MEMORABLE MOMENTS IN ONTARIO RETAILING
© John Winter Associates Limited
Two Wheeler Avenue, Suite 201
Toronto, ON, M4L 3V2
416-691-1870, fax: 416-694-6258
Turning Point: 1973’s 8 million square feet
1970 Ontario population is now 7½ million and there are 233 shopping centres in the Province.
1970 Dominion, the supermarket leader, unleashes a price war with its "deep discount pricing" campaign in August. Food prices drop four percent by March of 1971. Dominion picks up five percentage points in share and shows, dramatically, how the dominant retailer can win in a price war.
1970 Fairview opens anchored by Sears, The Bay and Loblaws. You can't get any better than being near the intersection of two North York expressways.
1970 Harwood Place opens in Ajax. In the next 30 years, the only thing that doesn't change in the mall is the location of the public telephones. Other Ontario centres include Willow West (Guelph), K-Mart Plaza (Kingston), Northcrest Plaza (Peterborough), Lambton Mall in Sarnia (anchored by Woolco), Shoppers World Albion (anchored by K-Mart), Westmount Place (Waterloo), Country Fair (Welland), Whitby Mall and Windsor’s regional, Devonshire Mall.
1970 Downtown was still unquestionably the dominant retail concentration in Toronto, though its share had been cut in half since 1950 (click here for shares). Compared to 1951, when there were three department stores in Toronto, by the beginning of the 1970s there were 30: 17 majors, 13 juniors, all but three outside the downtown.
In the next two decades, the department store inventory would rise to 51 (24 majors, 27 juniors; with three still downtown, and one mid-town). But the population in Metro would only increase nine percent over the same period.
1970 The Province amends the municipal act to permit Business Improvement Areas “to provide an opportunity for improvement, beautification, maintenance of municipally owned lands and the promotion of business or shopping areas”. The first BIA under the indomitable, Alex Ling, is Bloor West Village. Faced with declining sales to shopping centres and physical deterioration of their retail strip, Alex Ling and Bloor West lobby Ontario for the business improvement area concept. When I do the consumer surveys for them, what is annoying the consumers is that the stores close so early, before the commuters even get near Bloor West. (Bloor West has the incomparable advantage of subway stations and continuous linear parking over the subway line). The most successful BIA is Bloor-Yorkdale where, due to all the office space also assessed under the BIA levy, the budget for the BIA is over a million a year. The Beaches BIA budget is puny in comparison.
1971 Twenty percent of Toronto households have colour television. By 1983, the ratio is 84 percent.
1971 Spadina expressway cancelled.
1971 Eaton's takes the decision to build a new flagship store in downtown Toronto. The old store is falling apart, concrete has been poured in the side stairwells to prop up the old structure. Eaton's operates 1.6 million square feet of retail space scattered among various buildings in the 700,000 square foot "superblock" between Yonge, Gerrard, Bay and Queen. Michael Spohn commanded the retail real estate within the company.
The problem with the contemporary distribution: no "100 percent traffic location" between Eaton's and Simpson's for any smaller stores. When public opposition nixed the demolition of the old City Hall for a new department store, Eaton's was (fortuitously) forced to move away from its Queen Street roots (and from Simpson's) and to locate on Dundas.
The 1969 pro-forma showed the mall needed $9 per square foot in rents and between $5 and $6 per square foot in other expenses. Sales in excess of $100 per square foot would be needed for viability there. These incredible numbers were possible, and easily exceeded.
1971 The first downtown renovation since Wellington Square (London) a decade ago opens, Sudbury City Centre, with retail, hotel and offices developed by Marchland Holdings. It is built around a Towers-Food City combination. Eaton’s arrives two years later. The municipal investment had been based on wildly optimistic population projections from the Ministry of State for Urban Affairs (2.5 percent per year compound growth; of 210,000 people in the Sudbury basin, whereas for the next 15 years, with alternative nickel supplies developed outside Canada, and the price of nickel plummeting, the population drops to 150,000). As in Guelph, Simpsons-Sears moves out of the downtown to anchor a very popular suburban mall with free parking, New Sudbury Centre in Sudbury (1974) and Stone Road Mall (1975). When we do the surveys, we find consumers absolutely opposed to paying for parking on top of the Sudbury City Centre building. They preferred free parking at Simpson-Sears + Woolco (later Sears + Wal-Mart).
1971 Other 1971 malls include Bayfield (Barrie), Quinte Mall (Belleville), Appleby (Burlington), University Plaza (Dundas), Westmount (London), Westdale and Woodchester (Mississauga), Country Fair (Orillia), Blossom Park (Gloucester), Port Colborne Mall, Northwood Park (former Fort William of Thunder Bay) and The 101 Mall (Timmins). Westmount begins with a Dominion supermarket and 15 stores. Two years later a Horizon arrives along with 50 more stores; in 1981 a food court is added.
1971 George Weston Ltd. examines whether moribund Loblaws should be closed, sold or salvaged. UK consultants say that there is no equity in the Loblaws name. Many of the stores were shabby, the mix of products was not reflecting the new ethnic tastes, and many units were in the inner city. Dominion, the market leader, had dominated the suburbs with many small stores in order to capture the hungry teenager market. The price wars of the early 1970s also confirmed Loblaw’s reputation of a high cost chain.
1972 There are ten department store chains in Ontario and a handful of independents. The big ten are Bay, Eaton's, Gem, K-Mart, Miracle Mart, Riteway, Simpson's, Simpsons-Sears, Towers and Woolco. As the big ten grew and combined, the independents fade: such as Robinsons (Hamilton), The Right House (St. Catharines), Heaths (Tillsonburg), Caplans (Ottawa), Rossberg's (Niagara Falls), Silverman's (Sudbury), Charles Ogilvy (Ottawa), Chapples (Fort William), Freemans (Ottawa), Smith’s (Sarnia) and Sentry (Sarnia). (In 1993, Heaths celebrates 150 years of continuous operation in downtown Tillsonburg, and will eventually outlive Eaton's). Horizon is launched to compete with Sayvette, Kresge's, Woolco, and K-Mart. In the 1960s, the bigger department store chains took share from the family department stores. After being set up in malls alongside the nationals, the regional chains began to eat the department stores' lunch, by being more focussed, and by their ability to move faster, particularly in fashion.
There are 13 supermarket chains and by the early 1970s all had union contracts. Such contracts would restrict the ability of firms to provide as many checkouts as are common in the United States. Longer line-ups would become a feature of Ontario's food shopping.
1972 Harbourfront is brought to Toronto courtesy of the Federal Government. In 1983 a $60 million renovation is completed to a former 1927 warehouse for luxury apartments and upscale specialty retailing. The retailing is very well patronized over the three summer months. Seagulls are common during the winter. Upscale is not a success on the waterfront, neither in retail nor in housing.
1972 Marks & Spencer arrives in Ontario with their unique combination of panties and pork chops. Within four years the chain has lost $35 million, primarily by being so arrogant: no advertising, no niceties (like change rooms, mannequins, carpeting, open neon lights not spots, Spartan environment, etc.). Only European sizings at first (a size 14 Canadian became a size 16 European). Only European clothing weights at first (not adapted to central heating). It had all worked marvelously back home, and even on Boulevard Hausseman. They did not tamper with their formula of success. They did it their way. They also had inferior locations. They never made a profit in Canada.
Marks (no relation to the real one) and Sparks were never able to merchandise themselves out of a paper bag.
1972 The following shopping centres open: Centennial (Brampton), Burlington Heights, The Mall (Cambridge), Lloyd D. Jackson Square in downtown Hamilton (unanchored) along with Stadium Mall and Strathbarton Mall (Hamilton), Lindsay Square, Five Points (Oshawa), Grey County Mall in the next municipality to Owen Sound, Pickering Town Centre, Oxford Square (Richmond Hill), Thunder Bay Mall (in old Fort William), Finchway Mall (Weston), Galleria SC and Victoria Park Square (Toronto).
1972 OMB approves a downtown Sault Ste. Marie mall even though it "would affect detrimentally the existing commercial uses over the short term only and expanding population should dilute such effects over the long term ... in a few years there should be sufficient potential consumer dollars to accommodate all commercial areas in the City" (R6072).
1973 Sherway Gardens opens with an industry-leading 6.1 parking spaces per thousand square feet. It has taken eight years and four hearings to get this regional shopping centre approved, even though it will be at the intersection of two expressways. Most of the discussion is about access. It takes the nearest two shopping centres a decade before they can totally reposition themselves (click here for sales impacts). No one predicted the wholesale transfer of stores to the enclosed mall format. For the first time, "blight" occurs at a shopping centre. (But, since so much private investment is at stake, the investor thinks his way out of the problem).
The Ontario Municipal Board sets a laissez-faire agenda: local governments cannot control the location and rate of retail growth. This "could only succeed if the planning process reached such a degree of maturity that planners could tell businessmen not only where they could locate their businesses but also the rate at which they could expand". Remarkably, the Board was convinced that Sherway was in the wrong location. They preferred a site in Mississauga "where the centre could make a substantial contribution to the planning and development of that municipality". With the prevailing philosophy and law of planning in Ontario, the Board did not think that result, thought desirable to them, could be achieved.
Furthermore, it was "defenceless" for one municipality (Mississauga) to complain that another (Etobicoke) was pillaging and plundering its legitimate retail trade. The function of municipal planners was to protect residential areas and preserve amenities, and not to "regulate retail trade", nor to "sit in judgement with respect to unfair competition". This principle applied with "even greater force to the objections of private commercial interests". Just as shopping centres around Sherway had the right to expand, Sherway had the right to enter the market and compete for trade.
The Board would refer to these "Sherway principles" over the 1970s: Ontario retailers were not to be interfered with, nor regulated. (OMB decisions N-6706-64, p-2411-66 and Court of Appeal in Ontario Reports, 1966, volume two).
1973 is the year of the Ontario mega-mall. In addition to Sherway, three other malls of almost a million square feet each open in 1973: Bramalea City Centre, Square One and Scarborough Town Centre. The Scarborough mall has the first custom-designed fast food court (and the unexpected downside was that the food court became an area where teenagers hung out after school). Square One opens in October with 1.2 million square feet and is the largest in Canada. It is anchored by Bay, Simpsons-Sears, Woolco, Dominion and some cinemas. David Apperley, its general manager, tells the Star that he has only one non-chain: "I used to live on the Danforth and I love those little neighbourhood stores. But they can't operate in here. They are aiming at $100,000 a year in total sales, and the places here are aiming at a quarter of a million".
1973 A flood of other malls are opened throughout the Province: Georgian Mall (Barrie), Wyndham Place (Brantford), 1000 Islands (Brockville), John Galt (Cambridge), North Maple Mall (Chatham, by Multi-Malls), Country Fair (Fort Erie), Eastgate Square (Stoney Creek), Westcliffe (Hamilton), White Oaks (London), Bayshore (Nepean), Lincoln Heights (Ottawa), Pembroke Mall, Station Mall in downtown Sault Ste. Marie, Stratford Mall, Honeydale (Etobicoke), Manulife Centre in Toronto, Tecumseh Mall in eastern Windsor and University Mall in western Windsor.
Georgian Mall and K-Mart Mall are developed on Highway No. 24, Bayfield Street in Vespra, beside Barrie. The central city prohibits any retail in the suburbs in order to support the downtown. In 1970, the downtown has 363,000 square feet and Bayfield Street zero. A decade later, in McLaren’s Core Area Study, the downtown still have 363,000 square feet, but Bayfield Street has 800,000 square feet. I assist Vespra in the inevitable annexation problems.
1973 is the year of the oil crisis.
1973 Provincial sales taxes rise from six to seven percent.
1973 CN Tower is constructed.
1973 James McLaren applies the retail gravity model (without marketing inputs) to Oxford County and to Niagara Falls in 1974. Marshall Macklin Monaghan applies it to London in 1976. Without a consumer survey in a matrix form (zonal population to zonal spending flows), computer projections cannot be compared against real world behaviour. Stan Openshaw, Using Models in Planning, 1978 says that “without good survey data as a basis for a matrix of inter-zonal cash flows then these spatial interaction shopping models cannot be calibrated in any reasonable manner … without a matrix of cash flows it is impossible to say much about the performance of the model”. The 1981 application in St. Catharines (by R.E. Winter, no relation), “the model would not calibrate”. That, of course, did not hinder the authors from predicting future retail patterns.
1973 New Toronto Council suspends paying for underground connections in the downtown and realizes the damage the system has caused to street life. Height restrictions are placed on the downtown buildings. The Sheraton Centre, hotel, shops and underground walkway also built in 1973. Four years later, the Central Area Plan removes the exemption on the underground retail for zoning calculations.
1973 The Statistics Canada shopping centre report of 1973 explains why retailers were so eager to move: stores in shopping centres, on average, generated 24 percent better sales per square foot than those located elsewhere (Statistics Canada, Shopping Centres in Canada, 1951-1973, Research Report No. 1). Except for home furnishings, malls outsell, outgun and outperform every other location. By becoming so financially successful, the plaza changed forever the methods of, and the attitudes to, Ontario shopping. For a developer, they were a money machine, the greatest annuity known to investors, since the developers were piling more and more of their costs onto their successful retailers.
Ontario was the "spawning ground" for these shopping centres: from three in 1950, their number was now up to 266 in Ontario (Toronto had by far the largest number, 132, Ottawa was next with 23, Hamilton 15, Kitchener 14, London 12, St. Catharines 11, Windsor eight, Thunder Bay six, and 45 were elsewhere). Ontario spawned so many due to its population concentration and density (the rise of the baby boom), its affluence, its fast sub-urbanization, rapid family formation and its high auto ownership, and on the supply side, by specialist chain stores and department stores eager to expand from local and regional to national businesses.
But, land, building and development costs were rising. Statistics Canada misses the wave by concluding that "the years of explosive growth are probably over" (page 29). By their next check-up, in 1986, the number of shopping centres had grown by another 70 percent, to 444 centres. In 1973, Statistics Canada estimated a 22 percent shopping centre share of retail sales (up from three percent in 1950).
In the mid-1970s, therefore, no one predicted the commercial structure 25 years hence. Population forecasts (based on straight line projections) were a tad optimistic. No one foresaw the continued growth in affluence or the major shifts in household structure that have affected consumption. No one anticipated the spatial extension of the market or how it would disperse the commercial structure over the outer suburbs. The resurrection of the Toronto and Ottawa downtowns was a surprise, and the resilience of the retail strips throughout the Province was unanticipated. Many had predicted decline and blight for the strips (Simmons, Toronto's Changing Retail Complex, 1966).
Similarly, if someone had then said that a pipsqueak little chain in the Ozarks, of 33 stores in 1970, would soon rule the retail world, people would have thought them crazy. (By 1970, Wal-Mart had perfected "cross-docking": goods enter in one side of the warehouse and go straight out the other).
Douglas Tigert, marketing professor at the U of T, joins the chorus that saturation has arrived.
One hundred million square feet later, people still complain that Ontario is over-stored and advance the phobia that output is fixed. Rather, Ontario is under-stored by the stores the people like to shop, and under-demolished for the remainder.
1973 Mall openings gain momentum throughout Ontario: Arnprior SC, Hawkesbury Mall, Country Fair (Leamington), Highbury, Oxbury and Sherwood Forest (London), Huronia (Midland), Rockwood (Mississauga), Napanee Mall, Upper Canada Mall in Newmarket, Westdale (Orangeville), Hillcrest (Richmond Hill), Chartwell (Scarborough), Cumberland Terrace on Bloor, Kipling-Queensway (Etobicoke), Yonge-Eglinton Centre surrounded by high rises and on the subway, Glenridge (Waterloo) and Blandford Square (Woodstock).
To compete with the new enclosed shopping centres, many of the former strips enclose in the early 1970s, including Rexdale and Albion in northern Etobicoke, and Cloverdale and Dixie along the QEW. Also rebuilt in the early 1970s with the growing popularity of enclosure are Cederbrae, Morningside, Bayview Village, Don Mills and Sheridan Mall. Nobody’s gonna steal their tenants.
1973 Eight million square feet of shopping centre space opens in Ontario (click here for the statistics). Twenty five million square feet are added 1970-1975, more shopping centre space than added in the previous two decades. Scarborough Town Centre for three months was the largest new centre in 1973. Indicative of the thinking of the period, one consultant indicated that there was too much retailing in Scarborough (a municipality then characterized with "exceptional homogeneity" in its ethnic composition) and that the municipality should nix the next big idea, the retail warehouse. Their report is painful to read:
"Often retail warehouses will weaken the market of local DSTM retailers located in community oriented centres and may even force them into bankruptcy. If the growth of retail warehousing is widespread, the new DSTM structure of the Borough could be seriously undermined ... In order to prevent these problems, the growth and spread of retail warehousing should be rigorously controlled. Retail warehouses must not be allowed to proliferate at will throughout the Borough" (Scarborough Official Plan Review, page 5-7).
In attempting to understand the "commercial carnival" that was Scarborough, warehouses were not a legitimate type of retail activity. A logical tiered hierarchy of shopping centres was.
1973 Hypermarche Laval is opened in Montreal at 268,000 square feet by the Oshawa Group, with 60 checkouts and 3,000 parking spaces, 13 years before the much smaller super-combo Loblaws concept in Ontario. Neither is a success. These “malls without walls” have a high learning curve for their operators, particularly if they are going from food to general merchandise.
It is very difficult to go from food (characterized by low margins) to general merchandise. The food retailers turn their product so fast that they tend to think general merchandise will be easy, but there is a sharp learning curve for a grocer. It needs patience to learn the right assortment of 90,000 SKUs of general merchandise (indeed it takes a lifetime, or at least a generation to learn it), and it needs deep pockets.
Superstores are the ultimate "Macho Challenge". It took Meijer Thrifty Acres 20 years and two bankruptcies to perfect the concept in the United States. Meijer’s mother told him to continue; she held the majority of the stock. It all depends on the direction you come from: Wal-Mart, Target and K-Mart, all going from general merchandise (higher margins) to food, kept at it long enough (15 years in the case of Wal-Mart) to make the concept a roaring success. Because the food brought the consumers back more frequently for the higher-margin general merchandise and for a net 30 to 40 percent increase in general merchandise sales. For a discount department store, the traffic gain is so great that they can afford to learn (for a grocer, the losses are greater because the margins are thinner). In the Meijer manifestation, consumers had to push their buggies through the clothing section to get to the food.
Meijer typically has 33 checkouts working at one time, with no more than two people in the supermarket line. Eight are now lightening-fast self-checkouts. And there’s no annoying deposit for the supermarket cart (click here).
1974 Multi-Malls opens Blandford Square (just outside Woodstock; click here for shares) and in 1978 opens Norfolk Mall (just outside Tillsonburg). The Woolco and Dominion combination had also spurred malls in rural Chatham (1973) and in rural Peterborough. Here and elsewhere, Multi-Malls had exploited nearby rural land with no zoning for major new shopping centres even though in Oxford County, the McLaren projections said there was no prospects. Multi-Malls tried to fill up their centres by stealing retailers primarily from the downtowns.
A decade earlier, Towers/Food City combinations in the downtown had proceeded Multi-Malls, with little trouble and little debate. But the Oshawa Group anchors were not accompanied by small stores in Woodstock (1968), Peterborough (1965), St. Catharines (1965), Owen Sound, Westminster (1967), Niagara Falls (1965), Brantford, Aldershot (1968), and elsewhere. Indeed, the Towers department store was basically a group of jobbers (independent merchants), so no more specialty stores were needed (or advisable, from a landlord perspective) under the Towers/Food City combination.
A blizzard of government restraining orders were issued against Multi-Malls: in the case of Blandford Square, one was issued for the wrong location and by the time the Provincial government noticed its mistake, Multi-Malls had its building permit.
Multi-Malls in Woodstock and Tillsonburg were so far out in the rural area that they were on private services.
1974 Kincardine. OMB approves mall "for a limited time have some financial impact upon local merchants, increased population and more competitive practices will shortly restore such adverse balance ... outflow ... recaptured without in the final analysis permanently reducing sales figures of the existing business centre" (5OMBR15).
1974 Loblaws turnaround begins with William Shatner (a.k.a. Captain Kirk) tossing tomatoes in the air asking consumers if they've seen Loblaws lately. Loblaws begins by putting on its shelves what people want to eat, not what the Anglo managers, who run the industry, think they should buy. Loblaws becomes a textbook case of the re-invention of the supermarket. They become like a giant social laboratory, where everything is tested against benchmarks. It works.
They close unprofitable stores. Produce is brought from the rear of the store (where it was near the loading docks) to the front so it was the first thing customers saw. Not only did it give an immediate impression of a food store, but it carried solid margins. So did the in-store bakeries and delis.
1974 Keskus downtown mall is opened in Thunder Bay. There has been no market study for this Federal urban renewal effort. Rather, this urban renewal scheme bet its future on wildly optimistic increases in population (from 106,000 in 1968 to 150,000 in 1988; Census 1991 registered only 114,000 people in Thunder Bay). The Downtown Urban Renewal Scheme was prescient in that it saw the clearance would propel retailers to seek locations elsewhere "a location in Intercity where space adequate to their needs is available at lower cost ....The Intercity area is unusual in being geographically more central to the whole metropolitan area than either of the two traditional business centres". After the forced amalgamation of Port Arthur and Fort William in 1970, Intercity was central to the newly created city.
An enticing feature of Keskus was the fast food court built above Park Avenue with a marvellous view of the sleeping giant reclining in the bay. The word Keskus was Finnish for "meeting place" (Finns make up a component of the Port Arthur population). "Meeting place" turns out to be a poor descriptor.
Such urban renewal funding was wisely curtailed in the early 1970s. Since future benefits of Keskus would only accrue to the North Ward (Port Arthur), residents and owners of the South Ward (Fort William) were unhappy with the idea of them making substantial tax subsidies in a now-integrated city for something that was neither of interest or benefit to them. Incredible but true, the net result was the construction of a second downtown shopping centre, Victoriaville in Fort William. It was spearheaded, developed, administered and largely funded by the municipality, with no visible market support and with disastrous economic results. Fewer consumers shopped in the South Core after the construction of Victoriaville than before its construction.
1975 Eaton's has a 20 percent share of the department store market (after 106 years of operation; two years longer than the country). Simpsons-Sears has a 22 percent share (after 23 years of operation), 12½ percent for The Bay, 10½ percent for Woolco and five percent for Zellers.
1975 Sony launches the Betamax. Personal entertainment will never be the same, particularly after the first video store appears in 1977.
1975 Microsoft established.
1975 Espanola. OMB approves a mall: "The existing Espanola facilities are expected to experience a reduction in sales of approximately $1.4 million or an initial impact of just over 20 percent from their existing sales levels" (R75688).
1975 Ontario issues Guidelines for Shopping Centre Development, "the principal concern is for orderly growth and development, and effort is directed towards preventing an excess provision of commercial facilities beyond the scale which the municipality can support without detrimental impact on existing facilities, particularly the CBD" (click here for guidelines).
Professor McCabe, who in his doctoral dissertation promoted the use of the gravity model to sort out retail issues, has prepared the Guidelines. Unfortunately, he never applied a gravity model in real life or he would have discovered the enormous data inputs required. Anyway, gravity models are "in" for supermarkets and for municipalities, and notable examples are run in London (Parsons), Cambridge (Parsons), Oxford County (McLaren), Port Hope-Cobourg (Winter), Waterloo (Winter), Etobicoke (Winter) and Thunder Bay (Winter).
Dr. Robert Wylie McCabe began his retail career in Eaton's catalogue, 1947-1963, as Controller of the Catalogue and Branch Stores Division. He would predict within the first week what the success of each item would be by the initial returns, and he had various trajectories for successful, not-so successful and dog merchandise. (Sears Roebuck at the time would just measure the weight of the mail each morning). The McCabe system was simple yet sophisticated: if the initial one-third of the order was doing well after a week, the next third would be accepted.
Professor McCabe then went to the City of Toronto Planning Board for two years before teaching at the University of Toronto. As Captain in the Irish Regiment of Canada, he had supplied his fountain pen when Eisenhower didn't have one at the crucial moment of signing the end to the Second World War in Europe. I have his deck of the Huff gravity model.
In the era of the mainframe computer, there were few things as thrilling as dropping a few feet of punch cards into the hopper and waiting for the results to be printed out at the other side of the room.
McCabe came along with the rules: the need for new shopping space, according to the Guidelines, was derived from (a) population growth, (b) increased real expenditure, (c) decrease in floor space due to fire or conversion, and (d) decline in effectiveness due to economic obsolescence. No mention of (e) increased inflow, or (f) increased local share due to reductions of leakage (outflow). These guidelines alert Ontario developers to the complexities of anchors and mix.
The Guidelines advise careful scrutiny of population projections provided in support of a project. The Guidelines are too late for Sudbury and Keskus downtown centres, however.
McCabe teaches me his favourite game: on a retail strip, usually with five year leases, about 20 percent of the leases will come due each year. Which retailer or service is the next to go? And why?
The problem about the strips is that they are (1) subject to fads, and (2) there is no overriding control as in a shopping centre. Queen Street in the Beach over the past decade has seen a sudden opening of five bookstores and the departure of four, the opening of five bakeries all superb in their own right, and the departure of six, three new occultists with nobody having a good share, and now numerous coffee shops each eating each others lunch.
1975 Marilyn Brooks opens a clothing boutique in a rather scuzzy zone of Queen Street West. The pioneer gives other chic boutiques the confidence to follow. Investment is attracted. Pride is shown in the upgrades and the new restaurants. CITY-TV arrives. Rents rise astronomically. People attract people. So much so that contemporary retailers go west of Spadina specifically to avoid having to share their clientele with others.
1975 Fort Frances. OMB approves mall: "CBD merchants will suffer some moderate decline in business ... they will recapture their present share of the market after a period of not more than five years" (R751559). But in the meantime, K-Mart builds a 100,000 square foot mega-store in suburban International Falls (just across the border) and J.C. Penny anchors an ill-fated regional mall (which Penny vacates after two years). Due to the overbuilding across the border, only the small Canadian Tire gets built of the Fort Frances mall.
1975 William Davidson outlines “The Retail Life Cycle” in the November-December Harvard Business Review. Success in retail in ephemeral and contains the seeds of its eventual failure.
His four stages of the life cycle are: innovation, accelerated development, maturity, and decline. The life-cycle appeared to be getting shorter: 80 years for the downtown department store (1860s to the 1940s); 45 years for the variety store; 35 years for the traditional supermarket; 20 years for the early discount department stores and 15 years for the early home improvement centre. It is also plain that this typology can be applied to shopping centres.
1976 Malls dominate: 88 percent of the retail space in Scarborough is in plazas, 80 percent of North York and 70 percent of Etobicoke. The proportions are much higher in the outer suburbs, according to the Metro Planning Department’s The Retail Shopping Centres.
1976 The Ontario Government, concerned with the rise of the shopping centres, began its own Ontario Downtown Renewal Programme (ODRP). Millions of dollars were invested in this new form of urban clearance. There was little thought given to such a “motherhood” programme and there was little recent experience, only Sudbury and Thunder Bay, based on wildly optimistic projections. The municipality usually provided the parking structure. The department store got the subsidies. The developer got the incentives. Rarely were market studies done that followed the government guidelines. In Guelph, for instance, the municipality hired the local university (which specialized in agriculture) to predict the future downtown economy with the new downtown mall, and their results were extremely optimistic and wildly off the mark (click here for shares). When market studies were completed, as in Sarnia, the factors used to support the reinvestment were absurd (department stores gaining a 40 percent share of the market, when they actually had a 20 percent share).
According to Eaton’s executives, the Premier phoned his friend Mr. Eaton, and there was a quick acceptance of the programme, without crunching of any numbers. Without any numbers, there were just anecdotes to go by (such as the early success of Wellington Square, London, the first enclosed downtown mall in North America, 15 years earlier, with no suburban mall competition).
With the lure of government assistance, the numerous subsequent downtown failures helped to bankrupt Eaton's. When offered the choice, consumers refused to pay the accompanying municipal parking fees, and chose free-parking in the suburbs. With so much of their municipal funds invested in the parking garages, none of the municipalities was interested in parking incentives, or free parking, until it was too late, and the anchors had folded (click here for the Thunder Bay experience).
The new government-funded downtown mall offered the un-compelling proposition: drive further and pay for parking.
In a secret report, made available to us only through the Freedom of Information Act, the Province tried to find positive economic spin-offs from their $200 million of public expenditure. Their report could not identify any private investment triggered downtown (i.e. government money did not lever private investment). It did show how the Thunder Bay facility comforted many aboriginals during the cold of the winter and the heat of the summer. Under optimistic assumptions, the report showed that another eighty years would be needed to pay back the Thunder Bay public investment (An Evaluation of the Ontario Downtown Revitalization Programme, 1987).
Some residents courageously refused their government largess: 5,000 signatures were collected in Tillsonburg (population: 10,000) against the proposed government-subsidized downtown mall (that would demolish a very pretty and historic town hall and market). The Ontario Cabinet specifically overrode local objections (about "very large increases in municipal taxes") and approved the development (even though it did not meet the government guidelines, since the local politician was in the Cabinet, and had a vision of "the Eaton Centre of Oxford County"). Five thousand signatures were collected in Woodstock against the downtown mall (expropriation notices were sent out the week before Christmas for a downtown mall that no anchor wanted to touch).
The downtown market had been undermined by consumers moving to the suburbs (this is what Simpsons-Sears had identified with their November 17, 1954 opening of their Hamilton store). Retailers didn't stay downtown, they followed their customers home. One chain, however, continued beating its head against progress. And the problem was that the government bureaucrats loved ‘em (they were located near ‘em), but the consumers didn’t shop ‘em.
By trying to buck the market in favour of downtown's former grandeur, many restrictions were placed onto suburban development in the hope of forcing a successful downtown retail environment. With more people and thus an increased demand, this just caused higher prices. Ruins of failed downtown shopping centres abound: Kitchener's Market Square 1974 (click here for shares), Brantford, Guelph, Marathon's Peterborough Square 1975, Sarnia, Tillsonburg, Chatham, Sudbury (click here for shares), Thunder Bay, and elsewhere (click here for London shares). Every location that the government money touched is eventually a failure. A reverse "Midas Touch" (everything our taxpayers' money touched, turned to dust). Cadillac Fairview announced it would not subsidize properties where rents fall short (implicitly daring lenders to foreclose). Such downtown properties included the Sarnia Eaton Centre (1982, 260,000 square feet on Christina), Eaton Centre Guelph (1984, 275,000 square feet on Wyndham, with only one anchor) and the Hamilton Eaton Centre (1988, 390,000 square feet on James North, with only one anchor). (Even at a rent of $2.50 per square foot in Guelph, Eaton's couldn't push its sales over the $70 per square foot mark, an appalling performance: click here for department store rents). The remarkable thing is that a European pension fund buys both the downtown Peterborough and downtown Guelph malls, and three months later Eaton’s tanks. Clearly they did not do any due diligence.
A consultant hired by the City of Guelph recommends blowing the sucker away and re-opening Quebec Street to traffic.
With restrictions on suburban commercial development, the City of Ottawa kept the downtown share roughly constant over the 1980s (click here for shares), but at the cost of higher prices. Peterborough was the only community to try and prohibit any suburban commercial development to support its partially buried downtown redevelopment. It succeeded in lifting the downtown share two percentage points only, from 20 percent (1987) to 22 percent (1994), but again at the expense of higher prices to the consumers.
One of the problems of creating an enclosed centre downtown was the "vacuum cleaner effect", in that it attracted some of the stronger on-street retailers from the neighbourhood into a structure that was fundamentally unsound. The downtown Thunder Bay mall, which was purchased in 1990 for a “steal”, $8 million (down from $10 million asked), was worth only one dollar in a municipal appraisal in 1998. The municipality balked at paying one dollar in lieu of the back taxes owed. The municipality refused to throw good money (one dollar) at a bad project.
Rod McQueen writes: "Stores in Brantford, Sarnia, Guelph (click here for demolition) and Peterborough were all opened in the early 1980s as part of a wrong-headed Ontario government experiment that drew Eaton's in to help revitalize downtown urban cores that had been disembowelled by suburban malls. The idea was a miserable failure, another situation where Eaton's paid little heed to the fact that there was no business case to the strategy it decided to follow. The four cities still owe almost $40 million because loan repayment was to be based on profits that never materialised" (The Eatons, page 257).
As the anchors fade, so do their positive externalities.
ODRP was probably a decade too late. In the 1970s, the government should have focused on providing free parking downtown, which is consumers number one complaint. But then the government never asked consumers what they wanted. Only retailers did that. And it is the consumer who ultimately decides the outcome. (Later, a few savvy towns like Leamington and Woodstock, that instituted free parking throughout their downtown, would see a renaissance).
What went wrong? The diagnosis was faulty. Downtown was not in trouble because of an obsolete physical plant. It was in trouble because suburban competitors were doing a better job supplying the same market. Restructuring the business district to accommodate unnecessary new retail structures could never be much help.
Plus most communities were too small. The only way to foster spill-over from your project onto adjacent areas is not to fully satisfy the market with your project. But the government projects more than exhausted their small market’s potential, so that (secret) side deals had to be done, to restrain needed, convenient suburban development elsewhere.
1976 Also in 1976, the Provincial Government launches its Main Street programme, to encourage beautification. A less expensive programme, a downtown field of dreams, maintain it and they will stay. But, trees are not enough.
While 15 percent sales increases were recorded in a few projects, re-tenanting was needed, (Main Street has few positive externalities) which somewhat destroyed the programmes’ objectives.
1976 Eaton's closes its catalogue after 92 years of operation. (The catalogue was made possible in 1884 by the national rail system; it broke local market monopolies). The catalogue operation lost $100 million in the previous year on total sales of $300 million. Eaton's share of the market plummets to 14 percent due to the elimination of the catalogue. Despite its experience, a general merchandise catalogue is very difficult to operate: you have to order a year in advance and guarantee prices for as long as the catalogue is valid. Inflation in the 1970s was very high (the inflation rate had increased 34 percent over the previous three years). And you never fire a catalogue employee until the catalogue goes to the printer in fear of tipping of the opposition to your secret prices.
1976 July 17, Montreal Olympics opens. Without a Ticketmaster, Eaton’s gets the presale of Olympics tickets. Unlike later games, the opening ceremony tickets are distributed by lottery. I get two standing room only tickets.
1976 Hazleton Lanes opens with 60,000 square feet, aloof and invisible from the adjoining streets in the Yorkville district. It scoops up the upscale merchants before the Toronto Eaton Centre can get them. An expansion 12 years later that triples the size is not a success. Years later I look at the potential there for a food merchant who sells only natural and organic foods.
The expansion of Hazelton Lanes plus York-Hannover's stake in the ill-fated downtown Montreal Eaton Centre helps to put the developer into insolvency in 1992.
1976 The Retail Council establishes its "Recharges Committee". Mall retailers are becoming angry with the high rate of Common Area Maintenance (CAM) escalation. Over the past 12 years, the changing definition, the inflationary environment of the 1970s, and developer pressure, has increased CAM costs by at least 300 percent.
1976 Belleville. OMB approves new mall expansion: "... the anticipated growth of the Belleville area ... will produce sufficient increased spending to make the proposed expansion viable and more specifically that any adverse effect on the core retail area will be minimal and of short duration ... The opening of the K-Mart store, anticipated in 1978 ... would transfer some business from downtown stores but the transfer would be completely dissipated by 1981 due to overall growth in the market" (R7698).
But the market doesn't work that way. The centre with the mojo increases its share, the centre with no momentum, the downtown, does not recover, it sinks further.
1977 Don Mills Centre is enclosed; business volume immediately jumps 65 percent. The $7 million renovation attracts a much higher class of retailer (Shopping Centre World, May 1979, page 35).
1977 Sporting Life opens on Yonge Street with virtually no parking. It is the first new-style "big box" specialty retailer. It shows what parking problems are really like.
1977 April. Blue Jays open in the snow.
1977 First ATM opens in Toronto.
1977 Dylex buys half of Bi-Way, a southern Ontario discount chain with $49 million in sales. It makes a weird combination, fashion and slock. But in the next recession, Bi-Way helps the conglomerate to prosper.
1977 The new downtown Toronto Eaton's store opens along with the first stage of the Toronto Eaton Centre (down to the fountain) in February. Zeidler Roberts’ Centre is a pale copy of the Pompideau (Cultural) Centre in Paris. The Eaton brothers stand on the second floor all day welcoming the customers. I shake their hands. Much later I have the opportunity to see the material on which they based their decision: not one number is crunched for the one million new square feet. The old department store was falling apart and they just needed a replacement flagship. But they never could fill the one million square feet adequately with enough merchandise. (Three years earlier the specific downtown market was better served with a 300,000 square foot Bay at Yonge and Bloor).
There was considerable doubt expressed at the time: an enclosed mall of this size could not survive in a city centre. The subway, however, torqued many consumers into the shopping complex: 100,000 per week at start-up, 500,000 per week within two years and Phase II, one million a week within a decade.
There were no public subsidies involved in the redevelopment of the superblock. The City of Toronto accelerated the development processing, however.
1978 The rage in food retailing is the box store or "baby shark", a recycled food store with just the high volume basics. The concept extends the life of unprofitable stores. These small boxes include Valdi, No Frills and Thrift. They have the absolutely lowest prices on selected merchandise, and leave the larger supermarkets to charge what the market will bear. The model was the German Aldi chain (later bought by Wal-Mart). The No Frills units sold bulk food, a new twist in the market (Canadians had previously preferred everything hermetically sealed).
Supermarkets generally face high costs and slim margins. The stores are going to get larger, or cheaper, a fragmentation or a polarization of extremes. I predict a grid, superstores in the corners. Between the corners, there will be a lot of gaps that the smaller, the independent and the ethnic stores will fill in.
1978 Stoney Creek. OMB approves a new mall: "some adverse effect on the downtown merchants ... major new residential development is taking place nearby" (8OMBR494).
1978 Orangeville. OMB turns down a second mall, "enough doubt about impact that the effect of the first mall should be measured before a second one is approved" (8OMBR341). The first mall was just outside the town in the rural area.
1978 St. Marys. OMB approves mall: "It will not have any long standing detrimental impact on the CBD of St. Marys" (9OMBR80). A 1979 Order in Council confirms that the proposed mall would "not have any long standing detrimental impact on the CBD of St. Marys" (10OMBR). Downtown St. Marys was where Robert, James and Timothy honed their general merchandising skills before Timothy moved to the big, big city in 1868.
1978 Sarnia. Lambton Mall expansion in the township is premature, according to the Ontario Municipal Board. The City should have the opportunity to attract another department store (9OMBR219).
1978 Hudson's Bay Co. buys a controlling interest in Zellers. Zellers was started in 1931 in London, ON. Zellers moves its head office/principal buyers to Montreal early in the chain's history to be near its clothing suppliers.
1978 Metric system is imposed on Canada. The square foot reigns supreme in leasing, however, as it is a much more relevant dimension. Though a $100 per square foot performance looks so much better in SI, $1,076 per square metre.
1978 Horizon folds. It lasted 11 years. It was too little, too late. Three units are recycled as Eaton's stores.
1978 Guy Hatfield recommends that the Region of Ottawa Carleton freeze new regional shopping centre development until the downtown Rideau Centre has been operating for two years. "A delay of this nature would be in accordance with the goals to strengthen the retail component of the central area ... it would give Downtown Ottawa a chance to come off the floor and fight ... However, a policy of shielding the business district for an inordinate period of time is in strong conflict with an unfettered business climate".
But regulation is like rust: once you get it, it doesn’t go away. It spreads. The Ottawa freeze remains effective for 15 years.
1978 On working on McLaughlin's "Hole in the Doughnut" in Mississauga, I find a gap in the northern market for non-mall type retailing. After 15 years, the Heartland Centre is operating there (click here for a photo).
The year McLaughlin opens his Square One, he publishes his visionary 100 Million Canadians ("the traditional central city core is an anachronism"). Meetings at McLaughlin's were straight out of Kafka: some of his executives played full-contact hockey, and would arrive dripping blood.
1978 Peterborough. OMB nixes an additional department store in the suburbs in order to "guard against an expansion prejudicial to the regional role of the CBD" (R772800). The next year it approves a new suburban supermarket because "the proposed supermarket would not have a serious adverse effect on existing outlets and that all such food outlets would have sales in excess of the accepted average" (R79960).
1978 The Universal Product Code begins in supermarkets.
1978 Dominion beats Loblaws to the announcement of generics by one day. Dominion begins with 32 items; Loblaws has 30 "white labels". Within four years, the Loblaws commitment to the category has grown to 500 generic SKUs, double that of Dominion. The first chain to have had success with generics was Carrefour in France, with its Produit Libre.
1979 Simpson's is sold to the Hudson's Bay Co. rather than to Sears or to George Weston, for $347 million, (or $14 million per store). Something magical (it's called "synergy") occurred when Eaton's was at one end of a mall and Simpson's was at the other. (When Eaton's, who owned the land, invited Simpson's to Yorkdale, the CEO said: "It's an axiom of retailing that two big stores near each other attract more than twice as many customers as they would singly", Stephenson, The Store that Timothy Built, 1969, page 159).
Hudsons Bay Co. promises ten new Simpson's stores within five years. The joint venture with Simpsons-Sears is severed, meaning that (1) Hudson Bay has to develop its own brand name, Beaumark, because Simpson's cannot any more sell Kenmore, and (2) Sears can now move into Metro Toronto where it was so long excluded, by agreement, if it can find any space.
1979 Chelmsford. OMB nixes a mall as premature: "unless there is an increase in population there will be no compensating factor for the impact on the existing retail outlets". A 15 to 17 percent impact anticipated. Clearly, they did not look at the population projections used to support the downtown Sudbury expansion (R783347).
1979 Ancaster. OMB approves an open concept mall. The additional space would "not hurt present merchants" (R792220).
1979 Cadillac Fairview finds that if it throws enough money at an OMB hearing they can win big. The wrong location is chosen in Kingston Township for a regional shopping centre. The OMB justification is that it is the remotest site, "Mall chosen has least impact on CBD and smaller malls in the Township will not be seriously jeopardized" (5OMBR482, R75796). “In considering the sites, the City had regard to a retail market analysis based on the retail gravity model prepared by city officials with assistance and directions of Mr. McCabe, a specialist in shopping centres and consultant with the provincial government … this study was useful to all parties and does establish some benchmarks on which to build, relating to attractiveness or draw and impact on other centres. Certainly given centres of equal size and attractiveness, the resulting share of the market should vary according to the distance of the customer from the particular site. Accordingly, it was stressed that the further the centre from the CBD, the less reason to fear impact”. Of course, they didn’t need any fancy model to draw that conclusion.
1979 Phase II of the Toronto Eaton Centre opens in August. The mall expands (a) from the fountain down to Queen Street, and (b) west on a Dundas Street extension to a multi-plex cinema. Briefly, the multi-plex's 18 screens is the largest in the world. The multi-plex promise is that art and specialty films will be shown. However, the advent of the VCR means that audiences can get what they want at the video store for anything but new releases. And for the new releases, the multiplex screens are puny. It would be another 15 years before a new cinema mousetrap would evolve, stadium seating coupled with good sound.
Attendance at the Toronto Eaton Centre is reported at a half million shoppers per week. It is now an 860 foot walk between Eaton's and Simpson's. Simpson's has not yet constructed its "plus 15" walkway.
1979 Timmins. A new mall is approved contrary to Council's opinion. A building permit must be issued within one year and the construction must begin within three years (R798825).
1979 Big chains go to big cities. The largest 112 retailers in Metro Toronto get 46Ę of every retail dollar, according to Statistics Canada. Just a few companies dominate retail sales (click here for the statistics). The jury is still out on whether this is a good or bad thing for the Ontario consumer (and economy). There are reasons to believe that this concentration is not particularly harmful: rather than high concentration causing higher prices, the search for market share causes lower prices, which in turn leads to high concentration. By unleashing their sales machine, the larger retailers should ensure profitability through economies of scale, not just by price increases.
The national statistical agency has had a continuing concern to monitor the increasing share of the chains and the voluntary groups. There is a strongly-held feeling that independents are the life-blood of communities, that it is better to have a democracy of intelligent independent merchants than an oligopoly of impersonal chains and their low-paid workers. At least, the chains guarantee that the sales taxes get passed onto the government.
1979 Sears enters Scarborough Town Centre, creating the first super-regional shopping centre in the Province (anchored by three full-line, full-service department stores). The new mall design creates problems for existing retailers: it is faster to walk between Simpson's and Eaton's via Sears than it was via the old Miracle Food Mart supermarket.
1979 Dylex, with ten percent of the Ontario fashion market, installs optical character reader wands in 520 of its stores. It allows them to reduce inventory and keep more up to date with their fast-moving fashion items. Now at the Monday morning meeting, executives know what sold the previous week. Formerly, it took three weeks just to gather and collate such critical information.
1979 Cobourg. Council (many of whom are downtown merchants) turns down an enclosed mall in the suburbs in order to defend its central area. The consumer fury aroused by this move, of denying residents their symbol of modernity, their icon of the future, was so strong that the entire Council was thrown out at the next election and a new pro-mall slate was elected. A Board hearing under the first Council, which rejected the mall, heard diametrically opposite planning viewpoints under the second Council.
In dealing with the new contagion, Cobourg Council wisely renovates their Victorian gem, Victoria Hall, installing confidence in the downtown, which prompts upgrading and encourages new investment there. When the municipality sets the agenda with significant upgrades to the public facilities, private investment follows. When all they do is fight the suburbs, nothing positive happens downtown.
Cobourg, Orangeville, Woodstock, Peterborough, Collingwood and Owen Sound upgrade their civic facilities downtown and entrepreneurs have confidence to invest there.
Brantford and Newmarket move their civic facilities with disastrous results.
Brampton hurriedly moves to the major mall; then realizes its mistake and moves back downtown, almost before it is too late.
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