Nordstrom, the American luxury department store chain, has recently decided to shut down all its 13 stores in Canada. This decision has surprised many as the stores were opened just seven years ago, which has left many Canadians wondering what went wrong and why the company failed to make a mark in the Canadian market. But I wasn’t surprised!

The opening of Nordstrom stores in Canada was seen as a positive sign for the Canadian economy, as it was expected to create jobs and boost consumer spending. However, the timing of the store openings could have been more favorable. In 2014, the Canadian economy was hit hard by the drop in oil prices, which affected the country’s GDP growth, and led to a decline in consumer confidence.

The macroeconomists within Nordstrom’s organization overlooked this fact and failed to factor in the impact of the oil price crash on the Canadian economy. Nordstrom in Calgary, for example, made over $400,000 on their Gala opening day alone, which might have sent the wrong signal to the corporate’s VPs and Economists. The company struggled to keep attracting customers and generate profits, leading to the closing all stores in Canada.

Another factor that contributed to the failure of Nordstrom in Canada was the competitive nature of the Canadian retail market. The market is dominated by well-established retailers, such as Hudson’s Bay Company, which has been around for over 100 years. However, the company also faces competition from other international retailers, such as Zara and H&M, which have a strong presence in Canada.

Moreover, the Canadian retail market is heavily regulated, which makes it difficult for foreign companies to navigate. The rules around foreign ownership and Taxation on start-ups, for example, can be quite different from those in the United States, making it challenging for foreign retailers to set up shop in Canada.

Nordstrom’s failure in Canada highlights the importance of conducting thorough market research and considering all macroeconomic factors before entering a new market. It also underscores the need for companies to adapt their business strategies to local market conditions and regulations.

The experience of Nordstrom should serve as a cautionary tale for other companies, like SAKS, looking to expand into the Canadian market. While the closure of Nordstrom can offer significant growth opportunities to SAKS for the time being, it requires careful planning and consideration of various factors that can impact a company’s success. SAKS might need to exit sooner than later.

Moustafa Maher – Economist.