One of the key issues will be how to stand out from the pack.
Both Holts and Harry Rosen have embarked on expensive makeovers – in the latter case, the company is spending $100-million over the next several years to revamp and expand stores by 40 per cent. Privately held Harry Rosen has enjoyed annual post-recession sales gains of about 10 per cent, although they slowed to 3 per cent in the first half of this year amid dipping consumer confidence, Mr. Rosen said.
But differentiation is challenging when the retailers carry lots of the same brands and cater to many of the same well-off customers, said Antony Karabus, president of Hilco Retail Consulting in Chicago, who has advised major luxury retailers. Holts and Saks in particular have significant overlap, with labels ranging from Chanel to Prada to Diane von Furstenberg.
Nordstrom has a broader array of goods, but an estimated one-third of its most expensive lines are also stocked at Saks and perhaps as much as half of its brands overlap with those at Hudson’s Bay, catering to customers who are looking for more affordable luxury. Mr. Nordstrom, the great-grandson of the chain’s founder, acknowledged that there be will some overlap but said “we don’t get too consumed with any competitors. In this specific case, I don’t think it really changes the landscape.”
“We have a broader offering,” he said. “We compete with Hudson’s Bay on one end and we compete with Holts and now, presumably, Saks at the upper end, which is no different than what we have here in the U.S.”
Nordstrom prides itself on customer service, famously giving staff leeway to go out of their way to help shoppers. Recently, a Vancouver resident wrote online about her friend having her purse stolen at Nordstrom’s flagship store in Seattle while she was trying on a pair of boots.
The manager took the woman and her friend to the store restaurant, to wait for police, where he bought them meals, drinks and chocolates, handed them a bottle of champagne and gave the woman $400 to buy a new purse.
“If we can deliver the best Nordstrom experience up there, I think we’ll be successful regardless of what goes on outside our control,” Mr. Nordstrom said.
The ‘Harrods of Canada’
The ground may shift more quickly than either Nordstrom or Holts expect, as HBC closes its deal to buy Saks by the end of this year.
Richard Baker, the U.S. real-estate-magnate-turned-retail-mogul who acquired the struggling HBC in 2008, promises to move quickly. Sources familiar with HBC said he expects to open the first two Saks stores within the Toronto and Vancouver flagship stores by the end of 2014.
Mr. Baker is modelling the future Hudson’s Bay on its Toronto Queen Street West store , with a huge new shoe department, and in-store shops including Topshop from Britain, Kleinfeld Bridal Boutique from New York and, according to plans, Saks in 2014.
“It will become the Harrods of Canada,” Mr. Baker said in an interview Friday, referring to the prestigious London-based department store. “Bringing Saks to Canada is going to keep Canadians shopping in Canadian dollars in Canada.”
He predicted that HBC will have an edge over Nordstrom, as it already has stores, systems, technology and Canadian know-how in place to roll out Saks quickly.
Nordstrom is spending more than it had originally forecast for technology and merchandising systems for its Canadian stores, Mr. Nordstrom said in the interview. The investment is partly for mobile checkouts, which the company has in its U.S. outlets.
“We haven’t operated our stores in another country before,” he said. “Almost every single business operational process needs to be different in some way. That’s been a lot of work for us.”
Saks has an edge when it comes to selling pricey brands, whether it’s $4,000 Gucci leather jackets or $3,500 Jimmy Choo clutch purses, as it can count on economies of scale to lower costs and boost the bottom line. The increased number of competitors creates an issue for suppliers, however, which must figure out how to divvy up their collections without compromising past allegiances, or cannibalizing their current sales.