To woo Nordstrom north of the border, Canadian property developer Cadillac Fairview made a tantalizing marriage proposal: custom-designed shopping mall space to ensure the Seattle-based retailer tops the cake at four premier properties across Canada.
It was what the grand dame of U.S. department stores was waiting to hear.
Following a two-year courtship, Nordstrom finally said yes, agreeing last September to a deal that will give the retailer its first international expansion into stores expected to open in Calgary, Vancouver, Ottawa and Toronto as early as the fall of 2014.
If the marriage goes well, there are plans over time to open an addition three to five Nordstrom full-line stores, plus multiple Nordstrom Rack locations: offspring of this initial merger.
“We’ve had our eye on Canada for a long time, and are thrilled to have this chance to better serve our customers here,” Karen McKibbin, president of Nordstrom Canada, said in a recent interview. “We also recognize we’re new and that we’ll need to do a good job of serving Canadians the way they want to be served. That means doing a lot of listening and learning before we ever get started.”
Famous in the industry for enhanced customer service and a no-restrictions return policy, the luxury department store had been courted by several Canadian property developers. Cadillac Fairview promised newly renovated retail space recently vacated by troubled Sears Canada in Calgary, Ottawa and Vancouver as well as a new build at Sherway Gardens in Toronto.
Wayne Barwise, executive vice-president of development for Cadillac Fairview, calls it a marriage based on mutual admiration.
“We’re still in the honeymoon stage, but so far it’s a winning relationship. They’re a great retailer and we have great properties. Our expectation is that going forward it will be a very positive marriage for both of us.”
But what about the rest of the country? Will Canadian consumers support this mixed marriage between a Yankee and a Canuck?
“I don’t see why not,” said Stuart Smith, vice-president of CBRE Ltd., Urban Retail Group.
“Canada is under-retailed. There’s about 16 square feet of retail space per head of population in Canada compared to approximately 24.5 square feet in the U.S., so there’s room for them.”
More, Nordstrom looks to stand out. It is coming to Canada offering something different and that difference, Mr. Smith added, is key to it being accepted here.
“Nordstrom is very service oriented, and offering good service is about the only way you’re going to launch another department store,” he said. “The one-store-for-all-people concept, as Sears was promoting, just isn’t viable any more.”
Nordstrom’s extension into Canada is expected to create 1,000 new jobs and increased revenues at Cadillac Fairview-operated malls, making it a win-win partnership, according to industry experts.
“From a real estate perspective, it is absolutely the right strategic move and a terrific opportunity for both Cadillac Fairview and Nordstrom,” said broker John Crombie, senior managing director, national retail services, Cushman & Wakefield Ltd.
“Cadillac creates immediate rental uplift from what Sears was paying – including a sizable lease termination payment – and immediately improves the quality, pedestrian traffic counts and sales appeal of one of its key lead tenants in each of the respective shopping centres.”
It’s still early days in the Nordstrom-Cadillac Fairview relationship and renovation details are not yet available, “But we’re going to be working very closely with Nordstrom in renovating the malls,” Mr. Barwise said. “Their reputation is to have a very exciting retail environment. When they open a new store they bring the latest design trends to it and it’s expected they will do the same when coming here.”
For example, in Vancouver, renderings of the Pacific Centre renovation show the existing precast concrete façade removed and replaced with glass and windows “to make it a much more open and appealing structure,” Mr. Barwise said.
At Sherway Gardens, the newly built store will be part of a $350-million renovation. While Mr. Barwise concedes that’s “a lot of money,” Cadillac Fairview, wholly owned by Ontario Teachers’ Pension Plan, takes the view that it is money well spent.
“By bringing Nordstrom and other international retailers into our malls we are offering more choice to our shoppers. They will make more trips to the mall and have an opportunity to purchase more, and without having to leave Canada to do so.”
News that Nordstrom is coming to Canada has already made other retailers embark on costly renovations of their own, among them luxury department store chain Holt Renfrew, in order to be better prepared to face the competition.
“Holt Renfrew’s recent announcement of their new hr2 concept is obviously in direct response to the arrival of Nordstrom and Nordstrom Rack,” Mr. Crombie said. (Nordstrom Rack features clearance goods from full-line stores as well as excess inventory.)
“The good news is that as a consumers healthy competition will provide better customer service, larger product selection, sharper pricing and a more interesting shopping experience for the Canadian consumer. Maybe it will stop cross-border shopping.”
Still, Nordstrom is taking nothing for granted. “While this is a great opportunity and we think we can do a lot of business in Canada, we don’t assume anything,” Ms. McKibbin said. “Earning our customers’ trust isn’t something we take lightly, and we’re going to work hard to compete and hopefully give customers a reason to choose us.”
Cadillac Fairview plans to stay by Nordstrom’s side, guiding its transition into Canada.
The hope – mutually valued – is that Nordstrom will heighten consumers’ experience of the mall.
“Malls are quality assets and we have to take care of them,” Mr. Barwise said. “We continue to invest significant capital in our properties so we can remain best in class and dominant in our respective market place.”
Nordstrom, he adds, is definitely part of that plan.
“It’s a deal we worked a long time on and we’re committed to making it work.”
Calgary: The first Nordstrom store to open in Canada with 140,000 square feet on two levels at Chinook Centre. Fall 2014 opening.
Vancouver: The largest at 230,000 square feet spread over three levels of renovated space in the Pacific Centre. Spring 2015 opening.
Ottawa: Next largest at 157,000 square feet on two levels in the Rideau Centre. Spring 2015 opening.
Toronto: A new 138,000-square-foot, two-level store will be added to Sherway Gardens. Fall 2016 opening.
Nordstrom’s Canadian connection stretches back more than a 100 years to when company co-founder John W. Nordstrom first came to the Yukon from Sweden to pan for gold in the late 1890s. After two years in the Canadian North, the former lumberjack used his savings of $13,000 in 1901 to open the Wallin & Nordstrom shoe store in Seattle, the forerunner of the current Nordstrom. The rest is now U.S. retail history.
Today the company’s reputation for excellence in customer service and its range of high-quality products, from fashion to home décor, precedes it. Canadian consumer awareness of Nordstrom is already proven. The company says 15,000 Canadians currently have a Nordstrom card, and Canadians can shop Nordstrom on its website where shipping fees and duties are calculated into the final cost.
In British Columbia, the tendency is to cross the border to shop at Nordstrom’s flagship store in Seattle.