The Canadian retail industry has a history of taking seven years to create overnight successes. This has been true in Canada for decades and the track record of companies that try to move faster through the process have hit hard walls that forced early exits. Why does it take seven years to accomplish this rate of success in Canada?
The Canadian culture is a conservative and modest one. We prefer something that grows slowly and organically rather than overnight. It’s a formula that works and works for a reason. The following is the timeline for what works and what doesn’t;
What doesn’t work
- Year 1 – Explore the market and hire a demographics company to map a growth strategy.
- Year 2 – Use the growth strategy to drive the real estate decisions and explore possibilities of mass openings or an acquisition with targets in the desired retail nodes.
- Year 3 – Finalize the leases or acquisition, get the necessary permits, deploy a massive amount of capital to hire and build-out the stores.
- Year 4 – Open a fleet of locations staffed by American management who are challenged to understand Canadian labor laws, distribution issues and marketing nuances.
- Year 5 – Open wave two of the fleet of locations while playing catch up with the first wave that is still struggling. Repeat the same mistakes with management and misinterpretation of Canadian culture. Successfully offend your consumers.
- Year 6 – Evaluate a disposition or rent reduction program to improve profitability of failing locations.
- Year 7 – Terminate the leases with buy-outs and exit the country.
What does work
- Year 1 – Explore the market and hire a demographic company to map a growth strategy, choose a strategic broker relationship to help guide you through the market.
- Year 2 – Use the growth strategy to determine the ideal strategic landlord relationship to help launch the first two to three locations throughout the country that align with the desired retail nodes.
- Year 3 – Finalize the leases and get the necessary permits, deploy a moderate amount of capital required to hire and build-out stores.
- Year 4 – Open two to three locations trained and supervised by American management but operated by experienced Canadian operators who understand Canadian labour laws, distribution issues and marketing nuances.
- Year 5 – Begin negotiations on the second wave of locations with the strategic landlord partnership and start exploring outside that relationship for other partnership opportunities as presented by the brokerage house. Watch a modest growth rate turn into a steady return on the first two to three locations.
- Year 6 – Begin opening of wave three locations and continue to repeat with a target of increasing growth 10% to 20% annually in new store openings.
- Year 7 – Realize market penetration and economies of scale and become an established Canadian brand.
To learn more about successful Canadian expansions that cost less and earn more with better quality real estate, call Shawn Saraga in the SRS Toronto office at 416.862.2425.