Will Saks succeed in bringing Fifth Avenue to Toronto?
The luxury goods market in Canada is either crowded and competitive or wide-open for new entrants depending on whom you ask. Either way, Saks Fifth Avenue has decided the upside outweighs any potential downside with the opening today of its flagship store in Toronto.
“After more than two years of planning, our entry into Canada is truly a milestone for our company,” said Marc Metrick, president of Saks Fifth Avenue, in a statement. “We cannot wait to bring the Saks experience of an elegant edit of the best designer names, coupled with distinctive, personalized service to Toronto.”
In addition to offering a wide range of luxury goods across categories, the department store is focused on service with offerings such as Saks at Your Service, which will bring items “directly to a client’s home, office, or hotel, anytime and anywhere.”
Saks joins Nordstrom as the second U.S.-based department store serving luxury customers to enter the Canadian market. Both chains find themselves operating in Canada at a time when the national economy is softening. Some economists believe the country could fall into recession this year.
Retail analyst Wendy Evans told The Canadian Press that a slowing economy would most affect “aspirational” shoppers, a group important to both Saks and Nordstrom.
The addition of the American chains along with upscale designers opening their own stores means Canada’s homegrown stores will need to adjust.
“The whole landscape is going to change in a huge way,” Susan McGibbon, president of Retail Lab, told The Globe and Mail. “I think it’s going to be a pretty fierce battle. It’s probably one of the toughest times ever. … Holt’s and Harry’s have had a pretty comfortable existence for a long time without much competition at all.”
Saks plans to open a second full line store in Toronto next week and has plans to open five other locations inside Canada at later dates.
- Saks Fifth Avenue (Canada)
- Saks Fifth Avenue Announces Details of its Grand Entrance Into Canada – Saks Fifth Avenue
- Luxury retailer Saks entering Canada amid cooling economy – The Canadian Press/Yahoo Finance Canada
- Saks braces for battle in Canada’s crowded luxury fashion market – The Globe and Mail
Discussion Questions
DISCUSSION QUESTIONS: Do you think Saks Fifth Avenue will be successful in Canada? What do you see as the keys to the department store’s ultimate success or failure as it moves into this new market?
Poll
BrainTrust
Ryan Mathews
Founder, CEO, Black Monk Consulting
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
Well, there are many unknown variables not the least of which is the long-term health and stability of the currently troubled Canadian economy. If things don’t pick up and stay on the right course Saks could have a tough time.
Toronto is a very sophisticated and style-conscious market, so the consumer piece isn’t the problem.
That said — and again with a big economic caveat overshadowing the entire discussion — if I were advising Saks I’d suggest finding young Canadian designers I could sign up for exclusive collections. Canadian identity is a often fragile — but always critical — element in commercial life north of the border.
By promoting young Canadian designers whose work exceeds Saks’ style requirements but may be available, and sellable, at less than traditional Saks pricing, Saks could rapidly build interest and support without compromising its brand identity. Just a thought.
Downtown Toronto is a shopping mecca, with vibrant malls and boutiques. Saks is going to have a happy future there.
Well, given I’m a Canadian and living up here I should voice my view. Look for Saks to have a moderate level of success. One of the keys is that most of their stores will be inside existing HBC stores (HBC being the owner of Saks) so the real estate side of the business makes a lot of sense. Additionally, once they get rolling with their Off 5th stores they’ll find a strong market for them here.
The luxury market has been under-served here in the past, and now it’s getting pretty crowded with the arrival/expansion of Saks/Nordstrom/Simons and the improved Holt Renfrew stores. The good news (depending on where you sit at the table) is that the income levels are polarizing with the upper end growing fast. So there’s a larger-than-ever appetite for luxury.
I’ll be at their grand opening of their first store tonight and expect it to be packed with customers.
Timing could be better. The Canadian dollar is in the tank, and the “native” Canadian wealth if under pressure from low commodity (oil) pricing. There’s a lot of foreign money in town, but I have to wonder about the luxury market in general when middle east money is not as plentiful, and Chinese funds are under pressure as well. I’m sure downtown Toronto will work “ok,” but other locations may be a bit harder. The discount side of Saks … a more likely success story.
I can’t really speak for Canadians (I guess no one can, that’s why there are only three comments) but I see two possible responses: 1) Oh great! Our neighbor to the South is invading again, threatening what few home-grown labels we have left, or 2) Oh great! I want to shop there, I don’t care where they came from.
I don’t know which will prevail.
On a bigger picture level, I’m worried about the size of the market. Not only is the Canadian population small (relative to the U.S.), but it’s mostly close to major American cities: New York is but a short trip from both Montreal and Toronto, and Seattle is close to Vancouver; the prairie provinces are remote, but few people live there.
I wish them well, but I’m skeptical.
Saks would be wise to learn from the Target experience and understand the dynamics of the Canadian shopper. Hudson’s Bay Company did many things right for the high-end Canadian shopper and Saks should not completely discard those lessons either.
This is a smaller, unique market which will be difficult for Saks to create a demand proposition at retail, since there are many players who are already firmly entrenched. Saks thrives well in larger cities, or where it has a historical presence, of which it has neither in Canada. I see this as a poor focus for Saks.