Canadian Retailers Started The Year With A Drop In Sales

It hasn’t been a great start to 2019 for Canadian retailers. According to Statistics Canada, retailers posted an unexpected 0.3 per cent drop in sales for a third consecutive month in January.

Economists had predicted a 0.4 per cent gain. 

It was back between April and June 2012 when Canadian retail sales last posted three declines in a row.

Given we’re in a time dubbed as the “retail apocalypse” by experts, this year’s figures aren’t entirely surprising.  

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As Bloomberg highlights, the diminishing consumption of retail goods by households could be attributed to higher borrowing costs, moderating housing markets and volatile financial markets. In cities like Toronto and Vancouver,  the perpetually high housing costs — whether you own a home and have joined the “house poor” set or are dishing out ridiculous amounts of money to rent — mean there isn’t a lot of cash left over at the end of the month.

As highlighted in an analysis by Toronto retail consultant Ed Strapagiel, sales for food and drug retail weren’t as disappointing compared to other sectors (but, then again, those are kind of necessities).

For the three months ending January 2019, food and drug retail sales increased 2.4 per cent year-over-year – the highest gain of all the major retail sectors.

Perhaps because cash-strapped Canadians are choosing to dine out less, supermarkets and other grocery stores are leading the way when it comes to sales gains, with an increase of 3.0 per cent year-over-year for three months ending January 2019.

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This was the highest such gain in over a year. Specialty food stores and convenience stores also saw higher than average sales gains.

Things weren’t as positive at Canada’s health and personal care stores, where retail sales gained a disappointing 0.1 per cent year-over-year for the three months ending January 2019, as Strapagiel highlights.

Meanwhile, sales at general merchandise stores fell by 2.4 per cent.

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As Strapagiel points out, a few retail markets struggled going into 2019, including electronics and appliance stores (where sales declined 8.8 per cent year-over-year for the three months ending January 2019), sporting goods, hobby, book and music stores (down 3.5 per cent), jewellery, luggage and leather goods stores (down 2.2 per cent), and home furnishing stores (down 1.7 per cent).

It was, however, a notably weak performance in the auto sales sector that was largely responsible for really bringing down the value of Canadian retail sales.

After gains in four of the five months prior, weakness in new car sales resulted in a 1.5 per cent drop in trade. Excluding the auto sector, retail sales were actually up 0.1 per cent. As Strapagiel suggests, the “collapsing” auto sector is due to both lower gasoline prices and almost no sales growth at the country’s new car dealerships.

In addition to a lack of disposable income for consumers, a widespread availability of ride-sharing apps in major cities, coupled with lack of available parking spaces in dense condo buildings, reduces the need to drop dollars on a car for many young professionals.

According to Strapagiel, the only sector that is doing well is the miscellaneous store retailers group, which saw retail sales climb 9.7 per cent for the three months ending January 2019 – something largely attributed to the addition of cannabis stores.

The country’s legal cannabis stores increased the sector’s sales by 4.0 per cent in that timeframe.

Judging from the lineup outside Toronto’s first pot shop, The Hunny Pot, on its first day of business, the opening of busy pot shops across Ontario will likely keep this figure healthy.

In addition to sky-high commercial real estate costs in many cities, the struggle of bricks-and-mortar stores is made harder with the increased infusion of online shopping into daily lives.

According to Statistics Canada, Canadian e-commerce sales increased 11.6 per cent year-over-year for the three months ending January 2019 and represented about 2.9 per cent of total Canadian retail sales in that time period.

When it comes to the fate of Canadian retail for the remainder of 2019, though experts predict a closing of more physical retail stores, there is some good news.

According to Retail Insider, things like upscale and carefully curated “food halls” and “food markets,” a new found investment in malls and an expansion of both luxury stores (for those who can afford to shop in them) and off-price retailers (for the rest of us) are expected to make a major mark this year and beyond. So, at least there’s that.

Featured Image: Pixabay

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