It’s shaping up as an unhappy New Year for Canadian retailers, with Toronto retail analyst Ed Strapagiel saying that sales growth for 2018 could be less than half that of 2017, based on data collected during the first 10 months of the year.
“There doesn’t appear to be anything on the horizon to indicate that things are going to improve soon,” said Strapagiel, who provides regular retail outlooks based on publicly distributed data from StatsCan.
Among the key takeaways from his research:
E-commerce still growing, but slowing: Canadians spent $17.5 billion on e-commerce during the 12 months ended Oct. 31, $10.1 billion (57.8%) of which was directed towards so-called “non-store retailers” like Amazon. E-commerce sales increased 16.9% during the three-month period ended Oct. 31, down from a 26.5% gain for the corresponding year-earlier period. Not captured in the total is the amount spent by Canadians on foreign websites.
Online’s a small fraction of traditional sales: According to StatsCan data, e-commerce accounted for just 1.2% of the total sales for brick-and-mortar retailers. This group generated an estimated $7.39 billion in total e-commerce sales for the 12 months ended Oct. 31.
Sales are up, but not a lot: Canadian retail sales were up just 3.3% through Oct. 31 according to Statistics Canada data, less than half the 7.1% gain recorded in 2017. According to Strapagiel, volatile gasoline prices have provided “false optimism” for retailers (minus gasoline station sales, retail sales through October were up just 2.3% on a year-over-year basis).
Montreal a hot market: While year-to-date (YTD) retail sales across the country were up a modest 3.3%, the Montreal CMA bucked the trend with an 8.3% increase. At the other end of the spectrum, retail sales in Newfoundland & Labrador declined 1.2%.
Food and drug struggling: With year-to-date sales up just 1.3%, Strapagiel predicts that the food and drug sector will end the year at a five-year low. Supermarkets accounted for about half of the category’s $170.2 billion in sales over the past 12 months. Retail sales for health and personal care stores, meanwhile, are down 0.1% on a year-to-date basis. Although convenience stores, specialty food stores and beer, wine and liquor stores are enjoying what Strapagiel characterizes as “above average” gains on a year-to-date basis—5.6%, 8.1% and 4.8% respectively—he says they aren’t enough to make a difference in the sector as a whole.
Store merchandise: Retail sales for the category were up 2.5% for the three months ended Oct. 31, the lowest growth rate in 18 months. Cannabis stores, a new addition to StatsCan data, did $43 million in business in October, although Strapagiel predicts they will remain a “small part” of the overall retail sales picture for the foreseeable future.