Canadian retailers closing amid intense competition, failure to adapt to market

Canadian retailers have been closing their stores across Canada over the past several years. Industry experts say a combination of international 'fast fashion' competition, a lack of innovation and the challenge of moving operations online has created a 'fatal combination' for these stores.

Danier Leather, Laura, Jacob, and Smart Set have all failed for the same reasons

Well-known leather retailer Danier said it has entered insolvency proceedings because of ongoing financial problems, including more than $27 million in losses over the last two years. (Darryl Dyck/Canadian Press)

In fashion, everyone knows that you're only as good as your last season.

But now, you also have to be fast and adaptable, which is something many Canadian retailers — like Danier Leather, Laura, Smart Set and Jacob — haven't been able to do.

In Canada, many retailers had a "great thing going for years," according to Farla Efros, the president of HRC Advisory, a retail consulting firm. There wasn't much competition and the economy was stable.

But that all changed with the recession and the onslaught of international competition.

"They got a bit sleepy and all of a sudden have needed to go into recovery mode," says Efros, 

An influx of fast-fashion brands, combined with an inability to adapt to new styles and a growth in consumer choice, have led to the demise of many mid-price Canadian retailers.

"When you add all that up it was really just a fatal combination of things," says retail industry adviser, author and futurist Doug Stephens.

Fast fashion changing the game

International companies like Zara, H&M and Forever 21 are seen as fast-fashion brands — they're massive and they operate on a ramped-up schedule.

"A traditional apparel retailer might have taken months to go from the runway to a store," says Stephens. "A retailer like Zara is accelerating that process. So they've really just changed the speed with which retailers need to get apparel to market."

This speed allows these big retailers something traditional ones don't have: flexibility. They can get a new popular style onto the market in weeks or even days in some cases, according to Stephens.

Traditional retailers just can't keep up.

On top of that, spending habits are changing. Mid-market retailers don't have as much draw because, Stephens says, people are gravitating towards the extremes.

Fast-fashion brands like H&M and Zara have accelerated the retail cycle so much that it's become increasingly difficult for mid-size retailers to keep up. (Juan Medina/Reuters)

"Their new iPhone purchase is being supplemented by buying clothing at Forever 21. So these are the extremes of value," he says.

Lack of innovation

One of the main criticisms of Danier was that it didn't try to change until it was too late. It had a lock on the leather jacket market in Canada.

But leather's popularity has grown "astronomically" over the last few years, says Efros. That popularity has brought cheaper alternatives and different styles onto the market.

"It became less coats — it was more about blazers and outerwear that you can wear to work. And [Danier] just didn't grapple onto the trend," she says.

And Danier was not particularly popular with the younger crowd, says Ed Strapagiel, a retail industry consultant. Even if they had tried to appeal to younger generations, their traditional image stuck with them.

"The image and identity of a retailer is like a really big oil tanker — it's very tough to turn around," says Strapagiel.

Efros says that by the time many of these retailers tried to change, it was too late.

"They had already ignored their current consumer base and stopped reinventing," she says.

Spending habits have shifted towards the extremes, says industry writer Doug Stephens. People will buy less expensive clothing at stores like Forever 21, but splurge on a $600 iPhone. (Charlie Riedel/Associated Press)

Infinite choice

Most shopping in Canada is still done in "brick-and-mortar" stores — only about 10 per cent is done online. But according to Strapagiel and Efros, that percentage grows every year.

Because of this, consumers now have more choice than ever. And many customers expect Amazon-style free shipping, so the retailers have to eat that cost, says Efros.

Strapagiel says online stores, while actually quite challenging and expensive to operate, have become a necessary cost of doing business.

"But some of the smaller guys just can't afford to do that," he says.

Consumers now hold the power because online shopping has given them almost infinite choice, says Efros. That power had traditionally been in the hands of the manufacturer or the retailer.

"The consumer now says, 'This is how I want it, this is how much I want to pay, and this is how quickly I want to get it,'" says Efros.

"And if you don't succeed on the different levers that are important to me, well then I'm just going to post it on a social network so that you know that I don't support your brand."

The recession is difficult to ignore — Efros says it's been like the final nail in the coffin, but not the main cause behind these brands' failures.

Stephens doesn't think Canada has seen the end of this trend.

"I think we're going to see more of this, and it's just a natural consequence of the retail category in Canada," he says. "They were just stuck in the middle of the polarizing market and under intense competition."