BC retailers say that the record 21 million Canadians who made overnight visits to the U.S. in 2011 and spent a record $24 billion are hurting the local economy, particularly small businesses.
They also fear that cross-border shopping will accelerate following changes introduced in the federal budget that increase duty-free exemptions for travellers.
The U.S. Commerce Department will release a state-by-state breakdown of that data in late summer, spokesman Tim Truman told Business in Vancouver.
Retailers are convinced those numbers will show all-time high visitation from Canada to Washington state, which attracted more Canadian visitors than any other state except for New York and Florida in 2010.
That’s partly because they are contributing to the trend.
Last summer, when the 10-store Vancouver-based women’s fashion chain Current Fashion sank into receivership, co-owner Sandy Hayden blamed cross-border shopping as a major factor in the 80-employee firm’s demise.
Co-owner Frank Zetler then bought the White Rock, Richmond and North Vancouver Current Fashion stores out of receivership, rebranded them B Current and started sourcing clothes out of the U.S. instead of manufacturing them in B.C.
“We’ve joined the masses, who are cross-border shopping,” Zetler told BIV.
Ed Des Roches, who co-owns the nine-store Plum women’s wear chain, has adopted a similar approach.
He also takes advantage of the relatively high Canadian dollar, volume discounts and newly made contacts in the U.S. to buy ready-made manufactured fashions across the border.
Des Roches now sources fabric out of the U.S., instead of his previous preference of Eastern Canada, and he uses the material to manufacture clothes locally. “We’re seeing sales slippage in our White Rock store as a result of cross-border shopping,” Des Roches told BIV.
“I’m approaching a lease renewal at that location, and my offer will be the same as I’ve been paying for the last five years.”
In contrast, Des Roches expects that he will face slight lease rate hikes for other locations, such as South Granville.
Helping drive White Rock’s slumping lease rates are new South Surrey shopping centres, such as Grandview Corners and the Shops at Morgan Crossing. Those retail projects serve the area’s growing population but add so much new retail space that Sherri Wilson Morissette, White Rock Business Improvement Association executive director, suspects lease rates are falling.
Coquitlam Centre marketing director Deborah Stetz blames much of her mall’s 4.1% drop in traffic in the year that ended in February, compared with the previous year, to cross-border shopping.
Sales in the mall have dropped 0.6% during the same two time periods and lease rates are flat.
“I know we’re doing better than some other shopping centres,” she told BIV. “We did a survey through Vision Critical last year and found that 54% of our customers shop in the U.S. and 83% of that shopping is in between Southcentre Mall and Bellis Fair Mall in Washington.”
While Stetz believes there is little she can do to keep shoppers from going south, John Scott, Ivanhoe Cambridge vice-president of new development, told BIV that one strategy retailers could employ is to provide discount shopping opportunities at home.
His company plans to break ground on part of what will be B.C.’s largest shopping complex, in Tsawwassen, later this year: the 1.2 million-square-foot enclosed Tsawwassen Mills mall, which is adjacent to Property Development Group’s 600,000-square-foot outdoor Tsawwassen Commons mall.
Scott said that approximately 50% of Tsawwassen Mills’ retail will be “outlet or value-priced.”
The Vancouver International Airport Authority, meanwhile, is finalizing a deal with Europe’s largest outlet mall developer, McArthurGlen Group, to build a 340,000-square-foot mall on a 30-acre site on Sea Island. (See “Major new outlet mall planned near YVR” – issue 1167; March 6-12.) •
