Nordstrom stated on Thursday that it will be closing all 13 of its Canadian locations, which would result in the loss of 2,500 jobs.
The decision was made in response to difficulties with the Seattle-based retailer’s long-term intentions “to establish and sustain a long-term business” in Canada, according to chief executive Erik Nordstrom.
Back in 2015, US media reported Nordstrom “may actually hit the bull’s eye in Canada,” s many predicted a bright future for American retailer. In 2015 Nordstrom had just one store Canada, in Calgary, and had plans to open more in Ottawa and Vancouver.
8 years later, Nordstrom is leaving Canada, closing all of its 13 stores and cutting 2,500 jobs! A bitter say Good Bye for many.
With its decision, Nordstrom becomes the second significant US retailer to cease operations in Canada this year. According to court records, Bed Bath & Beyond, which has nearly declared bankruptcy in the United States, announced in February that it will be closing its locations in Canada due to financial difficulties.
Nordstrom’s court documents from Canada paint a bleak picture. According to the company’s testimony in court, it lost money every year it operated in Canada and just 3 percent of the group’s net sales were produced by the Canadian subsidiary. The Canadian organization has received $775 million in financing since it was founded. The company said that its decision to shut down was motivated by high operational costs and the effects of the coronavirus pandemic.
Plausible Factors contributing many closures across Canada
Economy growth from 2012 to 2016 in Canada has encouraged many international retailers, business owners and other investors to invest in Canada. This economic growth as we see did not last long. What are the factors contributing to US retailers leaving our country?
Well, let’s not blame it all on COVID!
Yes, COVID was a big bummer for Canadian economy and the entire World for that matter, but COVID did not destroy retailers in USA nor in European countries! In general, every major retailer is struggling to stay afloat due to enormous increase in online shopping. Online buying data demonstrates that the COVID-19 pandemic’s boost to worldwide web commerce also persuaded some resistant parties, including retailers and customers. As a result, in 2021, more than 2.14 billion consumers are anticipated to purchase online.
But, even before COVID, online shopping was on the rise! Canadian ecommerce sales in 2019 amounted to nearly US$25.3 billion. As more Canadians choose to conveniently shop online, many stores are left empty!
Restaurants, coffee shops, bakeries and even fast food chains are closing it’s doors in Canada! Yes, many closures are COVID related, economy down fall and Government restrictions have put many out of business, yet is it the only factor for closures?
Statistics Canada data shows that operating expenses for the restaurant and other food related businesses rose to $75.5 billion in 2019, up 4.9% from 2018. This was the second consecutive year in which industry expenditures outpaced revenue growth!
Food prices and alcoholic beverage price rose and so was the rent. And that might be the last nail in the coffin!
Rental prices of industrial, commercial and residential units skyrocketed in Canada! Major Canadian news outlets are reporting a huge increase in rental prices across Canada! In 2022 average apartment rental cost went up by 30% in cities like London, Ont. and 25% in Vancouver and Scarborough.
According to CBRE’s H2 2022 Retail Rent Survey, a snapshot of retail trends and rents for 10 Canadian cities in the second half of last year, there was an increase in the retail rent market in the second half of 2022 compared to the first half, with 24 retail rent increases across the country and only three reductions on benchmark rent prices.
Increase in rent market doesn’t necessary means lower rental unit prices, or does it?
As in residential household so in commercial business calculation, cost of rent is the major expanse in Canada! If the rent is to hight, many investors and entrepreneurs just don’t see the ROI (Return of the investment) and therefore see no business case!