Retail Trends in Canada, 2008

John Torella, Senior Partner, J.C. Williams Group
Presented to the CARF Workshop - Effectiveness of High-Tech In-Store Media – May 21, 2008

John Torella says that the retail industry in Canada is currently in a state of unprecedented uncertainty. While retail sales in January 2008 were 8.9% higher than a year ago, consumer confidence is at a two-year low. This is indicative of a harsher retail climate to come. In spite of the January figures, sales in February, March and April have not been good. At this point in time (May 2008), not all retailers are in the same growth mode. Sales of food and beverages, furniture, electronics and appliances all are up – but housing, interest rates, inflation, and savings rates all are down. As a result, Torella warns, the retail industry must maintain its flexibility and be able to adjust quickly to changing conditions.

In spite of some dire economic warnings about the condition of the economy, especially in the manufacturing sector in Ontario, Torella points out that the Toronto regional market in particular continues to thrive. He says that within a 1-day drive (1 hour flight time) of Toronto there exists a bi-national market of 22 million people with an economic value of $550 billion, making it the fifth largest market in North America and the 12th largest in the world! To take advantage of this market, some of the biggest and best retailers are, or soon will be, opening stores in Toronto, including Best Buy, Crate and Barrel, T&T Supermarkets, Adidas, and Apple Computers. Retailers are moving into the market in spite of economic uncertainty. Meanwhile, consolidation in the Canadian retail industry continues – 101 retail chains account for 65% of all retail spending in the country and increasingly only two chains tend to dominate each sector, Rona and Home Depot for example.

At the same time, not only is the Canadian population becoming older, it is becoming more diverse, especially among the Chinese and other Asian peoples. The importance of women to the retail industry is also greater than ever. By 2003, almost 30% of women were earning more than their employed spouses, up from 11% in 1967. The female head of household has become the chief purchasing officer in the home, making up to 85% of all household purchase decisions. Concurrently, up to 75% of Canadian households are “non-traditional” and people are either postponing having children or are childfree by choice. As a result of these things, Torella warns that continuing to define customers strictly along traditional demographic or even psychographic lines, is no longer applicable and the most successful retailers are working hard to understand and embrace the changes in social and shopping behaviours.

And, of course, the Internet has changed everything. Revenue in the e-commerce sector in Canada increased by almost 8% in 2005 versus only a little over 5% for the brick-and-mortar stores. Podcasting, blogs and other forms of social networking means retailers must adapt to being able to talk ¬with their customers, not just talk to them.

Torella makes clear that the bottom line for Canadian retailing in 2008 is to try to build long-term consumer relationships, even in a world where little customer loyalty exists. Simply to “get better at doing what we already are doing” will no longer ensure retail success. To help build customer traffic, he says that the retailer needs to innovate in ways that will engage the customer and enhance the total shopping experience.

EDITORS NOTE – Torella presented an interesting graph of where various sectors of the retail trade currently lie along the retail lifecycle. Click here to view the graph >>