Quote:
Originally Posted by Winnipegger
Common theme. Seems that between outrageous mortgage payments from rising interest rates, lower wages, high-ish income taxes, and high food costs, Canadians in general are becoming too poor for most luxury goods. Not enough money left over at the end of the month to justifying buying $200 shirts and pants.
Of course there are exceptions: Canada seems to have two groups of above-average middle class households that can afford luxury goods:
1) Boomers who bought their houses before 2001 and have paid the original mortgage, and now the value of their home has increased by 5 to 10 times the original purchase price, giving them access to HELOCS. This demographic would rather spend their excess cash on boats, RVs, Mustangs, and trips to Florida instead of buying luxury furniture or clothing. You can find this group across most major cities, but they are a dwindling number.
2) International students who bring in significant wealth from overseas. This is the group you'll find at the luxury stores in Toronto and Vancouver, but their number too small to sustain retail operations as we've seen with the closures.
After that, of course there are the 0.01% who have a tonne of disposable income, but again, too small a number to sustain luxury retail across Canada.
Canada lacks an "in-between" mid-life, high-income demographic that would be the main target for these stores. Sure, Vancouver and Toronto have a lot of 30 and 40-something high income earners from tech, law, and finance, but the vast majority of this group is too burdened with paying $2,500/month rents on skyboxes at Young and Bloor, $1,000 month lease payments on Audis, and then being broke at the end of the month after spending their remaining income on Skip/DoorDash/groceries to care too much about whatever luxury clothing brand is hot these days.
This group is much bigger in the states, and much more dispersed. If I was a luxury brand, the U.S. would be my main target obviously. Canada would be a tiny afterthought given the lack of disposable income in this country. Rents, housing prices, and food prices are way too high in this country and there isn't anything reasonable any one person can do about it.
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Interesting take. But I wonder how much of Nordstrom's lack of success in Canada has to do with a more frugal culture as far as clothes and accessories are concerned. Obviously Winnipeg is a bit of an extreme case, but I can think of a few people locally that I know with high net worths who buy their jeans at Costco. They could easily afford to buy whatever designer brands they want but they just don't care.
Contrast that with, for example, Asian cities where for many younger people it is culturally a Big Deal to make sure you have whatever designer handbag, watch or jacket. Even if you have to save for months to get it. The sheer prominence of designer brands there speaks to that. People may feel otherwise but I don't think it's a knock on Canada if people aren't lining up to buy expensive sweaters or whatever from Nordstrom... the money is there, it is just being spent elsewhere. Although it is tougher to swallow if that money is going towards high rents and mortgages instead.
I wonder if Nordstrom's timing was off too, I can't imagine that the sale of fancy tailored clothes has been all that hot over the last few years. I can tell you that I haven't bought a single suit, tie or dress shirt since the pandemic started. 90% of the clothes I have bought over the last 3 years have come from Under Armour and such. I'm probably not alone in that regard.
All that being said, I am a little surprised that Nordstrom didn't hang on at least in Toronto and Vancouver where the international presence and a tendency to spend bigger on labels would have seemingly kept those stores afloat. I guess it wasn't worth it. Those big department store vacancies are going to leave some big holes in the urban fabric there... it will be interesting to see what happens.
Finally, I guess Saks is vindicated for playing it safe, they started out by dipping their toes in the water with outlet stores before going whole hog like Target and Nordstrom did. But looking back at it, now that several US retailers have retreated from Canada, I wonder if the golden age of Canadian retail of roughly 2000-2020 where we were treated effectively as the 51st state by American chains is effectively over now.
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