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BMO Financial Group

May 20, 2011 11:52 ET

BMO Report: Canadian Retailing a Changing Picture

TORONTO, ONTARIO--(Marketwire - May 20, 2011) -

Attention Business and Lifestyle Editors

As the Canadian economy has outperformed the United States for much of the past decade and the Canadian dollar has strengthened, American retailers are looking to Canada for expansion. In a report released today, Dr. Sherry Cooper, Chief Economist, BMO Financial Group, notes that retail sales in Canada are now on par to those in the U.S. on a per capita basis. This has lured U.S. retailers north, changing the face of Canadian retailing.

"Canada is particularly attractive to U.S. retailers because of our strong exchange rate, higher sales per square foot and potential room for expansion," said Dr. Cooper.

Canada's recession was relatively mild and housing markets have remained quite robust. Household wealth relative to disposable income is near record highs and the jobless rate is relatively low. Canadian consumers will benefit from the wider array of products and more convenient store locations and formats. Shopping centre properties and other commercial real estate owners will benefit from increasing demand for space. But existing Canadian retailers will be challenged by increased competition.

"Domestic retailers must respond quickly and decisively to this threat or risk being shut out of consumer wallets or being swallowed up by acquisitive American behemoths," said Dr. Cooper.

E-commerce is a huge and largely missed opportunity in Canada. While it is improving, Canadian retailers lag behind the U.S. and an increasing number of U.S. e-tailing sites are offering free shipments to Canada. Canadian consumers are largely web-connected and stressed for time. They are shopping online already and using the internet for price comparisons and product research.

"The Internet is increasingly the go-to hub for consumers and presents a huge opportunity for businesses to promote their brand or highlight products through a number of avenues, including social media," said Cathy Pin, Vice-President, Commercial Banking, BMO Bank of Montreal. "Our research shows that social media tools have caught on with only a minority of entrepreneurs, but those who are logging on have seen the benefits."

Dr. Cooper adds that new entrants into Canadian retailing will force increased productivity growth. Capital investments, process changes and innovation are imperative. Technology will be key to managing costs and inventories. Canadian retailers must adopt the best practices in enterprise demand forecasting and collaboration with vendors, both domestic and international. Best labour practices regarding recruitment, training and retention of global talent are also essential.

For a copy of the full report, please contact (416)-867-3996.

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