Fitness aficionados may be gutted to hear that SoulCycle, one of the United States' most recognizable cycling gym brands, is shuttering their Toronto Yorkville Village location -- and effectively backpedaling out of the Canadian marketplace altogether.
Their exit comes after five years of operations on Canadian soil, and two years after closing the chain’s original King Street West location in July 2020, and Vancouver’s Yaletown location last spring. The closure is part of a massive downsizing, with the brand to shut down 20 of its 83 studios in the near future.
It’s just the most recent example of an American brand that couldn’t stick it out long term in the Canadian marketplace. Bargain shoppers will remember all too well discount retailer Target’s well publicized entry -- and infamous departure -- after failing to overcome local supply chain issues in 2015. That exodus cost the retail giant a $5.4B quarterly loss, led to the termination of 17,000 jobs, and left 133 big box retail properties empty.
In the case of SoulCycle, there are likely a number of catalysts behind the closure, says Ali Fieder, Vice President, Retail at Avison Young. The pandemic, which required an 18-month shutdown of fitness facilities in Toronto, could certainly have been a contributing cause, but the reality is that entering the Canadian marketplace comes with unique considerations.
“In general, when you see a brand exiting the country, there will be multiple factors at play, some of which are real estate, some of which are supply chain, some of which are cost, and some are even receptiveness of the market; Canadians love to support Canadian,” she tells STOREYS.
“Fitness was obviously largely hit by the pandemic across the board, but I don’t think specifically with them exiting was due to the pandemic in itself… One of the biggest reasons could be that we have a lot of great, local fitness studios and so it’s a competitive space to begin with in Canada. They didn’t have a ton of retail space up here too, so -- and I can’t speak on their behalf -- but operating a couple of studios in a different country rather than from the mothership in the United States, it’s probably easier to just exist and focus on your larger markets.”
American brands with Canuck aspirations must also heed Canada’s specific language laws, as well as take into account the country’s higher labour standards and taxes. Import fees and the distribution ecosystem can also differ dramatically from the US ecosystem.
While any brand leaving the country can have implications for the Canadian retail landscape, the marketplace is fairly resilient, says Fieder, especially in urban centres with limited commercial inventory. That helps considerably with backfilling any leasing gaps left by a company’s exodus.
“We’re lucky that in Canada, we just don’t have as much retail space as the United States, so we just have a tighter market,” she says. “We have a smaller population, and our population is concentrated mostly along the border, and therefore, in areas where there isn’t as much land mass.”
READ: GTA Commercial Real Estate Investment Remains Strong in Q2
She points to Chicago as a comparable example to Toronto from a cost perspective, saying that while the price of square footage is similar, the US city has roughly 30% more retail space. It’s also crucial for brands to select the right markets from the getgo when launching their Canadian counterparts.
“You get yourself into a bit more of a competitive landscape here when it comes to actually opening and finding the right location,” she says. “Because, as you know, it’s all about location, location, location. It’s so important to make sure you’re coming to the right spot in the country to start in general, let alone the city. And so, those are just other things to consider, too.”
STOREYS’ reached out for comment from SoulCycle but did not hear back in time for publication.
