*‘The Oval’ at Yorkville Village during what would have been a normally busy afternoon. A wine store was the only retailer open in the area. photo: craig patterson*

By Ed Strapagiel

The latest numbers from StatsCan indicate a slight improvement in Canadian retail sales growth for the 3 months ending January 2020. Well, fuhgeddaboudit. The reality is that Canadian retail had a relatively weak 2019, and is simply not in good shape to take on current challenges. The coronavirus pandemic is almost certain to lead to a recession which likely will significantly depress retail sales, although it will be a few months yet before we see it in the official statistics.

Another potential effect is that many consumers may make greater use of online buying and home delivery, just to avoid shopping in actual stores. And they may find that they like it. This could result in a marginal but permanent shift from bricks and mortar to e-commerce.

Food & Drug

Retail sales growth in the Food & Drug sector has improved somewhat in recent months, although this is as compared to some record lows in the second half of 2019. The short term 3 month trend (orange line in the chart) is crawling upwards, but the underlying 12 month trend (green line) is still at a 6 year low. Retail sales at supermarkets & other grocery stores were up a respectable 4.4% year-over-year for the 3 months ending January 2020. This however was offset by a mere 0.1% gain at health and personal care stores during the same period.

The Food & Drug sector is probably the most insulated from the coronavirus pandemic. People are still going to need groceries and health and beauty aids. Short term imbalances in supply/demand due to hoarding are likely to work themselves out in a matter of weeks, depending on the item. It can be expected that consumption of hand sanitizer and related products will dramatically increase, but there's no reason to say the same for toilet paper.

Store Merchandise

Retail sales in the Store Merchandise sector were up a modest 1.8% year-over-year for the 3 months ending January 2020. This was slightly behind the 12 month growth trend of 2.2%. Overall, Store Merchandise appears to be holding about steady, but at a modest level, and it's not regaining the momentum lost in 2019.

The usual suspects are dragging the sector down. For the 3 months ending January 2020, electronics & appliance stores retail sales were down 7.8% year-over-year, sporting goods, hobby, book & music stores declined 4.9%, shoe stores lost 2.6%, and home furnishings stores were off by 1.7%.

On the other hand, the retailer types that made better gains were fewer and less significant. Miscellaneous store retailers were up 13.3% for the 3 months thanks to the addition of cannabis stores in this category. Jewellery, luggage & leather goods stores gained 6.2% during the period.

The Store Merchandise sector may be the most vulnerable to the negative effects of coronavirus. Most of the goods on offer are non-essential, and whole shopping malls might be shut down by government decree. Retailers with an established and profitable e-commerce operation may be in a better position to ride out the storm.

Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the "By The Numbers" table below are estimates based on previous trends.

Automotive & Related

Automotive & Related retail sales growth appears to have spiked upwards for the 3 months ending January 2020 (orange line in the chart). But it's unlikely to last.

Gas station sales were up significantly in January 2020, but mostly due to gasoline price increases. Pump prices however have now declined drastically. Secondly, as more people work from home and avoid going out to public places, there is likely to be less driving and less demand for gasoline.

New car dealers, who are still trying to recover from lackluster sales in 2019, may be in for a rough ride going forward. People who are unsure about their jobs tend to put off major purchases like vehicles. Also, some auto dealers have suspended test drives which is likely to impede sales.

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

StatsCan started providing ecommerce retail sales data in January 2016. While the amount of data is limited, some trends appear to be emerging. Here are some results.

Overall, e-commerce represented about 3.5% of Canadian retail sales for the 12 months ending January 2020, including both pure play sellers as well as the online operations of brick & mortar stores. Canadian consumers however also buy online from foreign websites which is not captured in these numbers.

Canadian e-commerce sales were up 18.4% year-over-year for the 3 months ending January 2020. This was much higher than for location based retail which gained 2.5%.

Note that 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 January 2020, electronic shopping and mail-order houses had an estimated $14.5 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 January 2020, this group had an estimated $7.9 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $22.4 billion in e-commerce sales by Canadian operators, up 22.4% over the previous year. 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 85.8% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that just 1.3% 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 64.8% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce was 35.2%.

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