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In front of the Hudson's Bay flagship store on St. Catherine Street, a woman in a Santa suit is tinkling a bell for donations to the Salvation Army. At Birks jeweller across the street, Christmas decorations brighten the otherwise sunless day. Standing in between, in the snow-covered Phillips Square, is King Edward VII, whose cold bronze statue is begging for a scarf.

It's a picture-perfect shopping day that should inspire generous holiday gifts – or so retailers would hope. Yet the crowd of Montreal shoppers is subdued on this Cyber Monday, the U.S. online retail event that is slowly taking hold in Canada, like the Black Friday tradition that preceded it.

As the two marketing events have moved north, so have the U.S. retailers that sponsor them. But as those chains venture into Canada, they are not finding the shopping frenzies they had envisioned. It is not that Canadians are too polite to fight over a deeply discounted television set; rather, to spoof a Bank of Nova Scotia ad, many Canadians are poorer than Americans thought.

One could see why Canada might have seemed like a mall El Dorado. After the housing debacle floored American consumers, and the European debt crisis drove millions to unemployment centres, Canadians came out looking like oil-rich sheiks on a London shopping spree.

In 2011, when many U.S. retailers were preparing their expansion north of the border, household disposable income in Canada was 6.9 per cent higher than in the United States, according to Statistics Canada. Canadians are still faring pretty well: Disposable income in the third quarter is up 1.2 per cent over the previous three months, and up 4 per cent from a year ago. So are wages and salaries, which rose 0.8 per cent in the third quarter.

But although housing prices haven't cratered in Canada, neither have mortgage payments, especially for first-time buyers who have little money left over for anything extravagant. Canadians are also starting to pay attention to the many debt warnings expressed by Finance Minister Jim Flaherty and former Bank of Canada governor Mark Carney. Recent evidence shows Canadians are saving more money.

Unfortunately, the damage to the retail industry is, to a large extent, done. The stampede of U.S. retailers into a country of only 35 million people has littered the landscape with new stores. No matter how savvy Canadian and U.S. retailers used to be, few – from discount stores to luxury outlets – have escaped unscathed from the shopping wars of 2013. Even behemoth Wal-Mart took a hit in the back-to-school quarter, with sales in its Canadian stores that have been open for more than a year sliding 1.3 per cent.

Still, Wal-Mart Canada is eating into its rivals' market share in the grocery aisles. And those gains have forced formerly nimble competitors such as Metro Inc. to raise their game. The Montreal-based grocer is now revamping its Ontario network of stores.

Luckily for Canadian retailers, Minnesota-based Target Corp. made a bad impression when it crossed the border last March. With the opening of 124 stores in a year, the discount retailer was overly ambitious in its first foray outside of the United States. Poorly stocked shelves and higher-than-expected prices have disappointed Canadians looking for the U.S. Target experience.

This has allowed some companies, such as Canadian Tire Corp. Ltd., to hold their own. The Toronto-based retailer is reaping the benefits of its acquisition of sporting-goods chain Forzani Group Ltd., and of its return to its automotive roots, selling the tires and spare parts on which it built its success.

But it would be a mistake to assume that savvy Target won't get its act together. And that spells bad news for retailers struggling to find their place in a fast-changing market.

Sears Canada is high up on the possible casualty list. As it sells the leases to its best Canadian stores, the shrinking retailer has, in essence, been heating the house by burning the furniture. Most of the money collected has been returned in the form of dividends to its shareholders, the first of which is parent company Sears Holdings Corp. (controlled by hedge-fund manager Edward Lampert). Sears says its still believes in a turnaround and has denied rumours its Canadian affiliate is for sale. But everything the retailer has done since the departure of Sears Canada CEO Calvin McDonald in September speaks otherwise.

So you can forget Black Friday shopping brawls. This is the black year of Canadian retail, and the shake-up has begun in earnest.

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