The Bay may bring Bloomingdale's to Canada

Iconic Canadian retailer Hudson's Bay Company is in talks with New York-based Bloomingdale's to bring the luxury chain to Canada, a report suggested Tuesday.

According to the Globe and Mail, HBC is looking to set up Bloomingdale's stores within HBC's national chain of stores.

The paper cited unnamed industry sources for the story. When asked foran interviewby CBCNews,a spokesperson with HBC declined to comment on the report.

But experts suggest the move is a pre-emptive strike against an invasion by well-heeled American luxury retailers looking to set up shop in Canada.

Partnership strategy

BusinessProf. Louis Hebert of HEC Montreal says that on a per-capita basis,there are far less square feet of luxury retailing space in Canada than in the U.S. And a slew of tony American chains arehoping to take advantage of that market opportunity on the Canadian landscape and colonize the retail business here.

"The retail sector in the U.S. is overbuilt; there are closures," Hebert said in an interview. "But the Canadian landscape is better, with higher profit margins."

Prices for many identical products are higher in Canada than in the U.S., a sign that Canada's high-end retail sector isn't as cutthroat as the one south of the border, Hebert said.

"It's very appealing for them to want to come here," he said.

Discount chic retailer Target is set to make a splash on the lower end of the market, launching a slew of stores in former Zellers locations later this year. But the competition closer to the luxury end of the market could be just as fierce.

"Canadian retailers are watching bigger and more efficient American retailers getting ready to come here," Hebert said. "And one of the ways to fight that is to ally yourself with a foreign brand."

"Like the old expression goes, 'If you can't beat them, join them,'" Hebert said.

A deeper alliance?

Under the plan, HBC would reportedlyset up Bloomingdale's locations inside HBC's network of hundreds of stores across the country. That's an indication that thechain's strategy to compete in the luxury retailing war is to ally itself strategically with another player, and try to leverageits long expertise in the Canadian retail landscape.

"Their biggest advantage is the knowledge of the Canadian market so they can say, 'Instead of competing face to face, why don't we work together?'"

Indeed, Hebertsays that any HBC pact with Bloomingdale's could be a trial balloon to a deeper allianceeven a takeover in the future.

"This could bejust a firsttest of the Canadian market, and possiblylead to an acquisition of HBC down the line," he said. "It would not be difficult for a company of that size to achieve."