Vera Wong walked into the downtown Toronto clothing store and headed straight for a few tables piled high with cashmere sweaters.
Her worried expression quickly turned into a smile when she pulled one from the bottom of the pile. "I found it. They have it in my size and everything," she said, heading toward a cash register.
Analysts say consumers are taking advantage of increased competition in the estimated annual $10.4-billion women's retail apparel sector, especially after recent high-profile players such as Zara and H&M have entered the market the past few years.
Meanwhile, Canadian clothing chain Winners has reacted by sharpening its marketing, introducing a sleek new logo and opening stores in upscale locations. Even grocer Loblaw Companies Ltd. elbowed its way into the business by launching its Joe Fresh clothing line in its 40 Real Canadian Superstores across the country last March.
"It certainly is an interesting time right now," says Gregory Antrobus, a retail analyst with J.C. Williams Group in Toronto. "It's getting tougher and tougher for retailers though, because the competition is forcing downward pressure on prices while consumers' need for greater selection is going higher.
"You also have the need for things like liberal return policies. Expectations are constantly being raised. Your margins are probably suffering for a lot of people as a result."
Despite this, major players including Zara and H&M have still been setting a brisk pace by opening new stores across the country, Antrobus noted.
"They have indicated they still want to expand. There are no signs of scaling back at all. First, they came into Canada and laid down roots in major urban centres. Now they are trying to move beyond that base, which would lead you to believe things are going well," he said.
Both the Spanish-based Zara and Swedish-based H&M specialize in European designer- style fashions made from lower-priced materials. Most items retail for less than $100. Product teams see something on the runway of a Paris fashion show, and then quickly head back to the office to create a similar, lower-priced version. Within days, the clothing gets couriered to retail stores around the world.
The challenge with that business model, according to one analyst, is that if inventory doesn't move during a relatively short sales cycle, the retailer is left with lots of supply and little demand.
Zara is owned by the Spanish-based Inditex Group, with more than 3,000 stores operating under different banners in 64 countries around the world. There are currently 14 Zara locations across Canada.
H&M started after a Swedish women's clothing retailer bought a hunting store in 1947 that came with an inventory of men's clothing. The store then switched to selling men's and women's clothing and expanded throughout the years. It now has 620 stores in 13 European countries.
The company launched two Canadian stores in March 2004, followed by four more stores later that year.
But nothing prompted quite the same reaction as another European retailer, which opened Canadian locations at about the same time.
FCUK, which stands for French Connection United Kingdom, specializes in a hip, edgy and rebellious type of teen fashion.
According to the company's website, "fcuk's advertising has always encouraged the viewer to discover a hidden meaning, like french connection me (and) my place now."
The company was forced to tone down its suggestive brand name last October, however, after a "sales slump.”
The eight-year-old FCUK logo was removed from collections and taken off advertising billboards.
While Zara, H&M and FCUK are battling for the teen and young adult market, at least some Canadian-based retailers appear to be doing well.
Reitmans (Canada) Ltd. reported on Nov. 22 that third-quarter profits increased to $23.4 million from $19.2 million a year earlier due to "strong sales growth," according to the company.
They added same-store sales - where results are compared between stores open at least a year - were up 4.8 per cent for the quarter.
Reitmans also sells women's clothing under the Smart Set, RW&CO., Thyme Maternity, Penningtons and Addition-Elle banners.
Another Canadian retailer selling designer originals is celebrating 25 years in business next year. Winners, a 187-store Canadian chain based in Mississauga, Ont., specializes in "opportunistic buying," said company spokeswoman Shannon Johnson. "You might have someone who has ordered too much inventory or a supplier stuck with a returned order. One of our buyers will make a deal with them for a fraction of the going rate," she explained, adding store prices are usually 30 to 70 per cent off department store prices.
The company was started in 1982 by Toronto's David Margolis as a five-store chain near the city's downtown core. By 1990, it was acquired by U.S. retailer TJX Companies, which calls itself the world's leading off-price retailer of apparel and home fashions.
TJX expanded what Winners was offering and pursued an aggressive strategy of opening new stores. A home-accessory and giftware department started in 1995 and footwear was added in 1997.
Almost nine years after buying Winners, TJX had opened the 100th location for Winners in the Montreal suburb of Marche Central. The pace has continued the past few years, with a high-profile new location on Toronto's Bloor Street and, earlier this year, in the Scotia Plaza office tower in downtown Toronto.
The Bloor Street location is also known as Yorkville and serves as home to high-end boutiques such as Hermes, Prada and Gucci.
Rents are reported to be among the highest in North America, rivalling locations like New York City's Fifth Avenue.
Johnson says Winners sells fashions for the entire family.
But the Bloor Street store has only a tiny men's clothing section at the back of the third floor next to women's lingerie. The company added another location last October in the retail concourse of an office building in Toronto's financial district.
In an interview, Johnson refused to talk about the cost of the new locations. She also declined to say how many stores the company was planning to open in the coming year, or even during the current month of December.
"It's not our policy to talk about anything related to business strategy," Johnson said.
Antrobus said he was impressed by Winners. "I haven't seen anything really that they've done wrong. Again, they are opening new locations so it must be going well."
The recent Bloor Street and Scotia Plaza locations might be expensive, but they are high-profile and target another segment of the market for Winners, he added.
"Overall, I would say it's a good move from the standpoint of strategy, but we'll just have to see."
(David Hatton can be reached at hatton@businessedge.ca)
