,” said Keddy.
Declining to comment on which brands names are most likely to be prime prey, he said “troubled” retailers with quality real estate will be the first to entertain takeover discussions. Attractive targets will also likely have a coast-to-coast presence.
The report comes a day after Canadian Tire struck a friendly C$771 million deal with Forzani Group to defend against the influx of U.S. retailers.
The proposed deal gives Canadian Tire a commanding share of the country’s sporting goods market, a new presence in Canadian malls and an avenue for reaching younger consumers.
U.S. retailers are also finding it worthwhile to set up physical stores in Canada, rather than selling only to those Canadians who shop online or in the United States on cross-border trips, said Keddy.
Reporting by Ka Yan Ng; editing by Rob Wilson