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Shoppers outside the Holt Renfrew flagship store on Bloor Street in Toronto on June 26, 2012.Moe Doiron/The Globe and Mail

Holt Renfrew is running into a snag even a luxury retailer can ill afford: the unionization of its employees.

The company is facing a union drive at one of it best-performing stores – an effort that could set a precedent at other locations and add further pressure to the company as it braces for the onslaught of new competition.

While the unionization efforts are unusual for a tony retailer, they are nothing new for the wealthy Galen Weston family, which owns Holt's among a number of international high-end department stores.

The Weston family also controls grocery giant Loblaw Cos. Ltd., whose work force is highly unionized.

Over the years, Loblaw has fought its own battles with its supermarket union – the same one seeking the nod this week from Holt's employees – warning it that pay and other union rules force the company to operate with higher costs than its non-unionized rival discounters Wal-Mart Canada and Costco.

Analysts have pointed to the heavier expenses as playing a part in straining the grocer's profit margins.

Holt's is grappling with a union certification vote on Thursday at a time when competition is heating up in retailing.

Upscale U.S. department-store chain Nordstrom is believed to be close to finalizing the locations for its first stores in Canada while discounter Target Corp. is opening its first outlets here early in 2013.

"The timing is not good," said Paul McElhone, executive director of the School of Retailing at the University of Alberta in Edmonton.

"It could set a precedent."

Privately held Holt Renfrew says it has enjoyed a relatively strong financial performance as luxury retail recovered from the recession faster than other segments.

But the company also feels the pressure to prepare for a tougher merchandising landscape as more foreign competitors prepare to set up shop in Canada, threatening to steal business from incumbents such as Holt's.

The United Food and Commercial Workers union, which is trying to organize Holt's employees at one Ontario store, feels its own pressures: Many of its members who worked at Zellers are losing their jobs after Target bought the leases to its stores, which are now being closed to be converted to its namesake. (Zellers workers can apply for jobs at Target but have been given no assurance they'll be successful.)

At Holt's, UFCW executives say the retailer keeps changing employees' compensation package every six months or so, with higher thresholds for sales staff's commissions. As a result, some employees are losing thousands of dollars in pay annually, said Jonathan Lobo, organizing co-ordinator for Local 1000A of the UFCW. As the company keeps shifting its payment terms, "it's only a matter of time before employees say: 'We're not going to take it any more,'" he said.

At the same time, employees at the Holt's store at Yorkdale Shopping Centre, where the UFCW union drive is taking place, have beat their sales targets in each of the past few years, Mr. Lobo said.

He and other union executives predict the current drive will spread to more of Holt's nine stores – plus a Last Call outlet store – if this one is successful.

Sales staff at high-end retailers tend to count heavily on commissions for a good part of their pay. Staff at the Holt's store in Yorkdale earn commissions of between 2.5 per cent and 10 per cent of their sales, as well as base salaries "well above" minimum wage," according to Alix Box, senior vice-president of sales and marketing.

About 18 per cent of sales staff at the store earned a 10-per-cent commission in 2011, Ms. Box said.

The good times in the carriage-trade sector appear to have rubbed off on at least some sales staff: Holt's is forecasting that it will enlist more than 120 of its overall employees in its $1-million club – those who generate sales of at least $1-million a year – in 2012, up from 56 in 2009. In all, Holt's has about 2,300 employees; the union drive affects 174 of 247 employees at the Yorkdale store.

"We are listening, and strongly committed to partnering with our employees," Ms. Box said. Holt's president Mark Derbyshire and other head-office executives were at the Yorkdale store this week speaking with staff, union representatives said.

The union activity comes as Holt's is in the midst of an aggressive expansion at its Yorkdale store, adding about 40 per cent more space.

Mr. Derbyshire has attempted to spearhead change at Holt's by scaling back the number of discounted sales, and providing incentives for sales staff to ring up more business. In late 2010, he launched the "president's bet" under which sales staff received $100 if they hit their target by the end of the year, and $500 if they reach it a month early. About half of employees were winners, compared with only14 per cent in 2009, a Holt's spokeswoman said. This year, top winners get a trip to Last Vegas instead of $500.