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Canada Retail Sales Update November 2020

Retail Research Update November  HERO

Total Retail Sales for Sept. 2020 Increased by 4.6% Year-Over-Year. So Why is the Retail Sector Languishing?

Statistics Canada’s September Retail Trade report shows that retail sales and e-commerce are on the rise across Canada.  In fact, total retail sales, at $53.9 billion for Sept. 2020, is up 4.6% year-over-year from the $51.5 billion recorded for Sept. 2019.  

September retail sales come at a time when most of the country was still relatively open.  And with the prospect of impending fall lockdowns starting to be discussed, consumers were attempting to get out of the house and get some retail therapy in while they still could.

On a provincial basis, the relatively more open jurisdictions seem to be faring better, with the province of Ontario being a noticeable laggard as it has been relatively slow to re-open compared to others.

Although the recent monthly retail sales data points appear to be positive on the surface, it masked the fact that retail sales for 2020 year-to-date is down $18.3 billion, or 4%, when compared to the same nine months in 2019.  It also may come as a surprise that retail sales in general are currently trending higher year-over-year considering the higher unemployment rate, reduced wages, and general lack in Canadian consumer confidence.

Canadian Consumer Confidence

In fact consumer confidence, which although has seen a rebound from the historic depths experienced in the spring of 2020, has only rebounded back to the low levels experienced in 2009 during the financial crisis.  

Canadian Retail Sales by Industry 

Looking at retail sales by industry, as more people stay at home it is not surprising that spending is strongest among industries related to home outfitting.  Whether it be furniture, appliances, or building and garden materials, households are spending disproportionately large amounts in these sectors.  Furthermore, as more people stay at home, there is a clear reduction in spend at gas stations, and on clothing and accessories.  Lastly, as we pass the two year anniversary of the federal legalization of cannabis in Canada, the spend on cannabis year-over-year is up 138.4%.  With fewer recreational activities available to occupy free time, people are clearly looking to new recreational experiences.

Canadian E-Commerce as a % of Total Retail Sales

In regards to e-commerce, it is clear that e-commerce adoption increased dramatically as retailers were forced to close during the lockdown, reaching a record $4 billion in monthly spend in April 2020, and accounting for 10.3% of total retail sales.  Although e-commerce spend has fallen since then, it still accounted for 5.9% of total retail sales in September, just above the 5.3% recorded at the peak of the 2019 holiday season.
It should be noted that although e-commerce and bricks and mortar retail are not mutually exclusive, as many retailers have e-commerce platforms, and many institutional retail landlords are helping their retailers setup short term e-commerce solutions.  However, as the country progresses into the fall and new restrictions are implemented, limiting retailer operations and consumer movement, many consumers will once again flock to e-commerce during that all too critical holiday spending season.  The holiday spending season traditionally makes or breaks retailers, and this year the holiday season will be that much more critical to the survival of retailers and retail property performance.