In the past, Canada's traditional malls shared a common trait: relying on large-format, anchor stores like Sears, Best Buy, and Nordstrom. These stores are considered mid-tier retailers and are known as traditional, department stores, offering a broad range of products. However, over the years, many of these stores have either shut down or are in the process of liquidation. One primary example is the recent liquidation of Canada's legacy retailer, Hudson's Bay, with 96 store locations closed. Hudson's Bay closure was not a surprise, rather a textbook example of not keeping pace with changing consumer expectations. Their decline reflects a broader shift in consumer behavior; shoppers are no longer drawn to large department stores, instead seeking curated, efficient, and experience-driven retail environments. Consumers have also increasingly prioritized e-commerce and hyper-personalized shopping experiences.
This shift has made it difficult for traditional retailers to stay relevant, as their standardized, one-size-fits-all approach no longer resonates with today's more selective and convenience-oriented shoppers. As legacy retailers disappear and consumer expectations evolve, is Canada's retail sector undergoing a quiet revolution?
Inside Canada's Retail Footprint
The ongoing collapse of Canada's mid-tier retail sector is driven by three core issues: an oversaturated retail footprint, shifting consumer preferences, and an inability to attract and retain international retail brands.
Together, these pressures are reshaping the Canadian retail landscape.
The Oversaturation of Retail Space
Canada's retail space is infamously dubbed as being 'over-retailed'. According to Fiera's Report, Is it Time to Start Allocating to Canadian Retail?, the retail space per capita (2018) in Canada was approximately 16.8 square feet, second to the United States with 23.5 square feet. In 2018, Canada had a population of 37.1 million compared to 326.8 million in the U.S.—a vast difference that highlights the disparity in market scale. Despite Canada's modest population and vast geography, this begs the question why Canada remains one of the most over-retailed countries in the world?
Canada's Geography Presents as a Retail Hurdle
Canada's geography itself makes it a challenge for retailers, as retailers cannot capitalize on economies of scale. Canada has a large amount of retail space compared to its population spread across the country. With a population density of around 4 people per square kilometer means fewer customers per square kilometer, which makes it difficult and more expensive for retailers to operate profitably. Unlike the United States with a more densely populated country, Canada's population is concentrated in many metro hubs and suburbs, with large strips of land sparsely inhabited. Resulting in underused retail space, especially in suburban or rural areas. This also creates logistics challenges, such as distribution costs, retailers offering fast delivery options, etc.
Evolving Consumer Preferences Puts Strain on Mid-Tier Retailers
Mid-tier Retailers' Identity Crisis: Neither Discount, Nor Luxury
Over the years, consumer preferences have shifted towards either ends: luxury and discounted retailers–resulting in polarization in the Canadian retail space. Both ends attract two different consumer groups: luxury retailers appeal to more upper-class buyers, whereas discount retailers attract more cost-sensitive customers. This creates a bifurcation of consumer buying behaviour, where luxury and discount retailers are at an advantage, leaving mid-tier retailers to be squeezed out. Mid-tier retailers have to work hard in gaining interest and building loyalty with customers, which they struggle to do, as they do not have the allure of the luxury market, nor the bargain prices. From as early as 2014 to 2020, Canada has seen approximately 23 middle-retailer stores go through closures or bankruptcies. These retailers struggled to differentiate themselves in a crowded market. The combination of lack of high-end appeal, while also not being able to match the low prices of discount retailers made it difficult for them to attract and retain customers.
Demand for Convenience
Along with consumer preferences being shifted towards luxury and discount retailers–they also want convenience. In a survey conducted by Retail Council of Canada (RCC), 30% of respondents chose a retailer based on convenience, while 40% highlighted good value as a reason behind their choice. Retailers, like Uniqlo, are heavily investing in technology and e-commerce experience to improve one-stop shopping experience for customers. Fast Retailing, the parent company of Uniqlo, made it a goal to integrate technologies across all business processes. One such technology is the RFID technology, which allows shoppers to have seamless checkout experience. Customers place their shopping bags on the counter, and RFID automatically registers the items without the need for scanning barcodes. This integration of the RFID technology, halved checkout times, and improved customer experience through convenience. However, other mid-tier apparel retailers that have not prioritized convenience have lagged, as shoppers increasingly gravitate toward brands that offer streamlined shopping experience. Additionally, competitive pricing offered by e-commerce platforms, like Shein, have set high expectations for quick delivery and vast product selections, making it difficult for mid-tier retailers to compete on both price and convenience. Without investing in digital platforms, inventory visibility, or integrated shopping experiences, these retailers have struggled to keep up with evolving expectations, resulting in lower sales and declining foot traffic.
Demand for Convenience Paired with Retailers Downsizing
With the increasing demand for convenience, retailers have adopted another model: express stores that cater towards consumers' demand for convenience. Big format retailers are moving towards small-format retail stores as a way to embrace customers' desire for convenience. It is clear that in the Canadian retail space, there is a growing disparity between square footage that physical stores occupy and percentage of total sales. Many legacy retailers continue to operate large-format stores, even though an increasing share of their revenue is now driven by online sales or smaller, more efficient retail formats.
Best Buy Canada is a prime example of meeting customer's demand for convenience through downsizing by partnering with Bell Canada. The partnership between the two companies is focused on launching 167 new small-format, 'express' stores across Canada. This partnership brings a win-win as Best Buy and Bell will be able to expand their presence in malls and in smaller and mid-size communities across Canada. The partnership entails that Best Buy will provide electronics, supply chain, marketing, and e-commerce services, and Bell will be responsible for store operating and labor costs under the partnership, it will also be the exclusive provider of telecom services. The move towards small-format retail stores brings solutions to pressing challenges faced by retailers–which are operational costs of maintaining physical stores, including rent, staff, and inventory management.
Rise of Personalized Shopping, Leaves Mid-Tier Brands Behind
Despite this rapid growth in online shopping in post-covid era, mid-tier retailers in Canada are caught in the middle: where customers still value in-store browsing experience, yet expect personalized shopping experience. According to CanadianSME, 71% of Canadian consumers have some expectation of stores to anticipate their needs through hyper-personalized experiences. Furthermore, Mars United states that 90% of consumers find personalized shopping experiences appealing and 80% say that they are more likely to purchase from brands that offer these tailored experiences. Aritzia is a strong example of a Canadian apparel retailer that leverages personalized shopping experiences to deepen customer loyalty and drive sales. The brand combines high-touch in-store service, where style advisors tailor recommendations based on individual preferences and data-driven e-commerce platform that curates suggestions based on browsing and purchase history. When comparing this expectation to reviews of mid-tier retailers, like Hudson's Bay being described as inconsistent, unorganized e-commerce platform and in-store shopping experience. Mid-tier retailers are unable to keep up with the hyper-personalized experience found in higher-end retailers.
Limited International Mid-tier Retail Entrants
Canada's retail sector also suffers from limited international retail entrants. Historically, Canada has seen limited retail expansion, with most entrants being concentrated around urban areas. Pre-covid (2017) around 40% of international brands entering Canada were luxury brands, and Toronto was ranked among the world's top ten cities for luxury retail store openings that year. This trend continued into 2023, according to Retail Insider, of the 26 international brands that opened first retail stores in Canada, 20 were in the Greater Toronto Area (GTA).
Shopping centres play a key role in these international retail expansions, with brokers and landlords partnering to bring the latest concepts to Canada. Toronto and Vancouver remain primary target cities for luxury brands in Canada, with Montreal, Calgary, and Edmonton also seeing increased activity. Although luxury brands that expand in Canada have bigger wallets, however the regulatory environment in Canada makes expansion difficult for typical retailers, due to the highly regulated environment compared to other countries like the U.S. In terms of employment laws, building permits, environmental regulations, and health and safety, Canada continues to be more demanding, adding operational costs onto retailers. For many mid-tier retailers, rent represents one of the largest fixed operating expenses, and continues to be a burden in Canada's retail environment. In the first half of 2024, 40 out of 120 surveyed retail areas across 11 Canadian markets experienced rent increases, which is the highest number recorded in the CBRE survey's history.
Mid-tier retailers typically anchor regional malls, power centres, or suburban high-street corridors, all of which are experiencing some of the steepest rent increases. Unlike luxury brands, which can pass increased occupancy costs through premium pricing, mid-tier retailers operate on thinner margins, making rent hikes disproportionately damaging.
Decathlon, a French sporting goods company, is an exemplar of a mid-tier international retailer brand that unsuccessfully expanded in Canada. The store recently closed five store locations in the Greater Toronto Area. The store closed due to a number of reasons, but the primary reason being
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With the store closures, Decathlon saw this as an opportunity to shift towards e-commerce, smaller-format stores, and considering wholesale partnerships to adapt to evolving consumer behavior. Decathlon faces strong competition which is mainly dominated by Sports Chek, Sporting Life, and Lululemon–all are Canadian brands. Additionally, the stores that they built were large-format stores expecting strong sales volume. Decathlon did not understand the Canadian market, as the locations they opened in did not match Decathlon's core consumer archetype of outdoors enthusiasts willing to explore niche sports.
Outlook on Canada's Mid-Tier Retail Sector
Canada's mid-tier retail sector is being reshaped by retail oversaturation, evolving consumer demands, and limited international brand presence. The question remains: What does this mean for retailers and consumers in the future? Canadian retailers have already begun to narrow product lines, improving their inventory turnover and increasing their margins, while providing consumers with more affordable pricing and appealing selections in-store. Retail bifurcation has allowed lower-end and high-end retail stores to thrive through a catered experience for their customers, forcing mid-tier retailers to innovate. The rise of online shopping has also begun to lead to elevated in-store experiences, as physical retailers begin to offer more unique and personalized experiences (demos, drinks, stylists, etc.) in an attempt to attract consumers as seen in luxury stores. Additionally, Canadian consumers are increasingly favoring Canadian brands—not merely as a passing trend, but as value and loyalty-based commitment shaped by identity.
However, mid-market retailers have also begun to struggle, with reduction of service quality, offerings, and cost in the form of consumer satisfaction and loyalty. Discounting can also lead to dilution of brand image, and increased inflation and tariffs impact pricing, further raising costs for consumers and retailers alike. There has also been a decline of diversity for in-store offerings, with limited options and personalization in-store. Ultimately, while some segments in retail adapt and thrive, the broader landscape faces a pivotal period, where innovation, differentiation, and resilience will determine who will pull through and who will fade from the Canadian retail market.
