Best Buy Canada will lay off 900 employees and close 15 of its stores including eight Future Shop locations, while Sears Canada will lay off 700 of its workers as both retailers brace for the arrival of Target next month and the expansion of Walmart there. Nordstrom is also launching in Canada with four stores in major cities.
“The retail landscape continues to change, and our success is dependent upon our ability to evolve along with it,” said Mike Pratt, president of Best Buy Canada. “By taking a proactive approach in transforming our operations now, I have no doubt we will be in the best position to continue innovating our store experience for consumers and grow into the next decade.”
Sears spokesman Vince Power in a statement that the imminent layoffs across Canada are “part of our initiative to right-size the organization, which is working in concert with other initiatives to make Sears successful."
Best Buy Canada, like its American parent, faces stiff competition from online electronics retailers such as Amazon and Apple and is replicating a U.S. strategy of switching to smaller stores, which are less expensive to operate. Meanwhile, Sears Canada — which has suffered for years from falling sales and profits — is shrinking its overhead from its 360 department stores and 300 distribution centers.
While Canada's retail sector has been wobbling ever since Walmart arrived in the mid-90s, this latest round of market rumbling is spurred by Target’s immiment expansion plans, as the cheap chic retailer gets ready to open the first of its 124 stores in Canada next month.
In typical Target style, it's collaborating with designers (including Canadiana chic brand Roots) and entering the market with a meet-the-new-neighbor equivalent of an apple pie: corporate citizenship.
Walmart, north of the border since 1994 followed by a wave of Supercentres in 2006, is nervously watching its old rival's arrival. It's been getting ready by dropping prices and investing $450 million CAD to expand its presence to 388 stores by 2014. Last year, Walmart Canada CEO Shelley Broader told the Wall Street Journal, "We are cementing our place as the location for one-stop shopping," adding that nine out of 10 Canadians shop at Walmart.
"Of all players currently in or shortly entering the Canada market, Target has been competing head to head with Walmart for the longest and has arguably been the most successful at it, and we don't see that changing" north of the U.S. border, UBS retail analyst Robert Carroll told Dow Jones.
Wendy Evans, president of Toronto-based Evans and Co. Consultants Inc., offered a different view. “I think there is going to be a restructuring and a right-sizing in retail," she told the Financial Post. "Electronics and books are on the forefront of that, with specific names and brands that you can compare anywhere and buy online. I think that fashion is next.”
Like a growing number of consumers worldwide, Canadians increasingly buy online or seek out smaller stores with tailored experiences, challenging the long-held "bigger-is-better" retail mantra. "It has been quite a profligate use of space," Evans said, adding that Sears “also has too much space to be competitively productive.”
In a fall report assessing the impact of Target's arrival, Barclays Capital said that Sears Canada, Walmart, Old Navy, the Loblaws-owned Joe Fresh apparel brand (so-named for designer Joe Mimran, who founded Club Monaco, who's expanding the masstige brand in the US) and Canadian Tire are most at risk.
After pulling out of the UK in 2011, closing 50 of its huge U.S. stores last year and now consolidating its Canadian footprint, Best Buy is expected to close stores in Europe and China next. "I think it's fair to say that we've committed to optimizing our store footprint," said Best Buy spokeswoman Amy Von Walter.
Of course, whether these big box players succeed or fail depends on the Canadian shopper—and as Friday's Financial Post headline stated, it's all about bricks vs. clicks: "Canadian Consumers cutting big-box stores down to size, one online purchase at a time."
Below, more on Target Canada's designer partnerships: