Nordstrom exiting Canada

[ClownLoach]

Also you need to remember that a high percentage of the Canadian customers (along with an even higher percentage of affluent Canadian customers) live within an hour/100 km of the US and are well-disposed to do "big" shopping in the States...this was part of the reason Target struggled; and I'd posit that the Nordstrom customer would just as soon shop cheaper in the US.

Rack stores are in Buffalo, Albany and Syracuse; Portland, ME,
Both Rack and full-line stores in Detroit and Minneapolis; and both Rack and full-line throughout Washington State (plus the heritage of being ground-zero).

Target was a special case. They did everything they possibly could do wrong. They announced locations almost 3 years before opening, allowing Walmart to make sure every store was ready with manipulated lower prices and fresh remodels. Walmart pulled their classic US model of lowering all the prices to loss leader level near the competition, offsetting by raising prices at the other stores. They knew that they were so well entrenched in the market that they could leverage their EDLP model in an anticompetitive manner to help Target arrive with a swift "thud," and they were expecting Target to have well run stores like the US-they had no idea that Target would be an operational train wreck when they arrived.

Target did not successfully bring over any of their proprietary systems and processes that make their stores work, such as locating overstock, automated pick lists etc. so they were basically running dinosaur stores with plans to finish up the transition later. They bought a generic cash register system instead of their own system. Generic SAP software with data errors bolted to a JDA system that didn't know any sales history because they've never been in Canada before. And they did not get their supply chain model set up for timely replenishment so the stores could not maintain the needed inventory, resulting in wacky situations like blocking out empty aisles and racks with walls of paper towels or toilet paper that would have been appreciated in 2020. Our Canadian relatives were completely disgusted with these stores from opening day on. They looked like a bootleg Target store. Canada wanted Target and they got some weird, funky, out of stock store with red walls and high prices. The employees were frustrated too and Target helped many of their best US employees immigrate to Canada only to abandon them there a short while later when they liquidated. Since the company didn't even install normal Target policies and procedures this was likely much worse than if they just hired new employees as they wouldn't have been expecting to leverage their experience with systems and processes that didn't exist in Canada. Supposedly anger had boiled over well before the stores opened because nothing worked like it was supposed to. I cannot even imagine running a giant store like Target with dinosaur processes of walking around with a notepad and writing down a list of what needs to be stocked then going to find it manually in a Gigantic stockroom. Couple that with broken back end inventory trend monitoring and prediction and you would get what you expect, mountains of the "wrong stuff" and very little of the product needed.

A few good articles about the now textbook case of the failed Target Canada.

https://www.google.com/amp/s/fortune.co ... -fail/amp/

https://www.henricodolfing.com/2019/09/ ... e.html?m=1

https://archive.canadianbusiness.com/th ... et-canada/

On top of that remember many parts of Canada were locked down until this year at the border. If there was ever a chance to succeed it was the last three years as cross border shopping dwindled to zero. And the Canadian dollar has underperformed, making US shopping very expensive. In exchange the US dollar goes very far there. I am fairly certain that Nordstrom followed the same model as many other American retailers and they ship product in from the US then swap the trailer at the border with a Canadian carrier. So exchange rates and possible customs holds/issues affect the potential margin and sales. A weaker Canadian dollar is bad for retailers that operate in this manner. A Canadian dollar right now is worth US 73¢ and has been hovering around there for years. For the US visitor this means your American credit card is like a 27% off coupon so it's a great time to visit there and shop if you see what sounds like a good deal to you. (What scares the heck out of me is that I saw some pictures of grocery pricing up there in CAD and they were cheaper in comparison before even factoring in the exchange rate so their inflation must not be as bad as here).

I never visited a Canadian Nordstrom but I imagine it was not heavily differentiated from the US stores. I have seen surprisingly little differentiation between Seattle and San Diego Nordstrom stores these days yet they are totally different customers. Nordstrom seems to try to sell the same things at every store these days because they assume they are the dictators of fashion trend, a place they may have lived in for decades but the market has moved on in this heavy direct to customer market. Reading other articles about Nordstrom I think they have strayed from their original model that "no two stores are the same" in this post COVID era- my perception recently is their attempts to drive obscenely high percentage of e-commerce as a part of B&M sales drives a move to "sameness" which is clearly unhealthy for their business. They state that now 50% of their sales originate online. I think they're looking for the wrong metric and should be focused on the big three like everyone else: top line sales, comps, and profit. Their current model seems to be driving almost to a place where they wouldn't even need stores and just become a website. Their bizarre "Local" concept which is a 7-Eleven size box with a pickup counter, sales associate and a tailor shop is symbolic of their bizarre vision for the future. I believe that they really don't have any accurate way of understanding where sales truly originate. Their stores are so light on inventory and sizing these days that they force the customer to use the website. Even a decade ago they seemed to have a magical stockroom where they always could pull my size from the back. I wear an unusual size of men's dress shirt and have extreme difficulty in finding my size. Nordstrom had some high quality shirts that were reasonable when you factored in the convenience of immediate availability. Price was about double that of Macy's but quality, comfort, style and fit is in another universe. The shirt lasts much longer than the cheaper Macy's level shirts making it cheaper in reality. Now of course they've pivoted and my size isn't carried in stores and they want me to shop their website. This of course sends me back to shopping all their competition as well and they have missed the sale every time.

We have traveled several parts of the US with our Canadian relatives and they have plenty of money to spend but absolutely zero interest in the clothing sold here. I can't really name any popular Canadian brands (maybe Roots?) but I would imagine that if Nordstrom did stock up all their stores with the right product then they would be in a situation where the product is not nearly as expensive/high end as their overhead and service model requires for profitability.

[buckguy]

Getting back on topic, Canadian fashion is just not the same as American at all. Outside of Levi's I'm not sure of any major American fashion brand that is universally accepted. Flashy, blingy and trendy clothes tend to be light and cheaply made which doesn't fly in a place that is cold most of the year. Skimpy women's fashion which Nordstrom loves to sell doesn't work either. As I've mentioned before you must have a very deep wardrobe to be able to survive the winter. I can't name a real competitor to Nordstrom in Canada which is both why they probably thought it would be a good idea to enter - and why they didn't make it. Nobody can afford to wear $500 designer jeans and $1000 shoes when they must own at least 5X as many articles, including very expensive coats, boots, etc. just to survive the winter. When a major purchase is made it is expected to be built to last, like a Canada Goose jacket which easily exceeds $1K Canadian, so again they're not interested in a trendy design or color that will fall out of fashion next year. They appreciate good quality and timeless fashion/design that won't go out of style in a month. That just isn't Nordstrom in the USA, and I'm going to assume they didn't differentiate the Canadian stores except for more coats. Remember they only recently entered the NYC market too and by all reports haven't set the world on fire there either. They probably should be expanded more slowly.

I'm sure someone is going to call me out as that know nothing lifetime Californian and compare to their place in Boston or something, but Canada is just a whole different level of cold, snow and ice from what we are used to in the US, even colder areas.

As mentioned before.......Canada has it's own upscale chain: Holt, Renfrew which is nationawide. There's also Saks, which has Canadian ownership and stores in Toronto. When the dollar is strong (most of the past few decades), people shop in the US. The Detroit, Buffalo, and northern New England areas have benefited from this,as well as conveneient tourist areas like Cape Cod, but that's a bit like what people do who live a few hours from, say, Chicago or some other place with more variety than then their smaller burg---you don't do irt all the time.

Most of Canada lives in relatively temperate climes. What you describe is more like Winnipeg than Toronto and certainly not Vancouver. I grew-up across the lake from Canada, used to receive Canadian television and have known many Canadians all my life---Toronto probably gets less snow than the classic snowbelt in Western NY and the area is moderated by being on Lake Ontario. Having grown-up near the actual snowbelt, the wardrobe investment isn't much different than it is in, for example, DC and frankly much of the Southeast---damp grey winters aren't as warm as people want to think they are. Canadian incomes are lower than in the US and you have to pay for socialized medicine (although that also means you don't have to worry about medical bankruptcy), so taxation is greater. They have plenty of suburban sprawl but the densities are closer to what would be called "streetcar suburbs" in the US: places that developed between the World Wars or just after WWII. Because there is less disposable income, you don't have the retail overbuilding, in fact it's about half the square footage per person than in the US. Again, the convenience of having US shopping plays a role, but probably a marginal one.

As for the effect of US retailing, one chain unmentioned here is Giant Tiger, which is the lower end discounter and pretty hard lines oriented. It's like the kind of early low end discounter that pioneered the discount segment in the US. There's a reason for that---the name and format were borrowed from a chain called Giant Tiger that operated in the Cleveland area---the stores were smaller than even some of its contemporaries and in the city and small towns as well as the suburbs. The US Giant Tiger was bought by Gaylords and mismanaged into oblivion ages ago, but the Canadian counterpart seems to prosper. It's also worth mentioning Canadian Tire, another large national chain, which is a bit like Sears and a bit like the old Western Auto chain in the US. Canadian Tire tried opening in the US but failed and sold out to.....Western Auto. They are one of the chains that bought Target's stores. Canadian retail is qualitatively different in some ways....but the forms are more familiar than really foreign.

[storewanderer]

Getting back on topic, Canadian fashion is just not the same as American at all. Outside of Levi's I'm not sure of any major American fashion brand that is universally accepted. Flashy, blingy and trendy clothes tend to be light and cheaply made which doesn't fly in a place that is cold most of the year.

It's also worth mentioning Canadian Tire, another large national chain, which is a bit like Sears and a bit like the old Western Auto chain in the US. Canadian Tire tried opening in the US but failed and sold out to.....Western Auto. They are one of the chains that bought Target's stores. Canadian retail is qualitatively different in some ways....but the forms are more familiar than really foreign.

Canadian Tire has a limited clothing mix. It sells mostly what I'd call that "rugged" type of warm weather gear. Sure they have some t-shirts and things sitting around but that isn't their focus. Clothing takes up a small portion of the stores and they do not sell things "on trend" - they sell basics all the time. Their clothing mix reminds me more of a farm store or something.

I do not think there is much of any customer cross between Canadian Tire and Nordstrom. This is two completely different stores with completely different target customers.

Canadian Tire bought 12 former Target Stores in Canada.
Wal Mart bought 13 former Target Stores in Canada plus a distribution center.

[Romr123]

Don't forget that Canadian Tire is very predominantly franchisee-owned---they can merchandise as they see fit, particularly in the more esoteric categories. Marks Workwear Wearhouse is a division of Canadian Tire.

[Brian Lutz]

Oddly enough, from Vancouver the closest Nordstrom store (after the Vancouver store closes) will be 120+ miles (200+km) away from Vancouver, at Alderwood Mall, and even that is a relatively small Nordstrom. Getting to either the Seattle flagship or the Bellevue Square stores will add another 20 miles to either of those trips.

It also seems that Nordstrom is competing with another homegrown Canadian high end department store in "The Bay" (Hudson's Bay Company) which seems to sell a lot of the same high end brands, and which has been around since 1670.

[storewanderer]

Oddly enough, from Vancouver the closest Nordstrom store (after the Vancouver store closes) will be 120+ miles (200+km) away from Vancouver, at Alderwood Mall, and even that is a relatively small Nordstrom. Getting to either the Seattle flagship or the Bellevue Square stores will add another 20 miles to either of those trips.

It also seems that Nordstrom is competing with another homegrown Canadian high end department store in "The Bay" (Hudson's Bay Company) which seems to sell a lot of the same high end brands, and which has been around since 1670.

"The Bay" might be the problem. They basically try to do what Nordstrom does, but appeal to a wider range of customers.

It is interesting Nordstrom did not deem Nordstrom Rack in Canada worth keeping either. Based on store count I can't tell if they were running those under the old Rack model (before they over-expanded Rack in the US) of "feed the Rack from the nearby full line store."

[ClownLoach]

Oddly enough, from Vancouver the closest Nordstrom store (after the Vancouver store closes) will be 120+ miles (200+km) away from Vancouver, at Alderwood Mall, and even that is a relatively small Nordstrom. Getting to either the Seattle flagship or the Bellevue Square stores will add another 20 miles to either of those trips.

It also seems that Nordstrom is competing with another homegrown Canadian high end department store in "The Bay" (Hudson's Bay Company) which seems to sell a lot of the same high end brands, and which has been around since 1670.

"The Bay" might be the problem. They basically try to do what Nordstrom does, but appeal to a wider range of customers.

It is interesting Nordstrom did not deem Nordstrom Rack in Canada worth keeping either. Based on store count I can't tell if they were running those under the old Rack model (before they over-expanded Rack in the US) of "feed the Rack from the nearby full line store."

Hudson Bay in Canada does serve a wide range and also has almost all of the Macy's house brands which is interesting. But I still think Nordstrom has seriously lost their way recently.

[storewanderer]

Hudson Bay in Canada does serve a wide range and also has almost all of the Macy's house brands which is interesting. But I still think Nordstrom has seriously lost their way recently.

Nordstrom did not come out of COVID well. I have had real concerns with the "Rack" format and how they expanded it. I think at this point the quality (I use that term lightly) of "Rack" has deteriorated to the point that their brand has been harmed. Rack never should have been their largest format. That strategy was great for growth and Wall Street loved it but it came at the long term expense of the company's image and I think the damage done is not going to be repaired. In Reno, TJ Maxx seems to have a better reputation among upper middle class customers than the sorry little understocked Nordstrom Rack has.

I'm not sure how Dillard's is doing lately, but they seem to be lumbering along. Amazing how that works when you have almost no debt and own almost all of your real estate. Great business. They will be the last department store chain standing when all is said and done and it won't be because they had the best store, it will be because they kept their asset and liability affairs in order better.

[buckguy]

Hudson's Bay has been in trouble for quite awhile. They've closed flagships in the western provinces and are now owned by the same guy who owned and liquidated Lord & Taylor, so there's a fear that they will hollow it for real estate. They probably benefited from the demise of Eaton's which overlapped but was a more mid-market store, but that was quite awhile ago.

I've been to Buffalo a couple times in the last 5 years. They have as many dead malls as anywhere else--the one closest to Canada is being redeveloped after along decline. There's only one traditional mall that's considered healthy. If Canadians aren't propping up retail there, shopping at US malls probably isn't a big factor, overall.

Dillard has done well recently because they could sell more full price merchandise until recently but they put out a warning for the near future. They continue to buy back stock to inflate the dividend rather than invest in the stores. Before COVID, their profit margin was cratering because of more promotional activity. They only recently came up with an app and have been an online laggard.

[ClownLoach]

Hudson's Bay has been in trouble for quite awhile. They've closed flagships in the western provinces and are now owned by the same guy who owned and liquidated Lord & Taylor, so there's a fear that they will hollow it for real estate. They probably benefited from the demise of Eaton's which overlapped but was a more mid-market store, but that was quite awhile ago.

I've been to Buffalo a couple times in the last 5 years. They have as many dead malls as anywhere else--the one closest to Canada is being redeveloped after along decline. There's only one traditional mall that's considered healthy. If Canadians aren't propping up retail there, shopping at US malls probably isn't a big factor, overall.

Dillard has done well recently because they could sell more full price merchandise until recently but they put out a warning for the near future. They continue to buy back stock to inflate the dividend rather than invest in the stores. Before COVID, their profit margin was cratering because of more promotional activity. They only recently came up with an app and have been an online laggard.

Hudson Bay is a real estate play for sure, but they're better set up than say Sears was to remain a going concern. For example their flagship in Montréal is much larger than they need it to be, but the store still performs. They will eventually downsize it from its currently ridiculous 7 story sales floor down to maybe 3 floors, but they are still negotiating with the city to put either a condo or office tower on top of it. They have other valuable sites where they can do the same thing and get the store to a rational size but keep the business going while also cashing out on development opportunities.

Lord and Taylor changed hands multiple times in their history, however they were sold by Hudson's Bay to a company called Le Tote and didn't even make it a year under their ownership before liquidating. Despite the heritage of the name the stores were a disaster for years, the last couple of times I visited stores on the East Coast they were more comparable to Sears than Macy's. Empty space everywhere, run down buildings. There was no resemblance to the Hudson's Bay stores which are neat, tidy, well run and fully stocked (maybe too stocked).