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Summer 2000 Toronto: Open for Business

Good news! Toronto and its treasures are well within reach. Even though Canada’s largest city is situated in the Great White North, Toronto isn’t as far north as you might think. Located on the northern shore of Lake Ontario, Toronto is one of Canada’s southernmost cities: its latitude (43º N) is actually the same as Boston’s, and it’s further south than London and Milan. So even if Toronto isn’t within driving distance from you and your retail business, you can get there from here.

And you may indeed want to, because there’s even better news for specialty retailers. Toronto’s economy is volcano-hot these days, for a number of reasons. The banking and financial services sector, the city’s largest industry, is enjoying unprecedented growth. Toronto’s other major industries—tourism, manufacturing and communications—are also booming. So is new-home construction, that perennial measure of economic health. And to add a little glam to the mix, Toronto is now the third-largest film and TV production center in North America, after Los Angeles and New York, thanks in part to the devalued Canadian dollar (at time of writing, $1.00 Cdn. equals about 68¢ US).

Another consideration that makes Toronto so attractive is its sheer size. Even by US standards, Toronto is a significant market. The population of the City of Toronto is 2.3 million. And the larger Greater Toronto Area (GTA)—which includes Oshawa and Pickering to the east, Richmond Hill and Markham to the north, and Mississauga and Oakville to the west—raises population figures past the 4.4 million mark. This means that the GTA is actually the fifth largest metropolis in North America after Mexico City, Los Angeles, New York City and Chicago.

Obviously, then, when it comes to specialty retailing, Toronto is worth a good, hard look—especially since so many successful US cart and kiosk concepts have yet to find their way or make inroads here. Make no mistake: there’s always room for new players when it comes to innovative products and services.

Not only is there room for specialty retail newcomers, but there’s retail space, too. Some Toronto-area malls that are part of the Cambridge Shopping Centres Limited portfolio have cart vacancies in the 90 percent range, says Suzanne Cayley, director of specialty leasing.

“We work with a set number of units per shopping center, and we do not increase the inventory as we approach the Christmas period,” she says. “We’re very sensitive to ensure that we don’t bring in products that are in direct competition with the in-line tenants.”

The best-performing cart operations tend to be those that offer something different from typical carts or other in-line stores, Cayley says. One cart program that’s “very popular and very successful” is Tupperware, who formerly sold product through in-home parties only. Today, Tupperware is smack in the midst of the marketplace. At first, says Cayley, “they used the space just to display product and take orders. But now Tupperware is actually using (the cart) to carry products for immediate sale.”

Cayley strongly believes there is an excellent market opportunity for many US-based cart businesses that have yet to expand into Canada. “Many of the US concepts that are just now coming into the Canadian market have been very successful. Deziner Wholesale, for example, offers designer sunglasses at discounted prices. They have started to secure a number of locations in our properties and are doing very well.”

But Cayley says it’s worth noting that while the Canadian and US markets are similar in many ways, there are numerous subtle differences that can make or break a retail operation. Indeed, Cayley has seen concepts that were hits in the US but flopped in Canada. For example, she recalls a cart operation of a few years ago called Potpourri Pies, which she says was “phenomenally successful” in the US but tanked in Canada.

One factor might be that Canadians have much less disposable income than their American neighbors do, partly due to Canada’s heavy taxes. Another factor is the numbers: the US population is almost 10 times larger than Canada’s. This means that “the number of people in the middle-upper and upper income levels, on a percentage basis, is not as high proportionally because of the population base,” says Cayley.

Another factor: Government regulations prevent the sale of certain products in Canada. For instance, most weight-loss tablets are not approved by Health Canada and therefore cannot be sold. A cart specializing in such products—which may be wildly lucrative in the US—would not be allowed to operate in Canada.

What sells?

Cayley says products that work best in the common area of Canadian shopping centers (during non-peak periods) are those items priced under $150. Canadians aren’t as impulsive as Americans. “When people here purchase something from a cart, it’s something they want or need, so a lot of service-type products such as cleaning products seem to work the best,” she says.

From the shopping center’s perspective, the current challenge is simply trying to find committed owner-operators. Cayley says, “There are so many owner-operators in the US who are prepared to take on a particular state or region and roll with the concept. But [Cambridge Shopping Centres] really has trouble finding an owner-operator who will take on a concept and saturate the market with it.”

This situation exists simply because specialty leasing is “so relatively new in Canada,” she says. The first cart program didn’t get off the ground until 1984 at Toronto’s Queen’s Quay Terminal. “Also, many of our temporary tenants are seeking to ultimately become in-line tenants,” she says.

Still, there are many opportunities awaiting US cart retailers, mainly because US retailers tend to be much more savvy. “For example, I think many US operators display their products with a lot more thought than many of the specialty retail tenants we have here,” she says.

Meanwhile, at Cadillac Fairview Corp., there’s almost no vacancy for carts in the company’s eight Toronto-area properties, says Elaine Berg, specialty leasing manager for the company’s GTA portfolio. But good news again: that’s about to change.

Cadillac Fairview’s specialty retailing program is still in its infancy. Launched in 1997 in Toronto’s Eaton Centre (the company’s flagship property), with just 12 carts, the program was quickly expanded to the current 26 carts. All together, Cadillac Fairview currently has approximately 80 carts in its GTA properties, and about 250 carts throughout Canada.

Berg agrees that the carts that tend to perform the best are those that do something original, rather than “me-too” versions of in-line tenants. For example, some Cadillac Fairview malls have kiosks that exclusively sell freshly packaged sushi products (delivered three times daily). “It’s something really different, and they’re doing extremely well.”


David Menzies

Menzies is a Toronto-based freelance writer contributing to several newspapers and magazines over the years including the National Post, Western Standard, Financial Post Magazine, Canadian Business, Profit, Marketing and several trade publications.

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