The state of luxury retail in Canada

Unmoved by the pandemic, luxury retail sales in Canada continueto rise. But what are the trends impacting current and futureopportunities within the sector? // By Craig Patterson

Luxury retail continues to be a strong sector in Canada despite pandemic challenges, indicating a wealthy consumer base in the country that is willing to spend. As a result, new luxury brands are targeting the country as luxury retail in Canada shifts to suburban nodes.

Following pandemic lockdowns, many luxury brands are saying that sales are higher now than they were prior to the pandemic. Remarkably, some luxury brands even say that sales were higher during lockdowns as sales associates targeted consumers directly by selling goods via digital channels. Now there’s a race to build physical stores as consumers seek out experiences, something luxury brands tend to excel at.

Canada’s luxury boom

It’s clear that Canada has become an important target for luxury brands. In decades past, the market was considered to be “too small” for some. Today, however, brands such as Ferragamo are choosing Toronto to open first-in-the-world concept stores. And while new brands continue to enter the market, other brands such as Cartier have been updating operations by renovating, expanding and relocating storefronts in Toronto and Vancouver.

For decades, luxury retail has been focused in the downtown cores of Canadian cities. That appears to be changing, however, as suburban malls target luxury brands while new centres are built in Vancouver and Montreal.

Suburban shift

In terms of the suburbanization of luxury, the trend took off in 2009 when Tiffany & Co. opened at Toronto’s Yorkdale Shopping Centre. Oxford Properties has since added more than two dozen of the world’s top luxury brands to the mall, creating the densest clustering of luxury brands anywhere in Canada. As a result, Toronto’s downtown Bloor- Yorkville area is now a competitor and Yorkdale has many brand stores not located downtown.

It’s an interesting trend that will be replicated in Vancouver with the overhaul of two suburban shopping centres. QuadReal is redeveloping Oakridge Centre, which will become a mixed-use site that will include a luxury retail component that is expected to attract some of the world’s biggest names. Not to be outdone, landlord SHAPE is redeveloping the Brentwood Town Centre in Burnaby to create The Amazing Brentwood, a newly branded centre boasting investment by L Catterton. That investment is significant given its relationship to LVMH, and the landlord is also targeting top luxury brands for The Amazing Brentwood project.

L Catterton also invested in Royalmount in Montreal, which is also targeting many of the world’s top luxury brands to open in the centre technically located in the Town of Mount Royal. Royalmount will compete with the downtown Montreal luxury node which, after years of contraction, is primarily centred around Holt Renfrew Ogilvy on Ste-Catherine Street. Holt Renfrew Ogilvy itself functions both as a department store and a luxury mall with its roster of luxury brand concessions contained within.

Country-wide trend

It’s not just Canada’s biggest three cities seeing a shift of luxury retailers to the suburbs. The same has happened in Alberta’s two largest cities. In Edmonton, West Edmonton Mall has become a luxury node which in effect killed all luxury retail in downtown Edmonton. After Louis Vuitton made the decision to vacate Holt Renfrew in the city in early 2020, Holt Renfrew itself made the decision to exit entirely. Today, West Edmonton Mall is home to Louis Vuitton, Gucci, Saint Laurent, Rolex, Canada Goose and soon, Balenciaga.

Calgary also saw Holt Renfrew exit downtown, though Holts remains open. Louis Vuitton moved to the suburban CF Chinook Centre which is also home to Tiffany & Co. and Burberry, with more on the way.

Cues from the States

The suburbanization of luxury retail in Canada puts Canadian cities more in line with what’s seen in the United States, where for decades luxury brands have operated in suburban malls. It’s part of a phenomenon around the death of the American downtown core and the rise of suburbanization that picked up speed following World War II with car ownership exploding and the construction of new single-family residential communities on the edge of rapidly expanding cities amid new wealth.

Many department stores in the United States also once housed luxury brands, though the department model itself has almost died in the United States. In Canada, department stores were typically less luxury-heavy than they are now. Today, luxury can primarily be found in three large-format retailers - Holt Renfrew, Saks Fifth Avenue and Nordstrom.

The big three

US-based Saks Fifth Avenue and Nordstrom both entered Canada within the last decade. Seattle-based Nordstrom, which operates six fullpriced standalone stores in Canada, opened first in Calgary in 2014. Luxury brands are part of the mix, though only the downtown Vancouver Nordstrom store has shown success in terms of selling high-end goods or retaining luxury brands for that matter. In Toronto where Nordstrom introduced luxury brands to its CF Toronto Eaton Centre and Yorkdale stores, many brands have since vacated, leaving empty boutique spaces.

New York City-based Saks Fifth Avenue, as well, has seen brands exit stores in Canada. Saks operates primarily on a wholesale model in which the retailer stocks boutiques within, at a time when many brands are wanting either concession spaces or standalone boutiques. Saks has struggled in Canada - the downtown Toronto flagship lost Louis Vuitton, Dior and Saint Laurent among other brands, leading to a store renovation to fill the empty boutique spaces. The CF Sherway Gardens store in Toronto was downsized with a menswear floor being moved upstairs, and the CF Chinook Centre Saks store in Calgary was never luxury-heavy to begin with when it opened in 2018.

Holt Renfrew, which has operated for over 185 years in Canada, has been able to maintain its prominence and brand selection in the country partly because of its concession strategy. Many of the boutiques found within Holt Renfrew operate as leased concession spaces, something many brands have demanded in recent years. Now Holt Renfrew is home to an impressive roster of luxury brands, many operating concessions, creating a far more compelling luxury retail experience overall when compared to Nordstrom or Saks Fifth Avenue in Canada.

Things could change for Holt Renfrew in the future, however, as luxury brands begin opening standalone stores. Some brands have seen remarkable success operating concessions within Holt Renfrew, with some considering opening their own stores either on streets or in malls. In Toronto, landlord Oxford Properties could scoop some brands operating boutiques within Holt Renfrew at Yorkdale - Gucci, Dior, Prada and Chanel already operate boutique spaces at Holts with doors directly into the mall, which in effect means that Holts is competing with its own mall landlord. It will be interesting to watch what happens as brands such as Fendi open standalone stores at Yorkdale - one of Fendi’s reasons for the opening of its new store is the fact that Holts no longer allows fur to be sold within its walls, which is said to have angered some brands.

The future of luxury

The future of luxury retail in Canada remains bright while the dynamics around geographic locations experience a shift. In the coming years, we are more likely to see more luxury brands opening standalone stores in major Canadian cities as we see a polarization of luxury nodes in some centres.

At the same time, Canada is still a market smaller in population and wealth than the state of California. Given the relatively small population of Canada, some more obscure and up-and-coming brands are likely to remain as wholesale accounts within multi-brand retailers, at least for the time being.

And at the same time, we’ll be seeing more luxury brand stores opening in Canadian cities in the years to come, including in new suburban nodes that are part of the continued shift in high-end retail. The growth in luxury retail sales in the country is a strong indication that there is spending power in Canada. And, the opening of new stores also signals the importance of brick-and-mortar retail at a time when we’ve seen rapid growth in digital channels, particularly since the pandemic. As a result, it will be fascinating to see what happens going forward and how these trends might further impact the state of luxury retail in Canada.