How Canadian retailers can give U.S. competitors a run for their money: Comment

How Canadian retailers can give U.S. competitors a run for their money
By David Segal. Source: Financial Post.

From Le Chateau to Smart Set, Canada’s retail landscape is littered with examples of players who’ve failed to capitalize on their home-field advantage. Sure, there are some legitimate factors that make it tough for Canadian retailers, both new startups and established players, to grow: a weaker dollar, a smaller population, global saturation from U.S. media, to name a few. But we also have some real advantages in the form of a stable economy, relatively high salaries and a fraction of the competition faced by retailers in the U.S.

Ultimately, what really holds us back — both at home and abroad — may not be demographic hurdles, as much as a state of mind. As Canadian entrepreneurs, we need to ask ourselves: are we thinking as big, as bold, or as aggressively as we should to compete in a global marketplace?

For small businesses just starting out, as well as chains expanding across Canada, here’s how we can turn the tables and give U.S. competitors a run for their money.

Fighting the Canadian Complacency Trap
Stop me if this sounds familiar. An iconic Canadian retailer hits on a winning formula here at home, then sits back and watches the cash roll in … until an international competitor comes along and eats our lunch. Take coffee as as example. Once upon a time Second Cup had a lock on Canadian café culture, but then Starbucks crossed the border and, well, we know how that went. Starbucks’ conquest didn’t necessarily come down to making a better cup of coffee, it came by way of redefining what coffee is.

From the moment “frappuccino” hit the modern lexicon, Starbucks had an indisputable lead in the space, one it’s held onto by reinventing itself many times since. In contrast, stepping into a Second Cup today feels a lot like stepping into a Second Cup from years ago.

But stagnation needn’t be a given. And folding in the face of foreign competitors shouldn’t be seen as a foregone conclusion, no matter how big the bankroll behind them.

The trick, whether you’re a small business or have global ambitions, is to stop thinking about serving the Canadian market and start thinking about serving a global one, from Day One. Even if you’re not expanding to the U.S. and are satisfied with a smaller, successful operation in Canada, it’s a given that U.S. competitors, in time, will come to you. They’ll bring an offering that’s been refined and strengthened by the ruthlessly Darwinian retail environment south of the border.

To stand up to that challenge, Canadian retailers have to embrace continuous evolution as their only constant. This means continuously experimenting to come up with proprietary products, technologies and business models that aren’t just new to Canadians, but new to the world. This kind of preemptive global thinking isn’t always easy, but it’s our best line of defence. Not to mention, it means we’re better positioned to set up shop in their backyard, as well.

Learning to Embrace Risk … and Canadian Cool
Of course, there’s no way the frappuccino came about without a few flops. Risking failure is part of the process of pushing the envelope, but Canadian retailers big and small often shy away from this, as well. Rare exceptions to the rule, however, prove that risk can pay off. Just look at Lululemon: arguably Canada’s most successful retailer, it rewrote the rules on modern activewear around the world. But it’s easy to forget that this was only after embarking on a bold and risky expansion plan and staring down a few significant setbacks along the way (including an initially lacklustre U.S. launch). With more international expansion now in its sights, Lululemon is a global juggernaut, not afraid to break a few eggs in its quest for dominance.

By contrast, many Canadian retailers are overly cautious, preferring to sit on a successful (for now) business model, rather than rock the boat with a bold move. Just look at how international fast-fashion outlets have decimated Canadian clothing companies in the past few years. Jacob, Laura, Danier Leather and Smart Set all buckled under the weight of Zara, H&M and Forever 21. These foreign brands aren’t inherently better: They’re simply more willing to make the investments, take the risks and make the changes needed to succeed in a global marketplace.

To be clear, I’m not saying we have to bury our regional identity to thrive as Canadian retailers. In fact, Canadian provenance can be a powerful differentiator … if used properly. Tim Hortons’ first foray into the U.S. ended in disaster because the hockey nostalgia that makes it popular across Canada didn’t translate to an American audience. Tim’s was just another cup of coffee in an already crowded space. It was distinctly Canadian, but in a superficial way that didn’t translate to a better product.

By contrast, when Canada Goose opened its first flagship store in New York City last year, what really set the luxury parka-maker apart was true expertise on something Canadians know best: cold. Its SoHo boutique offers a bespoke customer experience that includes personal shopping, on-site brand ambassadors and limited-edition vintage styles, all made to a standard unequalled anywhere. By going above and beyond to offer real differentiation and proprietary advantages, Canada Goose is poised to have a lock on luxury outerwear in the U.S., its  fastest-growing market.

In the global marketplace, Canadians are an undisputed underdog, but for new businesses and big chains alike that’s no excuse to give up our home turf to international competitors — or shy away from venturing outside our borders. Technology, e-commerce and a globalized economy have evened the playing field. By thinking a lot bigger, embracing risk and sharpening our elbows to get more competitive, we can bust through the mindset that keeps us mired in retail mediocrity and show the world what Canadians have always been capable of.

David Segal is an entrepreneur, speaker and retail thought leader. He is best known for bringing radical innovation to a 5,000-year-old product category with the launch of DAVIDsTEA, the company he co-founded in 2008 and left in 2016.

1 Comment

  • May 10, 2017

    Jedannah Vieira

    Agree and so glad to see this opinion put out into the world.
    I’ll also add that the decided lack of government and business funding for industries like the Canadian apparel industry holds emerging talent back and dries up the opportunity to develop a viable fashion hub in Canada, either in Toronto or Vancouver. Some time ago, Harvard Business Review confirmed the importance of the existence of New York’s fashion hub in driving innovation and scaling the local fashion retail economy for global reach. Apparel simply isn’t seen as an area for innovation and investment, perhaps because of the risk tied to investing in fashion startups and the arts – again Canadian risk tolerance holding the economy back. In reality, retail, beauty and apparel are massive portions of the consumer wallet and a source for continued innovation so bowing out from participation is to our detriment. Talented Canadian designers and business eventually exit to be supported and scale for success in hubs like New York.

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