Discount department stores are about to make a big mark in Canada as more and more retailers find ways to tap the discount market. The market for these types of stores is seeing an increasing popularity, which can be seen as retailers start opening up discount store versions of original stores.
In April, Hudson’s Bay announced it will be opening a Canada-wide chain of discount stores which will operate as clearance centers for Hudson’s Bay merchandise. It remains to be seen whether the company will purchase merchandise directly for the outlet like competitor Nordstrom Rack does.
The Bay is looking to close stores that are underperforming and this could be a key way to transform these underperforming stores by opening them up as outlets instead. The company might also be looking at old Zellers locations or opening up discount stores within existing stores.
The first Hudson’s Bay outlet is scheduled to open August 1st in the new Toronto Premium Outlets, which will include no less than 85 upscale retailers offering goods up to 65% off in the 350,000 square foot space.
Upscale retailer Holt Renfrew has also just opened up its own discount store. In March, the first hr2 location opened in suburban Montreal at Quartier DIX30 centre and in May the second hr2 location opened in suburban Toronto at Vaughan Mills.
Unlike most discount clothing retailers, hr2 sets itself apart by providing a nice shopping experience where shoppers do not have to sift through stacks of clothes to find a deal. Instead, merchandise is neatly displayed for easy viewing. But, the stores have a more concrete bare look to the actual interior buildings themselves.
Holt Renfrew president Mark Derbyshire says that the goal of hr2 was to create an environment where shoppers can enjoy themselves while scooping up a bargain.
Holt Renfrew originally opened up discount store Last Call that sold clearance merchandise and last season’s rejects. Last Call was not successful and folded.
By contrast, hr2 may be more successful than its predecessor by offering brand new merchandise from upscale brands at discount prices. It mixes mid-price labels with discounted, in-season designer merchandise.
The company offers 150 brands with weekly shipments of stock turning over fast. Consumers can see how much they are saving since the company displays the original price next to the significantly lower one.
Seattle-based Nordstrom has begun plans to expand into Canada. The company launched its Canadian website and the first Canadian store is set to open in Calgary in fall 2014. After that, a store will open in Ottawa in spring 2015 followed by Pacific Centre in Vancouver in fall 2015 and then Sherway Gardens and Yorkdale in Toronto in fall 2016.
The popular discount version Nordstrom Rack has also secured space in Canada with the first retail location ready to be announced soon.
The company has announced a commitment to expand its store network in the United States and Internationally. In fact, nearly 20% of the company’s five-year capital plan of $3.7 billion is slated for the company’s entry into Canada and Manhattan.
Executives at RioCan REIT told analysts that Nordstrom is actively looking for space for Rack locations in prime urban markets in Canada and Nordstrom spokesperson Colin Johnson says the company is searching for as many as 20 or more stores.
As Hudson’s Bay gears up to compete with Nordstrom Rack and all retailers vie for retail space with the likes of Target, Walmart, Canadian Tire and Shoppers Drug Mart, the industry remains poised for change as the public benefits from new discount retailers.
It will also be very interesting to see the impact of these new chains on existing discount stores such as Winners, which relies on the same product sources or inventory. It looks like HBC and Holt’s are cutting out the middle-man and going right to the consumer!