Our guest is Michael LeBlanc. Michael is the founder and president of M.E. LeBlanc & Company Inc. He has over 25 years of experience in brand, retail marketing, and e-commerce leadership, and has worked with household brands like Black & Decker, Levi Strauss, Hudson’s Bay, The Shopping Channel and Pandora Jewelry.

Michael is also the producer and host of The Voice of Retail Podcast, a joint venture with The Retail Council of Canada where he is a senior advisor.

Join us as we explore key differences between US and Canadian consumers, Canada’s recent influx of foreign luxury brands, and what the Canadian cannabis market looks like one year after legalization.

Episode 44 of RETHINK Retail was recorded on October 31, 2019

TRANSCRIPTION

Julia Raymond:
Hello. Today’s episode of RETHINK Retail features my guest Michael LeBlanc. Michael is the founder and president of M.E. LeBlanc and Co. Inc. He has over 25 years of experience in brand, retail marketing, and e-commerce leadership, and has been on the front lines of retail industry change for his entire career with brands such as Black & Decker, Levi Strauss, Hudson’s Bay, The Shopping Channel, Pandora Jewelry, and The Retail Council of Canada, where he remains a senior advisor. Michael is also the producer and host of The Voice of Retail Podcast, a joint venture with The Retail Council of Canada.

Julia Raymond:
Michael, will you kick us off by telling us a little bit more about yourself, and your background in the retail industry?

Michael LeBlanc:
Yeah, for sure. First of all, Julia, thanks for having me on the podcast. It’s really fun to have the microphone turned around so to speak, so I get to do the conversation, so thanks again for it.

Julia Raymond:
Of course. You have the hard part.

Michael LeBlanc:
Yeah, I know. It’s like, wait a minute. So thank you.

Michael LeBlanc:
And the introduction covers a lot of it, 25 years veteran retailer, and I’ve been mostly in the retail industry, but also I’ve been in the media side. Lately what I’ve been doing, for the past couple of years, is working on my own with a couple of properties, and I do everything from retail advisory practice, I do a little bit of consulting, I travel the world and do keynote speeches, try to explain this crazy retail industry to all kinds of different people.

Michael LeBlanc:
I was in Dublin, Ireland last week, and also had the Voice of Retail podcast, which is just a real fun opportunity for me. I do two interviews, and then the news of the week, each and every week. You get to meet the most interesting people, hear their stories, and we all learn together. As we all know in retail, you can learn every day something different. It’s such a fun and exciting industry.

Julia Raymond:
Absolutely. I was just in Dublin, as well, last month. How’d you like your trip?

Michael LeBlanc:
I loved it. It’s work and play. I was actually there as a guest, working for the Irish government. They have a division called Enterprise Ireland, which is actually one of the largest VC companies or firms in the world.

Julia Raymond:
Wow.

Michael LeBlanc:
They actually take a stake in tech companies. They’re not all retail tech. They do agriculture tech, ag tech, med tech, but they’ve got 4000 plus companies under wing. Part of what they do … You know, Ireland is not a big place, so they are very outwardly, globally, focused. I’ve made several trips over there, and in this instance, took a few retailers from Canada over to Dublin and Waterford, which is their high-tech center, to meet some great tech companies.

Michael LeBlanc:
It’s just different. Right? You get to meet not the usual cast of characters, and plus you get the side … Very significant side benefit of discovering Dublin and Ireland, and the hospitality, if you haven’t been there.

Julia Raymond:
Mm-hmm (affirmative). That’s great. You guys met with some people, some retail companies that are backed by Enterprise Ireland. That’s exciting stuff.

Michael LeBlanc:
Yeah.

Julia Raymond:
I know that’s more of a global aspect, but you, I would say, are probably an expert in the Canadian market. I know that you guys have a lot of transformation going on as well in the retail space. I wanted to know, just broadly speaking, what are the trends that you’re keeping your eye on right now?

Michael LeBlanc:
Yeah, it’s a great question. For sure, most of my career has been based in Canada, though I spent some time working for large US companies, and of course, retail is undergoing the same transformation around the world, in one degree or another. As a macro statement, there’s more similarities than differences between Canadian and US retail. There’s a couple of unique differences. We are a different nation, with different dynamics. Some of the trends, as I said, are very similar.

Michael LeBlanc:
You’ve got other trends, like this whole e-commerce thing could be something in Canada. E-commerce developed very different in Canada, for a whole bunch of reasons we can talk about, but it has developed slower than it did in the US. And there’s, like I said, a number of different factors, tax being one of them. For the entire time e-commerce has been developing in Canada, consumers have always paid tax. There’s no tax haven from which you would not pay taxes. The inherent motivations were different.

Michael LeBlanc:
Slowly, the industry developed differently here, and also, it’s a matter of scale. Canada’s a very different market. We’ll talk about that later, in terms of scale. We’re 10% of the population of the US, but oftentimes, the cost of tech and the cost of infrastructure is the same. The opportunity profile is different.

Julia Raymond:
Sure.

Michael LeBlanc:
Other things that are being, in terms of trends, Black Friday is actually a big trend in Canada. That might be surprising to you or not surprising to some of your listeners, but Black Friday was never a thing in Canada up until about 10 years ago.

Julia Raymond:
Oh, okay.

Michael LeBlanc:
It didn’t exist as a holiday. We have Boxing Day here, which has been a longstanding holiday that happens the day after Christmas, or depending on the province, some forced closures on the 26th, so it would happen on the 27th. In the past 10 years, Black Friday’s become a thing in Canada. We can talk about why, but that’s a huge trend, and now we’re seeing Canadians shopping more on Black Friday weekend, or whatever we want to call it, Cyber Monday, than there are on Boxing Day. That’s a big shift. That’s pretty major.

Michael LeBlanc:
The other thing you’ve got, is you’ve got cannabis retail. We’ll talk about that. That’s a big transformation in Canada. Retail cannabis is now legal. It has been for the past year, so you now have an underground market across the country is starting to become an above ground market. I know it’s legal in several states, several major states, but nationally, it’s legal here. That’s starting to transform how we think, and how we think of real estate, where the real estate is going. In a city, or a province, like Alberta, you have 300 stores that didn’t exist this time last year. That’s pretty …

Julia Raymond:
300 in Alberta alone?

Michael LeBlanc:
Yeah, yeah, yeah. It’s projected that, as the market absorbs … How big is the cannabis market? Fascinating little side story, the Canadian government measures statistics through an organization called Stats Canada, Statistics Canada, a federal government organization. They were tasked with, as we approached legalization, how big is this market? We don’t really know. How do we guide, how do we gauge the size of the market? I had this wonderful interview with the head of Stats Canada. They created Stats Cannabis, and it was a crowdsourced way for Canadians to go on and report in an online tool what they were paying for their cannabis. Think about that. Think about that, that the Canadian government asked its citizens to willingly go and report illegal activity.

Julia Raymond:
Right.

Michael LeBlanc:
Millions and millions of Canadians did that, and still to this day do that.

Julia Raymond:
That’s surprising. It’s a little surprising.

Michael LeBlanc:
Well, it’s interesting, right? We all knew legalization was on the horizon, right? It was not …

Julia Raymond:
Right. It wasn’t a trap.

Michael LeBlanc:
No, no. It wasn’t one of those you’ve won the lottery traps. It wasn’t one of those. What we’ve discovered is that the market is about four and a half to five and half billion dollars today in the Canadian market. Now, for context, and that’s in the … What we would call the black market, or what we now call the legacy market. But for context, beer in this country is about an eight billion dollar industry. These are huge industries.

Michael LeBlanc:
In the past year, in the years and really decade to follow, we’re seeing that industry now start to move in from the shadows and into traditional retail, who are buying stores. It could be a province like Alberta, or Ontario, where I am, it could be a thousand retail stores that didn’t exist before. The dollars existed n the economy, if you know what I mean, but now it’s measured and taxed.

Julia Raymond:
Yeah, now that tax factor comes back in, that you spoke about.

Michael LeBlanc:
Yeah, for sure. For sure. Now, you’ve got a whole bunch of other things that happened, but certainly from a real estate perspective, from a retail perspective, from a talent perspective, this is now transforming our market. That’s different. That’s a lot of the discussion that happens here in Canada. Again, many of the same things are happening to transform retail in Canada, but different, because we didn’t overbuild, generally, the way … For example, the overbuild-ness happened in the United States, where there’s far fewer store closings. That’s not a thing here. A couple of chains do close, but not in the thousands. We didn’t overbuild, but it’s a net assessment at the end of a couple of years.

Michael LeBlanc:
There’s challenging environment, there’s not a lot of margin for error. Online is a significant part of retail, probably 8 to 10% of core retail, because I like to represent that number’s taking of things, like automotive and gas. It’s well behind, by percentage, what it is in the States, but it’s growing at a really fast clip for sure.

Julia Raymond:
That’s interesting that, in Canada, you don’t have maybe the issue with store closings and empty retail space. Is the barrier of entry actually maybe a little bit higher for retailers or entrepreneurs wanting to get into the cannabis business because they might have to actually build a new store location, or compete to get that location?

Michael LeBlanc:
You know, it was an interesting year, for sure. What you had is two-fold. There’s a lot of regulations of where you can put your stores. You had some entrepreneurs buying former illegal dispensaries and doing retrofits on the physical space, because the landlord could no longer rent to that location. But you also had some Greenfields. You had some in Toronto, on Young Street, one of the main strips. They had an old HMV Record store that’s now a cannabis store. You’re seeing some of the real estate, particularly not so much in the malls, of course. Not yet, anyway. But you’re seeing a main street, high street real estate that’s being converted into these store fronts.

Michael LeBlanc:
In fact, in Toronto, we have Bloor Street, which we call the Mink Mile. The locals call it the Mink Mile. It’s your Louis Vuitton, and your Chanel. There’s a cannabis store on that street, because they’re positioning themselves as a higher end retail environment. It’s been a fascinating year. To your point, there have been far less store closing here, because we had less exuberant growth, shall I say? We’re not immune to it, but any stretch of the imagination.

Michael LeBlanc:
The other defining characteristic that’s a bit different, and we’ll talk about similarities. Again, more similarities and differences. The shopping malls in Canada. The Retail Council of Canada did a report on shopping malls, there’s a new one coming out in a couple of weeks, and out of the 30 shopping malls in the country, only three of them posted net losses in terms of productivity. The rest posted gains. Shopping malls are still popular here. I think … There’s a couple of reasons for that. The customers are not so different, but what you did see … And it’s like your crystal ball, you can gaze down into the US market and start to pick up on trends, sometimes a couple of years ahead of what is happening in the Canadian market. You can say, “Looks like there’s been some overbuilding and some store closing. It looks like malls are losing … Only the best malls are going to win, so let’s get ahead of that curve before the demographic and the psychographic trends hit in Canada.”

Michael LeBlanc:
It’s a combination of both. You get savvy operators, who run great shopping malls here in Canada. To a degree, they’re still a thing, and e-commerce is a little less in Canada, but growing very quickly. All these trends come together to make a market that looks and feels very much like the US market, but has significant … In some ways, significant differences, and in other ways, very much the same.

Julia Raymond:
Sure. It sounds like you said basically 27 out of the 30 malls, according to your recent report, have net gains.

Michael LeBlanc:
Yeah, from a productivity perspective. I should say, for your listeners, Retail Council of Canada is … The equivalent in the US would be the NRF. It is a large organization … A large base of organization retail from all different types of formats that represents retail. They really have a great hand on the pulse, so to speak, of the Canadian retail environment, not unlike NRF. If you think about the NRF in Canada, they’re not associated, but do similar work.

Julia Raymond:
Excellent. Yeah, we actually had the editor of STORES magazine, Susan Reda, on the show about a year and a half ago.

Michael LeBlanc:
Right on, right on.

Julia Raymond:
Cool to be in the network. You guys have events as well, right? At the Retail Council of Canada?

Michael LeBlanc:
Yeah, very much so. I just actually wrapped up one this week. I was emceeing a flyer forum. Fliers are big deal here in Canada, so I had the pleasure of interviewing some leaders in the flyer business, the print flyer business, which is still a big deal. Digital, of course, important, but print fliers are still a major element of the Canadian market mix. That’s one thing that had been a little different. It’s still a thing here, for sure.

Michael LeBlanc:
And then, coming up in the weeks to follow, we’ve got a bricks and mortar forum, where we’re bringing in landlords, and shopping malls, and then a Canada’s retail forum. We bring together retail folks and experts in the Canada space, because that’s now part of retail. We bring them together for thought leadership and best practices, and all that great stuff. Build community, and … We actually, as well, go as a group.

Michael LeBlanc:
Many Canadians would go to the NRF January show, the big show in New York, and I have the fun every year of hosting a tour, a store tour, in Manhattan. There’s enough Canadian C level executives that we put … We get on a bus and we tour what’s new in Manhattan. Again, you have that little crystal ball, where you can say, huh, and try to find what’s happening here that may work it’s way up to Canada in some way, shape, or form. What does that look like, and what are the differences, and what are the similarities?

Julia Raymond:
Definitely. It’s interesting how there are some things you can predict, based on all the factors.

Michael LeBlanc:
Mm-hmm (affirmative). Yep. Yep.

Julia Raymond:
Are you doing the tour?

Michael LeBlanc:
Yeah, we do … Doing it this year. Actually, in my pre-visits coming up in a couple of weeks, where I go down in advance and … There’s some usual ones that are on my list for sure. Hudson Yards, for example. Let’s walk through Hudson Yards and that’s probably going to be on the tour this year.

Julia Raymond:
Definitely. And Nordstrom.

Michael LeBlanc:
Yeah, the new Nordstrom, for sure. That’s exciting. The new Apple store is pretty cool. What it comes down to, there’s a lot to see, but we only have a couple of hours, and getting around Manhattan isn’t getting any easier.

Julia Raymond:
No.

Michael LeBlanc:
I’ve been doing this tour in Manhattan on a Sunday for years, and I can tell you, between the number of ride share companies and the number of package delivery companies, traffic is not any easier. You really have to … Sometimes the tour is guided by logistics as much as innovation.

Julia Raymond:
Yeah, maybe it’ll be a Segway tour in the future. You know? You’ll go faster than the cars.

Michael LeBlanc:
It’s true. It’s true. You know, there’s clusters of innovation. Right? They send a cluster, whether it’s SoHo or Hudson Yards, or on Fifth Avenue, there tends to be clusters of innovation that we can look at, and get a glimpse of what may come to pass, or at least what the US market looks like, and judge from there.

Julia Raymond:
Sure. I hope to hit NRF as well, so I’d love to maybe catch you.

Michael LeBlanc:
Oh, yes.

Julia Raymond:
I wanted to ask, I wanted to bring it back, because you mentioned earlier that Black Friday was not a thing 10 years ago.

Michael LeBlanc:
Right.

Julia Raymond:
We’re saying 10 years, so that’s 2010.

Michael LeBlanc:
Mm-hmm (affirmative). Yep.

Julia Raymond:
Which doesn’t seem like that long ago, but that was a decade ago. What was the … Was it really good marketing from big global brands that it caught on in Canada? What were the factors that you think led to some e-commerce growth from that?

Michael LeBlanc:
I think it’s three things. One is, it was a defensive strategy. 10 years ago, the currency exchange rate was at par. In other words, a dollar Canadian was a dollar US.

Julia Raymond:
Mm-hmm (affirmative).

Michael LeBlanc:
And so, if you think about the geography of Canada, 90% of Canadians live within about 100 kilometers, or 150 kilometers of the US border. There’s a lot of proximity, even physically, with the US border, not to mention e-commerce, of course. What we were seeing was, when that dollar was at par, we as an industry were not celebrating Black Friday. It’s a big deal, and Canadians were streaming across the border. There was some lost sales that were pretty obvious there.

Michael LeBlanc:
The second thing was, there’s many, many US and international brands in Canada. They started to say, hey, maybe we should have an event. We should be in sync with our US counterpart. There’s a lot of buzz, of course. A lot of media spill that comes up into Canada. It’s not like Canadians didn’t know that there was a Black Friday. That was a big factor.

Michael LeBlanc:
And then it became the opportunity. Right? Is this the right opportunity to build in a new holiday? In fact, there’s two very distinct schools of thought. Of course, it’s not a holiday here. Our Thanksgiving was a couple of weeks ago, so our Thanksgiving is much earlier than US Thanksgiving. It’s not actually a holiday. It takes on a different flavor and a different characteristic. There’s really two narratives around Black Friday when you talk to retailers. One narrative is, it’s fantastic, it’s a demarcation point that kicks off the holiday season that we just never had before. We’d wait for a bit of snow on the ground or some leaves to fall for consumers to wake up and go, “Oh my God, it’s Christmas right around the corner.”

Julia Raymond:
Yeah.

Michael LeBlanc:
We didn’t have that big milestone event that, formally or informally, kicked off the holiday shopping season. The other school of thought, the other narrative, is my God. can we get the toothpaste back in the tube? All we’ve done is shift sales around. We’re not sure we see incremental growth. We’re taking markdowns on items that we were selling at a higher rate before, and we like that whole Boxing Day, because Boxing Day was a great time. You would plan promotions and deals, of course, and special buys, but it would also be a great time to say maybe we overbought on this one item, let’s clear it out in Boxing Day. It was different. It was more self-purchased, of course, than gifting.

Michael LeBlanc:
I’m actually narrating, or moderating, a panel tomorrow at one of our universities. Black Friday: Trick or Treat, which is all about … It’s a bit academic at this point, so to speak, at a university, but it’s here. Is it a good thing for a retailer or have we just moved dollars around at a lower margin? What is it going to look like this year when you’ve got the 29th? It’s a very late, in the season, and then you’ve got a shorter season before Christmas. It’s a great dialogue and discussion. They dynamics look the same, but they’re a little different. Black Friday, Cyber Mondays are a good example of that.

Julia Raymond:
Mm-hmm (affirmative). Yeah. Cyber Monday, of course, popping up. We all look for all the numbers that are released right after Black Friday and Cyber Monday to see how certain retailers are doing.

Michael LeBlanc:
Yep.

Julia Raymond:
I know that Target is one that’s always on our radar.

Michael LeBlanc:
Mm-hmm (affirmative).

Julia Raymond:
I wanted to know, because I read that Target crash and burned, and it was a very notorious story a few years ago in the Canadian market, and that amounted to a six billion dollar loss. I wanted to know, from your purview, what went wrong?

Michael LeBlanc:
Well, a lot, obviously. You’re right, the history is that in Canada, there was a mass merchandiser that I worked for, that was part of the Hudson’s Bay company, called Zeller’s. Zeller’s was very much like a Target store. In fact, carried many of the same items, and it was a national mass merch store. It was sold to Target. Target came to Canada, and basically said, between buying existing stores and opening new, I’m going to open 130 stores on the same day. I’m going to open a new warehouses, I’m going to open up new systems, and we … That’s not going to be that hard for us, basically. That’s what we usually do in the States, right? That’s not terribly difficult to open up that number of stores.

Michael LeBlanc:
You could sum it all up by three things. One, probably underestimated the complexity of opening up in a foreign country. Starting up a whole new distribution with new products, new vendors. Two, underestimated the regulatory differences in the two countries. I’ll give you an example of that. And three, underestimated the competitiveness of the market. To be fair, they gave everybody a two year running start. They said, “Well, listen. We’re going to close all the stores for a couple of years, and then we’re going to launch.”

Michael LeBlanc:
It gave many retailers a chance to say, okay, call to … That’s a good wake-up call, in case we need one. Let’s really up our game. They gave everybody basically a two year running start. If I pulled each of those components apart … I like to say that retailers who expand internationally into Canada, and Canada’s actually one of the top 10 destinations for international retail, measure twice, cut once. While the market looks and feels, in many ways, like the US market, which is why it’s attractive for international retailers, because it gives them a US light, so to speak. It’s very similar. It gives them that experience of opening an international division.

Michael LeBlanc:
The differences are not insignificant. Everything from the currency, the language. Right? We are a nation of two official languages, French and English. Whether you’re operating in the province of Quebec, or not, everything has to be, from coast to coast, in French and English. That’s packaging, signage. Not necessarily in-store signage, but everything has to be compliant with both languages. That’s a complexity.

Michael LeBlanc:
And then, there’s these narrow regulatory differences. I’ll give you an example. In baby car seats, in Canada, they frame it that there was a bolt in a different place. It was simple. It didn’t make it more or less safe than a US baby car seat, but you needed that bolt in a different place to sell them in Canada. What happened was, given the size of the market, you can’t make hundreds of these different formats of car seats. Canadians again, being so familiar already with Target … You thought it would be a slam dunk, right? So many Canadians, I think 40000 even have a credit card already before Target came to Canada.

Michael LeBlanc:
They were very familiar with the brand, but that meant they were familiar with the pricing. They were very familiar with the assortment. When Target launched in Canada, they had … The pricing was different, not just via exchange, but there’s other cost inputs and differences. And then they didn’t have the same breadth of assortment in some categories, because they couldn’t carry 10 car seats. The car seat manufacturer said, “Listen, there’s not enough people there. I’ll make you four.”

Michael LeBlanc:
That’s a broad lesson that there’s enough differences that they mustered through. If you were to do it all over again, it’d be interesting to have that discussion with them. If they started with 10 stores … 10 stores, you can muscle your way through any problem, pretty much. Right? Your distribution center doesn’t ship goods? No problem, we’ll drive it over there. If you’ve got 130 stores, too much, too soon, then it set them up, unfortunately, for failure. It was quite disruptive, right? They came in, and they hired tens of thousands of people, and then in three months, they left. It was very disruptive. To this day, some of the real estate remains empty, and some has just recently been converted this number of years on.

Michael LeBlanc:
It was disruptive to the industry, and a good case study for international retailers. If you weren’t going to do it before, you better measure twice, cut once, and then … Nordstrom, for example. Whether they took that lesson, or whether they had that approach to begin with, Nordstrom started with one store in Canada, and then waited a couple of years. And then another store. Another year passed, and so now they have … I think there are five or six stores, but over the course of many years. Similarly, Wal-Mart came to Canada in 1984, and bought a retailer called Wilko, made almost no changes, changed in the initial years, but now is a powerhouse here in Canada. Lots of lessons to be learned. Timing was also not their friend.

Michael LeBlanc:
Again, the mass … The key lesson is that it’s a great market to be in. It’s a good learning market, if you’re expanding internationally, it’s a good market for US markets to expand into Canada. I was reading an interview with the UNTUCKit folks, the shirts for men that are untucked. One of their most highly productive stores is here in Toronto. There is that expansion north, and many, many brands do that, and do that successfully.

Julia Raymond:
Sure. It sounds like with any brand expanding internationally, you just have to take those precautionary measures. Like you said, the three things, complexity, the regulatory, and then just the competitiveness of the market.

Michael LeBlanc:
That’s right. Yep.

Julia Raymond:
Target probably thought they had the upper hand, right? They had a good amount of people who had Target credit cards, that were in the market, but it actually backfired on them because they disappointed their customer base.

Michael LeBlanc:
It’s a great point, because on paper, if you line up all the reasons to expand … Really expand in a big way into Canada, they all lined up. Right? Wal-Mart was here, they were successful, so we can be successful, too. We’ll come up and compete with them in Canada. All the things lined up, but somewhere between the strategy document and the execution, it just fell down for them, and they left the country.

Julia Raymond:
Mm-hmm (affirmative). Now, Target’s more of a discount brand. I did read a stat that I was pretty surprised with. It said that analysts are reporting up to 40% of all new retailers in the Canadian market right now are international luxury brands. We’ve see a lot of new flagships opening in recent years. Can you speak to that a little bit? Is there a reason that’s driving … Or is there a driving force? Luxury tends to have some issues that they’re running into right now.

Michael LeBlanc:
Yeah. I think it points to a similarity in our markets, this bifurcation of retail, where the middle ground is where there’s danger, and the high end and the low end are thriving. When we talk about these bespoke retailers that are opening flagships, these big, global retailers are opening up flagships, but they’re not opening up hundreds of stores. They’re opening up three or four major flagships. Right?

Michael LeBlanc:
There’s a part of the market in Canada that was probably underserved, to some degree. There was part of the market that got on a plane and shopped in the United States for their luxury goods. And there’s part of a market that is big on tourism. Right? Tourism from Asia, from southeast Asia, from around the world, that now could come to Canada, and those dollars can be captured here. Even circling all the way back to our discussion about Black Friday, you’ve now got, in Canada, 10 years on, a significant, significant difference in terms of the retail brands that are here.

Michael LeBlanc:
There was always a couple of reasons to go shopping in the US, historically. One, if the exchange rate was in your favor, then that could work well. Prices are typically a bit cheaper in the US, just because of your scale and size. Two, the product you just couldn’t get. That’s less and less, each and every, the case. Whether it’s online, but also the physical presence of brand. Big international brands are coming here. 50, 60 of them have come here, many of which, as you correctly indicate, were luxury brands. It gives them great experience as they expand and go direct to customer in a market that very much acts and looks like the US market.

Michael LeBlanc:
In and of itself, Canada’s a good market. The economy is robust. At the high end, there’s high end … But it’s not big, right? It’s a few cities and it’s a few stores. It’s not hundreds of stores that Chanel is opening up. It’s a couple of milestone stores. For sure, you’ve got key … I can think of Dyson, Miele opened up their first global experience store here in Yorkdale Mall, one of our best malls in North America, actually here in Toronto, because they thought it was a great market in and of itself, and it’s a very familiar market, and let’s do it in Canada first. It’s like global expansion in a familiar place.

Julia Raymond:
Mm-hmm (affirmative). And like you said, that’s good for tourism, as well.

Michael LeBlanc:
Yeah.

Julia Raymond:
We talked a lot about the cannabis market, and how Canada just celebrated its first canna-versary, which I love that term.

Michael LeBlanc:
Mm-hmm (affirmative). That’s right.

Julia Raymond:
It’s funny.

Michael LeBlanc:
We call it canna-tourism.

Julia Raymond:
Okay, so it is … Is it a huge driving factor for tourism? What are the numbers? Do you know?

Michael LeBlanc:
We don’t really know that, specifically. I wouldn’t say it’s huge. Of course, you can’t bring it back across the border. Right? You can’t come to Canada, and buy your cannabis, and head back home. In fact, one of the most startling images I put when I do presentations, at every airport in Canada, there’s these large garbage bins with a sign on them that says, “Reminder, you can’t take your cannabis outside of Canada.”

Michael LeBlanc:
What you’ve got is all the airports with bins of cannabis. It’s crazy.

Julia Raymond:
It’s a canna-bin. Yeah.

Michael LeBlanc:
It’s a canna-bin. Listen, we can get in the weeds in all this … We can go quite deep on it, for sure. No, I think what you see, when I talk to retailers, they can tell tourists retailers, because they sell pre-rolls, as opposed to … These are ready to use recreational cannabis products. For sure, there’s tourism. Inter-provincial tourism and then there’s tourism, people who come here and want to enjoy the products free of any concerns about anything other than you can’t smoke where you can’t smoke. That’s another limiter, right?

Julia Raymond:
Mm-hmm (affirmative).

Michael LeBlanc:
The smoke-free act in Canada, you can’t just pick up some cannabis and smoke it in your hotel room. Like it is in the States, you have to go to certain places. It is a big deal. It’s not an export product, so to speak, at the retail level. For sure, people come up and it’s another great reason to come visit all of our cities, if you’re interested in partaking.

Julia Raymond:
Mm-hmm (affirmative). Definitely. It’s another reason for people to come to Canada, and spend money, and retail, as well.

Michael LeBlanc:
Yeah. Very much so. As municipalities try to think about their cannabis strategy, and how it rolls out, it’s just a different thing. When I talk internationally about it, it just bends some minds. Again, not unusual in certain states. Colorado, California, and many other states in the US, very similar. The fact that it’s nationally legal has the material differences in infrastructure and other things, for sure.

Julia Raymond:
Mm-hmm (affirmative). You know, the new Nordstrom flagship that just opened in New York, it’s funny, because they have a bar, a full bar, that’s going into their shoe department.

Michael LeBlanc:
Yeah.

Julia Raymond:
I wonder, in the future, 20 years from now, or maybe even sooner, will we have dispensaries that are within certain retail shops, like bars are sometimes?

Michael LeBlanc:
Well, yeah. You probably … For sales, for sure. The consumption of product is not always smoking. Right? In fact, as of last week, edibles are now legal in Canada. When you talk about that cannabis market, you get beyond the stigmatization of smoking, so now edibles become a thing that you can enjoy in many other different places. You’re already starting to see, in small ways, retailers start to think about what a dispensary, what a cannabis retail store looks like. Shop and shop, kind of thing.

Julia Raymond:
Right.

Michael LeBlanc:
Early days … You know, we’re only a year in. The industry, in the first six or eight months, really was struggling with a shortage of supply, actually. There wasn’t enough supply. Retailers are now just right-sizing and actually getting product, so they’re now starting to turn their minds to years ahead, where they think about those kind of real estate strategies. The first year really has been characterized by I just need the product. I don’t care what part … Stores were closing for days on end, because they had no product. One of those hiccups. Early days hiccups, but that’s, to some degree, if not entirely, resolved itself. And now, as I said, they’ll start to turn their minds to how to integrate edibles into the assortment, which is a different planigram, of course, as we would say in the retail biz, and then think about difference in alternative real estate strategies.

Julia Raymond:
Absolutely. It’ll be interesting to see where the industry heads in just a few years, because there’s been so much transformation already.

Michael LeBlanc:
And we have … To get back to this theme of we’ve got a bit of a crystal ball, right? We just get on a plane, and we go to Colorado, or we go to Las Vegas, or we go to California, and we see what retail looks like there, and what the challenges are. They’re going to be different, but we have a bit of a crystal ball. Right? Colorado’s had legal recreational cannabis going on five years. We’re not cracking exactly new ground. In some ways we are, for sure, but in other ways, we have … We can look south, to our friends down south, and see how the industry’s evolved.

Julia Raymond:
Mm-hmm (affirmative). I might have to correct myself on this, but I think Colorado, the state of Colorado, actually had to give a refund to residents on their taxes because of all the revenue from the industry.

Michael LeBlanc:
You know, it’s a great point, because the black market, or the legacy market, I think last I heard, is still 40% of the market. It does mean that 60% of the revenue now is taxable. Let’s be clear, those taxes go into building better roads and better infrastructure, and paying for schools. It is certainly, in the case in Canada, there’s three objectives to … Government objectives at the high level, keep our roads safe, and make sure people aren’t abusing the product. Keep our children and youth safe. And then, eliminate the black market, and capture both the safety of the product … You know, what we call seed to sale, and then also the tax revenue, which flows into building much needed infrastructure. Roads, taxes, and all those other things, both at the municipal, provincial, and the federal level.

Julia Raymond:
Mm-hmm (affirmative). Certainly. Before we wrap up, I just want to touch on one other thing, because I’m curious mostly. We just heard last week, Amazon is now doing this free grocery delivery for Prime members. I’m wondering, is grocery delivery a service that’s picking up in the Canadian market? Are you guys seeing new players there?

Michael LeBlanc:
I would say yes and no. One thing we should talk about is one of the key differences between … I’ve touched on it, but I want to make sure and really accentuate it, the difference in Canada is scale. We are a vast nation. Right? Only Russia is bigger than Canada, but there’s not a lot of people here. We’re a vast nation, but you have density in a couple of three cities. That drives a lot of different things.

Michael LeBlanc:
Particularly in grocery, you have the existing players all lining up to figure out what their strategies are going to be. I’ll talk about Amazon in a minute. You’ve got major Canadian retailers, Loblaws, Metro, SoBe, who are major grocery retailers, all thinking about how they are going to go to market. They each today do things a little differently. Loblaw, the biggest grocer retailer in the country, uses InstaCart. SoBe’s, which is a very number two, actually not unlike Kroger, has done a joint venture with Ocado. They’re building dedicated warehouses in Toronto and Montreal. They have a different way of doing to market.

Michael LeBlanc:
Amazon in Canada is an interesting discussion, because Amazon came to Canada a couple of decades ago. Even for the first 10 years, they outsourced their warehouses here. They didn’t in source their warehouses. Over the course of time, they now have 12, maybe 13 warehouses in the country. Of course, they have Whole Foods here. There’s only 14 Whole Foods here, versus 400 in the States.

Michael LeBlanc:
When you think about Amazon and grocery, they’re not really in the fresh and frozen business in this country. They’re more in pantry. They’re selling the goods from the shelves, from Whole Foods and from other product. They’re not really a player in Canada. When, not if, is probably the right to assess that, but the industry here is very competitive. We expect to see a lot of interesting things happen next year, based on all the major players, existing players, lining up. Again. SoBe’s, who has done the deal with Ocado, and is investing a tremendous amount of money in Toronto and in Montreal to be … To have those dedicated trucks on the road.

Michael LeBlanc:
Right now, it’s … I think we probably estimate it to be about 1% of sales, in terms of 99% done in grocery stores, and 1% shipped to home. We expect that to start to move up, for sure. Of course, it’s a competitive share of stomach, so to speak, or share of appetite. You’ve got meal kits, you’ve got Uber Eats, you’ve got a whole number of different ways for people to have that meal on the table, each and every day. Again, more similarities and differences.

Michael LeBlanc:
It’s also been a slow dynamic growth in the US. I’ve seen numbers pointing to 3 to 4%, nowhere near a South Korea 20, or a Britain at 7%. I do expect the e-commerce innovation and activity in the grocery sector to be the big highlight for the next number of years, mostly because the sector’s been absent, so to speak, from e-commerce. You’re going to see a lot of change and a lot of growth from a number of different players, for sure.

Julia Raymond:
Yeah, it’s great to see those partnerships forming. To an extent, it’s a little bit rooting for the underdog before Amazon swoops in and takes over.

Michael LeBlanc:
You know, we don’t exactly know in Canada how big they are, because they don’t report their results. For sure, fresh and frozen is a very competitive space in this country. There’s not a lot of economies to be made. Of course, with the Amazon flywheel, they’d love to have more grocery in more peoples’ carts, because it generates them more data, as you know, part of their business model.

Michael LeBlanc:
We’ll see. We’ll see over time. Really, they seem to have been focusing on just expanding. Expanding their Prime memberships in Canada, expanding their warehouses. We’ll see how it all settles down. Again, they don’t have that same base in Canada to work from, with only 14 Whole Foods. They have even a less base from there to start with, in terms of the lifting off point. Of course, we’ve talked, or have heard about them starting up a whole entirely different grocery chain in the US. We’ll keep a close eye on that, and see how it evolves up here in Canada.

Julia Raymond:
Totally. Yeah, it’s crazy. It all comes back, in some way, to just the convenience factor that is driving consumer behavior, and the demand, and … Uber Eats, sometimes, you just have a craving for something, and you’re like, “I can get in my car and drive 10 minutes, or I could pay 15 extra dollars and have it delivered.”

Julia Raymond:
You know?

Michael LeBlanc:
Well, you know, it’s this unit economics moat, basically, that has been protecting retailers from too much Amazon incursion, that they can’t ship small dollar unit. Now, I read Amazon in the States is even back-filling that moat, where they’re going to start shipping Prime members toothbrushes and toothpaste, and boggles the mind, because it turns unit economics on its head. But for sure … Again, back to even my first comments there was never a tax advantage. Right? You could never shop from an Amazon in Canada and pay less for the same item because of taxes, that you could from another retailer. That boot strapped the entire industry in the United States, and I would argue it also boot strapped Amazon. That was purposeful, of course. Right? Jeff Bezos put it into Washington state because there was nexus there, was a small place to base, and the rest of the country didn’t pay tax.

Michael LeBlanc:
You didn’t have the phenomenon here. The market evolved differently. It continues to evolve differently. They continue to merge. The trend is the trend. More people are shopping online than less, each and every day, for sure. Physical retail is still very vibrant here, but it’s not an easy game. There’s not much margin for error. Everyone wants experiential retail, and we’re getting it. We’ve got our first Ely opening up next week actually, in Canada. 50000 square foot Ely opening up in downtown Toronto, the first one in Canada, and one of their first big international expansions outside of … I guess it’s their newest, I should say, Ely store in the chain. We’ll see how that chain articulates experience in brand.

Julia Raymond:
Oh, very cool. I’ll have to check it out. I’m actually going to be in Toronto later this month.

Michael LeBlanc:
Oh, great.

Julia Raymond:
Yeah.

Michael LeBlanc:
Well yeah, you won’t be able to miss it. It’s in downtown Toronto, on Bloor Street. There will be lots of PR, and for sure we’re all lining up to go check out how they articulate their vision here. They’ve been talking about coming here for over a decade, so certainly when you talk about measuring twice and cutting once, there’s a great example.

Julia Raymond:
Yeah. Oh my gosh, that’s funny.

Michael LeBlanc:
Mm-hmm (affirmative).

Julia Raymond:
Well, then it should be an excellent grand opening. Right?

Michael LeBlanc:
Yeah, much anticipation. It’ll create some buzz, for sure. Then, it’s up to see how and where it can sustain its value proposition, and we’ll see how it fits in. Again, grocery’s a very competitive business, both sides of the border, that’s for sure. We’ll see how they do.

Julia Raymond:
As with all retail, we’ll see how they do.

Michael LeBlanc:
Yeah.

Julia Raymond:
Competitive market out there.

Michael LeBlanc:
As I like to say, there is no retail apocalypse, but that doesn’t mean that it’s not transformative, and that doesn’t mean that it’s not more difficult than it was 10 years ago. The pace has increased. Retail is strong. Retail is very strong in the States. We see the numbers and retail is solid here in Canada. Not the same kind of growth numbers that you see posted, but it’s solid. There’s not a lot of store closures, certainly, compared to the US market. Again, a bit of the factor of not being overbuilt to begin with, and a little less exuberance, so to speak, which is characteristic in the Canadian market.

Michael LeBlanc:
Yeah, the dynamics are, in some ways, the same, some ways different, and it’s always a treat to chat about them.

Julia Raymond:
Yes. Michael, I loved having you on the show, and hearing about all of the nuances and differences, and the market, and consumers, and just what’s going on in general in retail in Canada. It was a really insightful conversation. Thanks for joining.

Michael LeBlanc:
Julia, thanks for having me on. It’s, again, a real treat to be on the other side of the microphone and just talking about retail. I could talk about it for hours. Next time you expand the concept into a four hour program, one of those four hour endless discussion podcasts.

Julia Raymond:
It’s a marathon.

Michael LeBlanc:
It’s a marathon. Sign me up. I’m there. Sign me.

Julia Raymond:
Love it. Love it. If our listeners would like to hear more from you, your podcast, where they can find it?

Michael LeBlanc:
Yeah. You can find my podcast on all the major podcast platforms, Apple, Spotify, and just search for The Voice of Retail. Even shorter, generally, if you search for retail, it comes up pretty high around the world. If you want to learn a bit more about me, LinkedIn, of course, or on meleblanc.co, dot C-O, is the ways to learn more, or get in touch, or just subscribe to the podcast each and every week, interviewing interesting folks. The current episode, I interviewed Ron Johnson, who you may remember from Apple retail, JC Penney, and now he’s got his concept Enjoy, which has just launched here in Toronto. Always interesting people, and always interesting perspective, each and every week.

Julia Raymond:
Mm-hmm (affirmative). I will attest, it was a great conversation to listen in to.

Michael LeBlanc:
Oh, thank you.

Julia Raymond:
Check it out, The Voice of Retail podcast with Michael LeBlanc, from the M.E. LeBlanc and Company, Inc, and Retail Council of Canada.

Michael LeBlanc:
You got it. You got it. Absolutely.

Julia Raymond:
All right, thanks so much.

Michael LeBlanc:
Thanks, Julia. Have a great day.