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International Retail Expansion in Canada: New Frontier or Next Wave?


Analyzing Patterns of Past and Present Growth and Assessing Future Prospects


JOSEPH AVERSA*, TONY HERNANDEZ* and CHRISTOPHER DANIEL*


Abstract: The recent flurry of interest from foreign retailers in the Canadian marketplace caps a long history of such activity in the nation. This article traces the influence of such retailers from the turn of the 20th century to the present day. This analysis identifies segments with the greatest concentration of foreign retailers, metro markets where they have reached critical mass and prospects for their further penetration into Canada.


Drivers of Retail Internationalization In early 2011, Target Corp. announced its plans for a expansion into Canada.1 The move


major by the


Minneapolis-based discount department store followed the introduction of major foreign players such as Apple, Coach, Mango, Bath and Body Works, Crate and Barrel, Aeropostale, Brooks Brothers, H&M, Lowe’s, Hollister, Victoria’s Secret, Pink and Marshalls, to name but a few. Though the


volley of media coverage might give the


impression of something distinctly different, it might be more accurate to say that the internationalization of the Canadian retail landscape is simply more pronounced than before.2 In fact, internationalization has been a staple of the Canadian retail environment for over a century, and has significantly affected its evolution during that period. When attempting to understand the process of foreign


retail internationalization, it is important to identify the reasons or drivers (typically called the “push” and “pull” factors) as to why companies look for growth beyond their domestic borders. Push factors can result from increased competitive threats, concerns over market saturation in the domestic market or constraints of planning legislation and competition laws that restrict growth potential. By contrast,


*Centre for the Study of Commercial Activity, Ryerson University, Toronto


The authors would like to thank our industry colleagues for taking the time to share their insights on retail internationalization in Canada. Any errors and omissions remain the responsibility of the authors.


1 “Target Corporation to Acquire Interest in Canadian Real Estate from Zellers Inc., a Subsidiary of Hudson's Bay Company, for C$1.825 Billion,” Canada Newswire, January 13, 2011, http://www.newswire.ca/en/releases/archive/January2011/13/c2264.html, retrieved Apr. 6, 2011. 2 See, for instance, Robert J. Boyle, “U.S. Retailers Expanding Into Canada: Will It Ever End?” ICSC Research Quarterly, Fall 2003 (Vol. 10, No. 3), pp.


1-3, http://www.icsc.org/srch/rsrch/researchquarterly/current/rr2003103/analyst.pdf, retrieved Apr. 6, 2011. 3 Irena Vida and Ann Fairhurst, “International Expansion of Retail Firms: A Theoretical Approach for Future Investigations,” Journal of Retailing and


Consumer Services, 1998 (Vol. 5, Issue 3), pp. 43-51. 4 Nicholas Alexander, “International Retail Expansion Within the EU and NAFTA,” European Business Review, 1996 (Vol. 95, Issue 3), pp. 23-55.


INTERNATIONAL COUNCIL OF SHOPPING CENTERS 10 1 RETAIL PROPERTY INSIGHTS VOL. 18, NO. 1, 2011


pull factors most often relate to retailers looking attractive markets with


high size of growth potential the for (i.e.,


increasing population, incomes and consumer spending) and/or emerging economies with less intense competition. Factors such as the


factors when companies retail market, the


availability and cost of real estate, the presence of various “comparable” target groups and the level of competition are key determining


expand


beyond their domestic markets. Research has also found that the collective knowledge, experience, perceptions and attitudes of senior retail decision-makers act as significant push and pull factors in their own right when it comes to retailers’ international expansion.3 International retail expansion also heavily depends on political, social and economic similarities between the home country and the


host following passage of the North American Free


country. Reduced trade barriers Trade


Agreement (NAFTA) in turn encouraged the regulatory integration of Canada and the U.S., decreasing retailer difficulties in developing cross-border strategies.4 Many U.S. retailers have chosen to expand their store network north of the border as their first international venture, seeing Canada as a safe test market to experiment with


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