June Ong's Blog

This article contrasts the differing strategies of Target and Nordstrom on entering the Canadian retail market. Nordstrom is a large US based retailer offering upscale products including clothes, cosmetics, accessories and handbags. A direct competitor to Nordstrom in Canada would be Holt Renfrew & Co., who focus on luxury goods and Harry Rosen, who specialize in menswear. Even though the competition is not strong, Nordstrom decided to take a slow and steady approach opening only six stores over the span of two and a half years. It is also not counting on being profitable in Canada in the immediate future and by staying small for the time being, it is able to learn and adjust quickly. In contrast, Target opened 126 stores in 2013 alone. Unable to cope with the rapid expansion, Target left a bad first impression with customers due to empty shelves and overly high priced items. Unlike Nordstrom, Target expected to make a profit in the first year of operations but ended up in a staggering $1 billion loss.

It appears to me that the cautious approach taken by Nordstrom is the correct one. Although it is a well known name in the US, it is new to Canada. Supply chain, tax laws and in particular consumer behavior are different in Canada. The cautious approach allows Nordstrom to learn, adapt and take appropriate corrective actions quickly. In addition, being in the upscale market, choosing the correct locations and creating an exclusive brand name is particularly important.

Nordstrom will face other challenges and competition. Some Canadian retailers are already stepping up their game while expecting Nordstrom’s arrival. In 2013, The Hudson’s Bay Company bought Sak’s on Fifth Ave., which is a US based rival to Nordstrom. They are expected to branch out into Canada sometime soon as well. Also in response, The Hudson’s Bay Company has attempted to market itself as a higher end retailer. They are trying to tap into this market by adding luxury designer brands to the brands that they offer. For example, recently Chanel, Guerlain and Yves Saint Laurent cosmetic counters have been popping up in The Hudson’s Bay Company in downtown Vancouver where they were nowhere to be found before. It would be interesting to see if the Bay can really transform and re-position itself to become a high end retailer. After all of the “Bay Days”, I personally think it would be challenging for the Bay to rebrand itself as an exclusive high end retailer. A better bet for the Bay is to leverage the Sak’s on Fifth Ave brand to compete with Nordstrom.

http://www.theglobeandmail.com/report-on-business/nordstrom-bets-on-a-slow-entry-into-canada/article20100322/