The liquidation sales at Nordstrom stores across Canada will begin Tuesday.
Pot shop owners say they’re worried they will lose customers and run out of product if a halt on Ontario Cannabis Store deliveries stretches on and consumers turn to the illicit market.
The stores said Tuesday they have been left with no other choice but to make do with the stock they have after the provincial pot distributor informed them Monday that a cyberattack faced by one of its logistics partners had left it unable to process or deliver orders to marijuana shops and customers.
“I don’t like to order massive quantities of any one thing because I rotate a lot of things through, so when I get disrupted, it means that the shelves are going to be bare,” said Elisa Keay of K’s Pot Shop in Toronto.
“It means that some customers are going to come in, shake their head, upset they’re not getting what they want and they’re going to go somewhere else because they don’t want to hear that it’s not my fault … and there was a cyberattack.”
The OCS has said there is no indication that its systems were targeted or its customers’ information was compromised during the Aug. 5 attack on the parent company of its third-party distribution centre, Domain Logistics, but deliveries were stopped “out of an abundance of caution to protect OCS and its customers.”
Domain Logistics has not responded to a request for comment and the OCS has not offered a timeline for how soon it could restart deliveries, but promised to provide an update later Tuesday.
The timing is terrible for Keay. In recent weeks, she’s seen an uptick in sales, but not getting a delivery, means she’s selling through items quicker and will be more likely to have to turn customers away, if products aren’t sent to her store.
Like all other cannabis stores in the province, she also can’t seek cannabis elsewhere because the roughly 1,333 licensed pot stores in Ontario must buy the products they sell from the government-backed OCS.
“When you’re my only wholesaler and you’ve got a firm grasp on who can get delivery and when we can get delivery, it leaves us zero options,” Keay said.
“We’re totally at their mercy.”
With no idea when deliveries could restart, High Tide Inc. has begun reallocating inventory from its lower volume Canna Cabana shops to higher volume ones, said senior vice-president of corporate and public affairs Omar Khan, in an email.
But independent businesses with single locations can’t model that behaviour, pointed out Sean Kady, co-owner of Cosmic Charlies, a Toronto pot shop.
Independents are also less likely to have a big stockpile because most don’t place huge orders.
“They’re on a more tight, fixed budget, so from week to week, we can only spend so much and if you’re not getting that product that you need, what are you supposed to do and how are you supposed to pay the rent?” he said.
While his store was almost “overstocked” on Tuesday, he’s heard of other retailers “freaking out and pulling their hair out” because of their dwindling supplies.
The situation has created trouble for Lisa Bigioni, who owns the Stok’d cannabis chain.
She estimates she has enough marijuana to keep her stores stocked for a week but worries about the halt on deliveries continuing past that.
She’s also had to put a weekend opening of a new store complete with a barbeque and parking lot games on hold because she’s unsure when product will arrive.
“We put a lot of time and effort into planning the grand opening … and all of that is going to have to be rescheduled,” she said.
Cameron Brown, vice president of The Retail Cannabis Council of Ontario, says this halt in deliveries could cause a “significant shortage of cannabis in Ontario” if it continues throughout the week.
“The next worry for a lot of retailers is when their next inventory shipment is going to come from to get through not only this week but another big weekend in August — one of the busiest times so far in cannabis.”
An OCS letter to retailers obtained by The Canadian Press said “as a goodwill gesture,” the OCS will waive retailer delivery fees until Sept. 30 and a $500 processing fee for one emergency order per store between Sept. 1 and March 31, 2023.
But many shop owners don’t feel that’s commensurate to the risk their businesses are facing.
Keay feels if customers don’t find the products they want at their store, they’ll go elsewhere — a rival shop in Ontario’s crowded market or even to an illicit dispensary or dealer that the industry has been fighting against since recreational marijuana was legalized.
A customer that finds another option might be lost forever, so Keay said, “There’s no sort of compensation that can fix damaging someone’s business.”
This incident follows an OCS announcement May 11 that the Ontario Provincial Police were investigating the “misappropriation” of confidential store sales data.
That breach “was no failure of IT security or systems,” the OCS said, after it quickly launched an investigation to identify the source, restricted access to internal data reports and notified the police.
Both breaches came amid heightened competition in Ontario’s cannabis industry, which has seen the number of pot shops explode in recent months.
Many predict store closures are on their way because demand for cannabis has not increased at the same rate as shop openings, the illicit market remains strong and stores are consistently having to reduce their margins as rivals steadily drop prices.
Nordstrom is expected to begin liquidating its stores across Canada today.
The start of the department store chain’s closing sale comes a day after the U.S. retailer’s Canadian branch got permission from the Ontario Superior Court of Justice to start selling off merchandise.
Nordstrom’s liquidation efforts are being led by Hilco Merchant Retail Solutions ULC and Gordon Brothers Canada and are expected to be complete by late June.
Furniture, fixtures and equipment will be liquidated alongside most of Nordstrom’s merchandise, but goods from third parties aren’t part of the sale because they were removed from stores over the weekend.
Nordstrom required court approval to liquidate because it is winding down its Canadian operations under the Companies’ Creditors Arrangement Act, which helps insolvent businesses restructure or end operations in an orderly fashion.
As part of the wind down, Nordstrom will close its six Canadian department store locations and seven Nordstrom Rack shops, which sell designer goods at discount prices.
This report by The Canadian Press was first published March 21, 2023.
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The upscale department store chain has a store at the Rideau Centre mall as well as a Nordstrom Rack location at the Ottawa Train Yards shopping centre
The liquidation sales at Nordstrom stores across Canada will begin Tuesday.
A spokesperson for Nordstrom confirmed the impending sales period Monday in an email to The Canadian Press, just after the Ontario Superior Court of Justice gave the U.S. retailer’s Canadian branch permission to start selling off its merchandise.
The upscale department store chain that primarily sells designer apparel, shoes and accessories has six Canadian stores and seven discount Nordstrom Rack locations, including its Rideau Centre location and a Nordstrom Rack at the Ottawa Train Yards shopping centre, which sells merchandise at discounted prices.
When Nordstrom announced the move in early March, it said it expected the Canadian stores to close by late June and 2,500 workers to lose their jobs.
The company initiated the exit from the market because chief executive Erik Nordstrom said, “despite our best efforts, we do not see a realistic path to profitability for the Canadian business.”
Nordstrom opened its first Canadian store in Calgary in 2014, followed by the Ottawa store at the Rideau Centre, which occupied the second and third levels of a former Sears location.
The Rideau Centre store has an alterations and tailoring shop and an energy drinks bar. Merchandise ranges from brand name to designer apparel, housewares, furnishings and beauty products, including brands such as Geox shoes, Gucci, Adidas and Adidas by Stella McCartney.
Later on came Nordstrom Rack, which made its Canadian debut in 2018 at Vaughan Mills, a mall north of Toronto. At the time, Nordstrom said as many as 15 more Rack locations could follow.
Nordstrom promised each Rack store would deliver savings of up to 70 per cent on apparel, accessories, home, beauty and travel items from 38 of the top 50 brands sold in its Canadian department stores.
Nordstrom had trouble with profitability because of its selection of products and the COVID-19 pandemic, said Tamara Szames, executive director and industry adviser of Canadian retail at the NPD Group research firm, a day after Nordstrom announced its exit.
“You would hear a lot of Canadian saying that the assortment wasn’t the same in Canada that it was in the U.S.,” she said.
She noticed Nordstrom started to shift its product mix away from some luxury brands around 2018 and saw it as a sign that the retailer was struggling to maintain its original vision and integrity.
The pandemic made matters worse because many stores were forced to temporarily close their doors to quell the virus and shoppers were less likely to need some of the items Nordstrom sells like dressy apparel because events had been cancelled.
Despite stores reopening and many sectors rebounding, Szames said the apparel business is the only industry NPD Group tracks that has yet to recover from the health crisis.
“The consumer has really been holding back in terms of spendâ¦within that industry.”
At a hearing at Osgoode Hall in Toronto, lawyer Jeremy Dacks, who represented Nordstrom, said the company has “worked hard to achieve a consensual path forward” with landlords, suppliers and a court-appointed monitor to find an orderly way to wind down the business.
The monitor, Alvarez & Marsal Canada, suggested five potential third-party liquidators and Nordstrom was approached by another five. The company decided to go with a joint venture comprised of Hilco Merchant Retail Solutions ULC and Gordon Brothers Canada, which were involved in the liquidation of Target, Sears and Forever 21 in Canada, Dacks said.
They will oversee the sale of merchandise, furniture, fixtures and equipment, but not goods from third parties, which removed products this past weekend, Dacks said. He added that all sales will be final and no returns will be allowed.
Lawyers for Nordstrom landlords Cadillac Fairview, Ivanhoe Cambridge, Oxford Properties Ltd. and First Capital Realty testified Monday that they were pleased with how “smoothly” and “organized” the process has gone so far.
In approving Dacks’ liquidation request, Chief Justice Geoffrey Morawetz agreed, saying Nordstrom is facing a “difficult time, but this process is unfolding in a very cooperative manner.”
Nordstrom required court approval to begin the liquidation because it is winding down its Canadian operations under the Companies’ Creditors Arrangement Act, which helps insolvent businesses restructure or end operations in an orderly fashion.
With files from Joanne Laucius
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