Canadian Retail Getting Back On Track, Sort Of: Ed Strapagiel

Ed Strapagiel
Ed Strapagiel
This analysis is updated monthly as new numbers are published by Statistics Canada. If you would like notification from Linkedin of when an update becomes available (and you've read this far), please connect with Ed Strapagiel on LinkedIn.

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The latest numbers from Statistics Canada show that total retail sales increased 3.2% year-over-year for the 3 months ending August 2020 on a not seasonally adjusted basis. That’s not bad, considering that retail sales growth for all of last year was just 1.2%. But while the trend looks good, it may not last with a second (or third) wave of COVID pandemic, and if stores and shopping malls have to be shut down again. Furthermore, how things are playing out can vary greatly among different types of retailers.

After a disastrous Q2, the 3 month trend (orange line in the chart above) has finally crossed back into positive territory. The underlying 12 month trend (green line) has stabilized and is poised to improve in the months ahead. After 8 months or 2/3 of the year, Canadian retail sales in 2020 are still down 5.4% from a year ago.

Food & Drug

The Food & Drug sector appears to have prospered from the pandemic, recording historically high year-over-year retail sales increases for most of 2020 so far. For the 3 months ending August 2020, retail sales were up 6.6% versus a year ago. The underlying 12 month trend (green line in the chart above) has gone from a near record low at the start of the year to a near record high currently.

Sales at supermarkets & other grocery stores gained 9.3% year-over-year for the 3 months ending August. People may be cooking and eating more at home rather than going to restaurants. Convenience stores, specialty food stores, and beer, wine & liquor outlets also recorded healthy sales increases in the latest 3 month period.

Health and personal care stores had some weak months earlier in the year but now appear to have recovered somewhat. Their retail sales were up 4.2% for the 3 months ending August 2020.

Store Merchandise

After a vicious dip in Q2, retail sales growth in the Store Merchandise sector has now just as quickly turned positive. For the 3 months ending August, retail sales were up 5.8% year-over-year. Some of this might be latent demand being exercised now that stores and malls have reopened, in which case things may cool off somewhat in the next few months.

The underlying 12 month trend (green line in the chart above) still has some way to go to get back to pre-pandemic levels. Year-to-date retail sales are still down 3.5% after 8 months. There is likely to be some permanent loss as many consumers have become more comfortable with e-commerce, and/or remain uncomfortable with in-store shopping.

Many retail categories had significant sales increases in the latest 3 month period, including general merchandise, building material and garden equipment & supplies dealers, electronics and appliance stores, and even the grab bag “other stores” group.

On the other hand, clothing and clothing accessories stores remain a major COVID casualty. Their retail sales were down 19.9% for the 3 months ending August, and down 34.4% year-to-date after 8 months of 2020. Fashion retailers are dropping like flies.

The Automotive & Related sector was particularly hard hit by COVID. Note that the scale in the above chart goes down to -50%, twice as low as Store Merchandise. While things have become less bad in recent months, the 3 month trend (orange line in the chart above) is still in negative territory.

Sales at new car dealers may be bouncing back. Their retail sales were still down 0.6% year-over-year for the 3 months ending August, but this was their best such result since the start of the pandemic and a much better result than the 36.1% decline in Q2.

Gasoline stations however remain in poor shape, with retail sales down 16.1% in the last 3 months and down 18.7% year-to-date. This is as a result of both lower consumption and lower gas prices.

By The Numbers

Special Note: Statistics Canada revised historical data with the February 2019 release. Unadjusted monthly data were revised back to January 2018, while seasonally adjusted data were revised back to January 2015. Those keeping score should update their files. The analysis in this report is always based on unadjusted data.

For definitions of store types, see Statistics Canada NAICS.

Canadian E-Commerce Sales

The chart below suggests that Canadian e-commerce sales are cooling off, but the trend is merely going from “white hot” to “red hot”. For the 3 months ending August, retail e-commerce sales were up 69.3% year-over-year. Some of this business may never return to in-store shopping, but just how much remains to be seen.

Overall, e-commerce represented about 5.1% of Canadian retail sales for the 12 months ending August 2020, including both pure play as well as brick & clicks stores. Note that Canadian consumers may also buy online from foreign websites which is not captured in these numbers.

Location based retail is the same as that in the preceding “By The Numbers” table. It’s what’s normally reported as Canadian retail sales. Except that it isn’t. Location based retail excludes another section called Non-Store Retailers (NAICS code 454), which includes electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce businesses are. For the 12 months ending August 2020, electronic shopping and mail-order houses had an estimated $19.1 billion in e-commerce sales.

But that’s not the only source of e-commerce, as (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending August 2020, this group had an estimated $11.9 billion in e-commerce sales. With electronic shopping and mail-order houses, there’s a grand total of $30.0 billion in e-commerce sales by Canadian operators. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include e-commerce purchases made by foreigners at Canadian operations.

For electronic shopping and mail-order houses, an estimated 91.1% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that 2.0% of their total sales are attributable to e-commerce.

In the final section of the above table, (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generated an estimated 61.6% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers’ share of e-commerce was 38.4%.

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.

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