Nordstrom, the upscale American department store chain, made headlines in 2014 when it announced its expansion into Canada. The move was highly anticipated and generated excitement among Canadian consumers who were eager to experience Nordstrom’s renowned customer service and luxury shopping experience that they were famous for. However, just nine years later, Nordstrom made a surprising announcement that it would be closing all of its stores in Canada by June, 2023. The decision left many Canadians wondering what went wrong and why the company had failed to establish a successful presence in the Canadian retail market. The Nordstrom stores, equalling over a million square feet, set to close are:
CF Chinook Centre, Calgary, Alberta – 135,636 square feet
CF Pacific Centre, Vancouver, British Columbia – 230,000 square feet
CF Rideau Centre, Ottawa, Ontario – 157,000 square feet
CF Sherway Gardens, Etobicoke, Ontario – 140,000 square feet
CF Toronto Eaton Centre, Toronto, Ontario – 220,000 square feet
Yorkdale Shopping Centre, Toronto, Ontario – 188,000 square feet
There has been a lot of discussion in the media about what went wrong, with most experts talking about the fact that there was an over-saturation in the market, low customer density, and the pandemic’s effect on the fashion industry as a whole. While this is important consideration, JCWG wants to focus on what’s next for the large, very important, properties that will now have major anchor spaces left with vacancies to fill.
As we know, the Nordstrom locations are substantial, with some over 200,000 square feet. The fact is, there are no plug and play options for these spaces, like Nordstrom was for the dormant Sears spaces many of them filled. This is the opportunity for shopping centres to be creative and to make each property more unique and differentiated from others.
The Solution is Not Another Department Store
There are logical replacements for Nordstrom, like successful Canadian department stores that operate in a similar space such as La Maison Simons and Holt Renfrew. These perhaps logical fits are not going to be solutions for these shopping centres, as the appeal and perception of department stores is not what it once was for shopping centre operators. And let’s face it, Nordstrom exiting the Canadian market proves that they are not leaving a market gap.
The reality is that the shopping centres that are losing Nordstrom stores are going to need to make changes. 100,000 square foot+ anchor tenants no longer have the same appeal, with other large format stores such as Ikea opting for smaller urban stores. Therefore, the spaces will most likely need to be carved up into smaller, more flexible spaces for retailers and other concepts. Since many brands have exited department stores in favour of maintaining their own brick-and-mortar locations to aid in controlling their brand ecosystem, large anchor spaces are non-starters.
Given the caliber of the shopping centres affected, there is still the possibility of attracting further tenants in the mid-high luxury space (or even ultra luxury in the case of properties like Yorkdale). Regardless of the prestige of possible retailers, carving out smaller units out of the Nordstrom vacancies is a must.
There are numerous options for shopping centres when leasing out the amount of space that these six will be looking at, with opportunities in entertainment, experience, and international expansions.
There is the opportunity for entertainment related concepts to fill the space that have already proven successful in similar markets. For centres less focused on luxury, the Rec Room has seen successful expansion in the Canadian market through the opening of units in malls. This is also an opportunity for shopping centres to include the “Experiences” concepts like The Friends Experience or the World of Barbie, or even the large immersive experiences like the Lighthouse ArtSpace Toronto. Yorkdale, which has been highly focused on luxury for years now, may want consider opportunities similar to Eataly to create a high-end grocerant. Another option would be a “social wellness centre” space, such as Altea Active (as found in JCWG’s Retail Innovations 18 eBook). These concepts can fill large spaces and offer high-end entertainment and experiences to members that aren’t solely focused around a gym but include activities like golf simulators, bowling, collaboration space, and a bar/restaurant.
There is also the option of creating a more experiential space out of the new units. When the JCWG team visited New York for the NRF show, the team visited the best stores that New York has to offer (read our coverage here). Concepts like the Starbucks Roastery, the Google Store in Chelsea, and the Lucid Studio are all highly experiential concepts aimed at engaged the customer with the brand, rather than selling a product. The idea of creating a strong presence and ecosystem for the customer would fare well in these properties.
Finally, there is still the opportunity for other international entrants into the Canadian market. JCWG just returned from EuroShop and meeting with our international partners in Cologne, Germany. Below are some examples of potential global brands that could be an excellent fit into a portion of the space:
- Globetrotter: Cologne is home to the largest Globetrotter location in the world. The outdoor retailer is highly focused on customer experience with experiences including a pool to test kayaks and Stand Up Paddle Boards, a rock climbing room, a refrigerator to test winter jackets, and a dark room to test headlamps and flashlights.
- Arket: Owned by H&M, Arket is a higher-end fast-fashion retailer that offers better quality and experience to their customers as compared to the less-expensive counterpart of H&M. Their Cologne location not only offered great customer service but included a café for customers to purchase food and beverages. Arket is also more focused on sustainability than H&M by making products out of stronger materials (like bags made of Cordura) and they even have a cup-exchange program for their hot beverages.
- More Fast-Fashion Players: Uniqlo is a great driver of traffic in shopping centres, that may fill part of the space in the three (Pacific Centre, Rideau Centre, and Sherway Gardens) that do not already have a Uniqlo. The location in Cologne has a much larger section focused on textile recycling, and even has a museum on their top floor focused on the history of Japan and it’s influence on the brand. Another opportunity could be a further expansion of Primark, which the JCWG team saw at the American Dream mall in New Jersey, and more recently at numerous locations across Germany.
Overall, the JCWG team is saddened by the exit of Nordstrom. Their inability to differentiate through their story telling, one of unbeatable service, was a key element that was missing in Canada. However, when one door closes, another one opens – this is a great opportunity for shopping centre operators to flex their creativity and create a space that drives more traffic than ever before. This does not need to be related to previous retail concepts but can be expanded to human-centric health services, sports concepts, or cultural space surrounding the centre’s local community.
For further thoughts on optimizing shopping centre operations and integrating innovation into shopping centre leasing, reach out to the JCWG team and help your mall perform better than ever.
Photo Credit to Jenna Marie Wakani for Toronto Life.