One of the country’s most iconic retailers has joined the fray of the online marketplace.
Canada Goose revealed Monday that after decades of selling its famous parkas through wholesalers, it is shifting its a direct-to-consumer strategy focused on e-commerce, supported by a few flagship stores.
CEO Dani Reiss told Bloomberg News that he hopes the move will help narrow a 15-point profit margin gap between with its luxury retailer competitors.
The change in tactics comes as retailers try to maintain customers in a market where consumers are increasingly making purchases through Amazon rather than heading to the local mall. In fact, Canadians spent a total of $26.6 billion, or about $730 per capita, on online shopping last year.
Maureen Atkinson, a senior partner at retail consultant firm J.C. Williams Group, told Yahoo Canada Finance that while there is a greater need for businesses to emphasize their online presence, she doesn’t believe they can be successful without brick-and-mortar locations.
“I think that’s why you have Amazon getting into stores,” she said, referring to the online retail giant’s growing fleet of physical locations.
“I think it’s neither one nor the other. I think you have to have both. What the balance is between (the two) depends on the store, the customer base — a lot of different kinds of things … I think any retailer these days [is] moving towards having stores, if they don’t have stores already, and then there are other retailers that are improving the number of stores they have, so think it just is that all the retailers are trying to find the right balance.”
In the case of Canada Goose, Atkinson said the strategy “makes sense” because luxury retailers need fewer stores to serve the limited customer base who can afford the product.
“It’s almost better to have fewer stores but have it accessible in other ways,” she said.
“They obviously must’ve figured out that they can serve their customers well by being online, as opposed to adding more stores, [and] it certainly reduces the cost of expansion.”
Evercore ISI analyst Omar Saad said in a note earlier this year that e-commerce sales already account for more than 20 per cent of Canada Goose’s revenue, compared to zero in 2014.
While Atkinson said the Canadian retailer stands to improve its profits from an increased focused on online sales, the strategy comes with its own costs.
“Staying ahead in online is expensive … it doesn’t put them in a position where they don’t have to invest, but they’re just investing in a different medium,” she said.
Canada Goose’s annual report said that jacket sold directly to a consumer provides two to four times more operating income than one sold through a wholesaler.
However, the strategy isn’t without flaws. Atkinson says Canada Goose will have to see if consumers are prepared to buy its products without seeing them in person and trying them on.
“It’s not like people can’t find a Canada Goose store. They may not be able to find them in their backyard … but they tend to be available in most large cities, so I don’t see a huge downside, but you know never say never,” she said.
“I think they’ll try this and I think if they don’t feel like they’re getting the kind of growth they want, I’m assuming that they’re prepared to change gears.”
Click through the gallery to see how some other Canadian retailers are trying to expand their reach online.