Retailers Shutdown
Table of Contents :
US Stores Closing.
Canadian Stores Closing.
Canadian Reasons.
Online Shopping.
Nordstrom Exit.
My Perspective.
Disclaimer.
People are curious why recently some of the biggest retailers in Canada are shutting down.
Don’t you think knowing the reasons can help us make informed investment decisions, while staying ahead of the curve.
US Stores Closing
Hundreds of retail stores are being shutdown across the US, where California is affected the hardest.
This slow collapse of physical retail stores is going on for a while now, and in 2023 alone about 2000 locations will shutdown.
Experts believe, missteps by executives and pandemic-related challenges are major contributors, and eventually some of them have filed for bankrupcies.
During pandemic, retail sales went up as e-commerce rose at the cost of brick and mortar retailers.
Consequently, they were not able to fulfil their lease obligations that has a ripple effect on real estate investment Trusts, which own big shopping malls in North America.
Canadian Stores Closing
Multiple Canadian retailers are either shutting down their physical stores, or filing for bankruptcy as there is a seismic change in retail sector.
Whether it's Carlton cards bench or forever 21, a brick and mortar retail business model is changing forever.
Like America, Canadian consumer behaviour is changing very rapidly as most of us prefer to now shop online.
Most big American brands who entered Canadian market with much fanfare are leaving, latest being Nordstrom who is now closing all their Canadian operations.
I believe Canadians prefer their own favourite brands over outsiders, which might be the ultimate factor for their longevity here in Canada.
Canadian Reasons
According to retail insider, more than 90 foreign companies entered Canadian retail space in the last couple of years.
Canada is geographically very large with a diverse population.
So when a new entrant expands too quickly, shoppers often are not able to properly resonate with new brands.
Often we have sticky shopping habits, or even get attracted to cheaper alternatives that are available at smaller mom and pop shops, especially during todays inflationary times.
Also new retailers have to furnish their stores while investing both in supply chains and employee training, which can very expensive, thus increasing their cost to do business.
At the end, I believe brand loyalty plays a huge role why one is more famous and profitable than other others, hope you get idea.
Online Shopping
There is a seismic shift how people shop, that is from physical stores to e-commerce and this trend accelerated during pandemic shutdowns.
Some of the brick and mortar stores have evolved to cater to this changing trend, but most big box stores were stuck in their old business model, hence are now facing challenges.
Surely millennials prefer online shopping, which gives them more options ease of use convenience home delivery and liberal return policy, all at click of a button.
Online shopping trend is an industry disruptor, that is why even Walmart is focussing more on their e-commerce side of business.
Nordstrom Exit
Nordstrom is the latest American giant to exit Canadian retail space, which some believe is not Canadian enough.
I think Canadian retail space is too diverse like its population, which is spread over this vast country.
Surely that might have put enormous stress on supply chain, as customer choices are different on west middle and east side of Canada.
Ideally they should have just opened a couple of stores in eastern and western Canada to gauge the market, and then slowly ramp up.
But often big corporations are in hurry, both during entry as well as existing a market in my opinion.
My Perspective
Recently an irreversible trend of going online is picking up, both for services as well as shopping.
Consequently, future of retail in our downtown and business district looks uncertain, as there are multiple factors at play.
Just imagine the rent you need to shell out for a prime location, and why would you pay that when trend is moving online.
Surely this will affect rentals in shopping malls, but I think in a capitalistic economy, inefficiencies are weeded out and most efficient and profitable businesses survive.
Hence I would avoid investing in REITs, as well as stocks of brick and mortar retailers right now.
Disclaimer :
As a disclaimer, I’m not a financial advisor please consult one before investing based on your personal financial situation.