Under renovation for the past year, much of the Holt Renfrew store at Toronto’s Yorkdale Shopping Centre is a labyrinth, a cluttered space that doesn’t conjure the luxurious experience one expects from a premium retailer.
Yet the Holt Renfrew of the future is gradually becoming evident with the unveiling of a spacious “beauty hall,” launched this summer. There are plans for a Christian Louboutin shoe boutique modelled on the chi-chi designer’s Paris apartment, its red velvet couches evoking images of his red-soled pumps. It’s all part of a wider $300-million makeover, as Holts arms itself for the coming luxury battle.
Holts is not alone in the fight for big spenders. From Harry Rosen Inc. to La Maison Simons, premium fashion retailers are feeling the heat. The Americans are coming, and they know it.
The market in Canada will become decidedly more crowded. This week, Hudson’s Bay Co. unveiled a $2.4-billion deal to buy New York-based Saks Inc. and bring as many as seven of its tony Saks Fifth Avenue outlets to Canada. Seattle-based Nordstrom Inc. will open its first Canadian store in the fall of 2014 and has plans for up to 10 locations. Luxury brands that supply the chains, from Hugo Boss to Stuart Weitzman, are opening their own standalone boutiques, raising the ante for incumbents.
Erik Nordstrom, president of stores at the chain that bears his name, isn’t daunted. He said in an interview this week that when staking out new territory, “traditionally we look for the best competition, because that’s where the most business is to be had.
“Once we get those locations, we have to compete like crazy ... Sometimes there is fallout.”
High-end fashion merchants are preparing for an unprecedented level of competition, not only in their bricks-and-mortar stores but also in the fast-growing e-commerce segment. To succeed, they will need to freshen their stores, making it easier and faster for shoppers to find products and check out with mobile devices. They will need to better understand their customers’ demands to tailor offerings to them, while focusing increasingly on cybershoppers. And while demand for $800 Coach handbags and $295 J. Brand skinny jeans is growing among Generation Y consumers, there is evidence that, over all, wealthy customers aren’t opening their wallets much wider than they did in previous years.
“The suggestion is that there is an undeveloped market in Canada – there is a need,” said Alecsandra Hancas, fashion industry analyst at market researcher NPD Group. “But we’re not seeing a lot of money spent in the luxury market.”
The changes will force incumbents to improve their store ambiance, customer service and product selection. Consumers will potentially benefit from better service and even possibly lower prices.
Calling big spenders
The luxury players who are preparing for battle are expecting to serve a swelling population of heavy spenders in this country.
While data on the Canadian luxury fashion market is in short supply and inconsistent, research does point to a growing number of wealthy consumers. The number of households with income of more than $200,000 accelerated four times as fast as that of households with average incomes since 2007, according to Environics Analytics. And the number of households in the top income bracket – over $250,000 – jumped 34.2 per cent since 2008, with 14.9-per-cent growth in the past year alone, it said.
But growth in the $83.4-billion North American luxury market over all isn’t exactly robust. According to consultancy Bain & Co., the segment is expected to grow by just 5 to 7 per cent this year, less than half the 13 per cent it grew last year.
The Canadian market could see an uptick as consumers who would ordinarily travel across the border to visit U.S. retailers can now shop at home. Cross-border shopping has taken away an estimated $1-billion in business from Canadian retailers in the year to May, according to NPD’s Ms. Hancas. Its research shows consumers are spending more on apparel purchases outside Canada, suggesting that they’re purchasing more expensive items, such as those found at retailers such as Nordstrom and Saks.
While there may be some room for new competitors, there is still significant pressure on domestic retailers, who can ill afford to lose sales to newcomers. “There has to be a bit of a shakeout,” said Larry Rosen, chief executive officer of Harry Rosen. “It’s got to come from somewhere.”