Leave the mall, and enter “the crevasse.”

The walls are decorated to look like a craggy rock face. The howls of a frigid wind surround you. On the ground, screens glow with an image of an icy surface, and cracks appear in response to the pressure of your feet. Every step into the new Canada Goose store is part of an experience designed to sell customers an image of the brand – as one that can carry its consumers into extreme temperatures.

The location in Toronto’s Sherway Gardens mall is one of nine new stores the Canadian outerwear manufacturer has opened in the past year, nearly doubling its store count to 20. Five years ago, Canada Goose was a wholesaler, selling the brand through other retailers; as of the end of 2018, 52 per cent of its sales were direct to consumer through e-commerce and its own stores.

“We’ll continue to grow our wholesale business, but it was also important for us to have our own environment, our own experience and our own retail stores,” chief executive Dani Reiss said. “… The retail landscape is changing.”

Many brands are recognizing that. Athletic-apparel manufacturer Under Armour, kitchenware producer Zwilling J.A. Henckels, and Canadian outerwear brands Soia & Kyo and Pajar – which all sell their products through other retailers such as Canadian Tire and various department stores – have been expanding their own store networks. Meanwhile, Balenciaga, which sells its wares at Holt Renfrew and Nordstrom, opened its own location for the first time in Canada last month, at Yorkdale Mall in Toronto – part of a significant expansion in its retail network in the past three years. Aritzia, which sells a number of its own in-house brands including Tna, Sunday Best and Little Moon, has also expanded its store network, opening dedicated stores for its Wilfred brand since 2011 and stand-alone stores for Babaton since 2016.

While it’s not new for product manufacturers to operate stores – Apple, Lululemon, Aldo and The Body Shop are just a few examples of companies that have built brands this way for years – the growth of e-commerce has reinforced the power of going direct to consumer. And as the market power of department stores has waned, the appeal of relying on wholesale has as well.

“The retail network has changed. Some brands may think, I don’t trust that department-store network any more, and I have to go direct to the consumer to protect my market share, protect my brand,” said Paul Morassutti, a partner and co-lead of the retail practice group at Osler, Hoskin & Harcourt LLP.

Bypassing retail intermediaries means selling at a higher margin, controlling the relationship with the customer, and keeping all-important data on buyer behaviour. But it used to be more difficult to be both a wholesaler and a retailer: In the old days, department stores would demand an exclusive on selling certain brands in a mall, preventing a company from wholesaling to others or opening its own stores.

“The value of wholesale has deteriorated in the last 10 to 20 years,” said Tim Sanderson, executive vice-president at commercial real estate firm JLL. “Years ago, if you could get your product in Eaton’s or the Bay, you’d hit the jackpot. … Their sales have been deteriorating.”

Some of this expansion is driven by real estate opportunities.

“As traditional brands either shrink or disappear altogether, landlords have no choice but to go find somebody else,” Osler’s Mr. Morassutti said. “There are brokers who actively go international trying to entice somebody to come to Canada – because they’re looking for more business.”

E-commerce has also proven how profitable it can be to go direct to consumers. And many of those brands have opened bricks-and-mortar stores, including Casper, eyewear makers Warby Parker and Montreal-based BonLook, and apparel brand Frank & Oak.

David Bell, a former professor at the University of Pennsylvania’s Wharton School, has done research showing that opening physical stores leads to e-commerce sales growth in the surrounding geographic areas.

“There’s kind of a billboard effect when people see your physical stores,” said Mr. Bell, who co-founded New York-based Idea Farm Ventures, which invests in consumer lifestyle brands. Prior to that, Mr. Bell invested in many direct-to-consumer companies, including Warby Parker. “There’s a trust and a veracity that you get from having a physical store.”

Vancouver-based Indochino, which makes bespoke men’s wear, has opened 51 stores across North America. It found that in-store customers spend on average 25 per cent more than they do online, and are 50 per cent more likely to make a purchase in future.

“The ability for brands to control the experience that their customers have … has become really important for retailers like us,” Indochino CEO Drew Green said.

Customers shop in a Laderach store, at the Eaton Centre, in Toronto, on Dec. 5, 2019. The Eaton Centre location is the Swiss chocolate maker’s first flagship store in North America. FRED LUM/THE GLOBE AND MAIL

Others, such as the Swiss chocolate maker Laderach, eschew wholesale because of logistics.

“The chocolate is allowed to be in the store only for three weeks, so it’s very fresh. That’s why we have to be at these premium locations because we need the foot traffic, we need the frequency to turn it over,” CEO Johannes Laderach said. “We don’t sell our brand anywhere else except in our stores. Only like this can we be hopefully quicker and fresher than anyone else.”

Stores are also a marketing vehicle. At Laderach’s new location in Toronto’s Eaton Centre, vibrantly coloured models of cocoa beans from Costa Rica, Ghana, Trinidad and Ecuador are exhibited under bell jars, and a sweet smell emanates from the slabs of fresh chocolate stacked on the marble counter. None of this would be possible in a department-store display, Mr. Laderach said.

“Brands have become commoditized in a lot of ways,” Canada Goose’s Mr. Reiss said. “… We’re not selling made-up stories behind products that are made in some mass-produced factory overseas. The stories we’re telling are authentic. Having an immersive environment like this, where we can tell that story, I think is a powerful thing. … It’s important to control our own destiny.”

The Globe and Mail, December 26, 2019