Retail E-Commerce Explodes in Canada Amid COVID-19 Pandemic

Date:

Share post:

Retail e-commerce sales reached a record $3.9 billion in May in Canada, a 2.3 percent increase over April, and a 99.3 percent increase over February ($2.0 billion), according to Statistics Canada.

Year over year, e-commerce sales more than doubled—with a 110.8 percent increase compared with May 2019.

THE EXPLOSION OF ECOMMERCE HAS THE POTENTIAL TO RESTRUCTURE THE CANADIAN RETAIL INDUSTRY

The federal agency said small businesses are increasingly turning to e-commerce platforms and are using these platforms in innovative ways. The degree to which Canadians continue to choose e-commerce purchasing options or return to traditional purchasing methods has the potential to change the structure of the retail trade industry in Canada. Clearly, the retail landscape will evolve, it said.

“These record gains in e-commerce occurred as total retail sales experienced record declines. The impact of COVID-19 is best highlighted using April data. Retail sales plummeted to $33.9 billion in April, a 29.1 percent decline from February and a 26.4 percent decline from April 2019. While e-commerce saw a 63.8 percent monthly increase in April, in-store sales dropped 25.3 percent. In May, total retail sales started to recover, reaching $39.3 billion,” said the federal agency.

“Retail e-commerce sales have risen steadily, with the proportion of online sales rising from 2.4 percent in 2016 to 4.0 percent in 2019. The month of April highlights the peak of the COVID-19 impact, with the proportion of retail e-commerce sales jumping from 3.8 percent in April 2019 to a record high of 11.4 percent in April 2020. In May, as the Canadian retail environment allowed for more in-store purchases, the proportion of retail e-commerce sales was 10.0 percent.”

The report said e-commerce sales increased more among non-essential retailers. All 11 retail trade subsectors with e-commerce sales saw an increase in online sales as a result of COVID-19. From February to April 2020, only the food and beverage subsector experienced an increase in in-store sales (+3.3 percent) and a surge in e-commerce (+107.0 percent).

StatsCan said In-store sales declined for general merchandise stores (-15.1 percent), building material and garden equipment and supplies dealers (-15.8 percent), and health and personal care stores (-16.1 percent). These subsectors had relatively moderate declines compared with other brick-and-mortar operations, it said.

“In contrast, other retail trade subsectors — such as furniture and home furnishings stores (-69.6 percent); sporting goods, hobby, book, and music stores (-79.0 percent); and clothing and clothing accessories stores (-84.2 percent) — saw much sharper declines in in-store sales from February to April 2020. As in-store sales decreased for these subsectors, e-commerce sales increased.

“Mandated business closures that prevented retailers from making traditional in-store sales resulted in a greater shift toward e-commerce. Meanwhile, food and beverage stores — essential services that were allowed to remain open — saw a 38 percent increase in grocery sales in the second week of March compared with 2019, and a surge in sales of certain personal care products.”

EXPERT BELIEVES THAT BRICK AND MORTAR WILL STILL APPEAL TO CUSTOMERS AS ‘NEW NORMAL’ SETTLES

Michael Kehoe, broker/owner of Fairfield Commercial Real Estate in Calgary, said the mandated business closures that prevented retailers from making traditional in-store sales over most of the past five months was a black swan event.

“The spike in retail e-commerce sales over this period is no surprise but there is a robust return to customer visits to physical stores that will likely lead to similar customer footfall levels over the medium term that were seen before the COVID-19 pandemic,” said Kehoe, a veteran of the consumer real estate industry with 45 years of experience.

“Small businesses in the retail sector have increased their e-commerce platforms but as things normalize across the country retailers will rely on their bricks and mortar locations that are essential to any omni-channel retailing strategy. Retailers are the heart and soul of the country we have realized during the pandemic. Shopping will normalize over time as Canadians return to their favourite venues.”

COVID-19 HAS ACCELERATED DIGITAL FULFILLMENT IN THE CANADIAN RETAIL INDUSTRY

Gary Newbury, a retail supply chain strategist and serial transformation executive, said the impacts of COVID-19 for Canadian retailing prompted full attention to digital fulfillment, especially for those non-essential retailers who were forced to close, but also for those in essential businesses as they deployed “in store” fulfillment models.

The figures at 10 percent do not show the potential. This potential is split between three key factors, he said:

  1. Canadian’s propensity to order abroad having their items imported (which are not tracked by Stats Canada);
  2. How retailers choose to report their online sales, there are some classification challenges; and
  3. The lost opportunity for many retailers to “shine” during this time with a combination of curbside and home delivery services to help drive brand loyalty during a period of extreme uncertainty for many consumers.

“The significant uptick in volume of online order fulfillment is an important trend. It also is a time for reflection for retailers who were often forced to ‘get their digital side of their business up and running’, to attempt to scale their services from a standing start, or were, frankly, in their element as they had already been operating at volume and welcomed the extra demand, especially if their stores were closed to consumers,” said Newbury.

“Given many consumers are fearful or, at best, reluctant to “get back to normal” with their shopping habits, it begs the question, will the recent rise in online sales continue to grow?

“My thoughts are that there are many factors that relate at category, brand and consumer level. I believe there will be a massive flight to value during this year and early next and uncertainty will prevail for 18-24 months. This seismic demand movement will tend to mean there is no prospect of profit for many retailers looking to operate an online business. Only those making significant investments now will likely be in good shape to buck this trend. Those still looking at eComm as a bolt on to their store distribution network will run into all manner of problems and will conclude the best way forward will be to close the online store.”

He said retailers are starting to rethink their merchandising approaches and are looking to have more clear propositions both in store and online, often by removing proliferating SKU (stock keeping unit) assortments and going back to basics.

At the end of the day, whether the percentage online will grow, stabilize, or reduce will be as a result of consumer perceptions of value, how quickly they want to acquire products and the relative friction they experience between channels (store and online), much of which is in the retailers hands to manage, he added.

“Many people experienced online services for the first time over the last four months, some had a great experience, some not so great. If somewhere in the order of 50 percent of people would prefer to avoid retail stores (lots of friction currently), this is a big prize for retailers to go after, however, they need to approach this opportunity with care, ensure they elicit the help of digital fulfillment experts, be open to look at digital retailing in a different way (skip the extended aisles and pricing mechanisms etc), and ensure they fully comprehend the financials of online if they are going to develop a profitable online business,” said Newbury.

Bruce Winder, author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail, said the Statistics Canada report confirms what many people hypothesized: as brick and mortar retail softened in many cases, e-commerce sales soared during the key months of the pandemic (thus far).

“The multi-million-dollar question is what will e-commerce sales look like from now until a potential vaccine is developed and administered and what will e-commerce sales look like post vaccine,” he said.

“One can argue that the growth in e-commerce during wave one of the pandemic allowed consumers to sample the convenience, safety and endless aisle of online shopping - leading to a permanent uptick in this channel. Sadly, we will probably see wave two sometime soon which will reinforce online shopping's benefits.

“An important point however, is to recognize that existing e-commerce infrastructure is lacking as witnessed by countless order delays, missing products and charging errors during wave one. As we have already seen from Walmart and Empire, retailers (and suppliers) have begun to pivot to quickly increase online shopping and delivery capacity to meet anticipated needs.”

STORE COUNTS WILL DIMINISH BUT BRICK AND MORTAR WILL PREVAIL

This will have, as we have already seen, retailers reviewing store counts and closing unproductive locations that have been pushed into the red. There will be fewer stores from many legacy brands as a result, added Winder.

“New digitally native brands will emerge though and have the benefit of building brick and mortar infrastructure based on this evolving environment. They will integrate all channels so that the shopping experience involves less friction than today's incumbents,” he said.

“The tough part for retailers is learning how to make money on e-commerce sales - especially if they don't sell their own brand. Even with the required scale, technology and partner infrastructure, it won't be easy and net profit margins could be considerably less than traditional brick and mortar channels that have been refined for decades. Will suppliers help pay for this gap as per Walmart's announcement to add new discounts to vendors last week?

“Nevertheless, this is a transition that must happen as the customer is demanding it. Those that can make the successful jump to profitable e-commerce will survive, those that cannot will be swept away as online retailers like Amazon, who have been readying for this day for decades, will dominate."

2 COMMENTS

LEAVE A REPLY

Please enter your comment!
Please enter your name here

More From Retail Insider

Iconic Flo’s Diner in Toronto’s Yorkville Forced to Close After 33 Years Amid Landlord Dispute 

Retail Insider interviewed Flo’s co-owner who discusses the “heart wrenching” situation where he is being forced to close his business that began on Bellair Street in 1991.

Anatomy of a Leader: Teresa Spinelli, Owner of Alberta-Based Italian Centre Shop Ltd.

Spinelli discusses her leadership of the popular retailer which has expanded over the years, describing how she struggled to run the company at first and grew to love it.

Upscale Canadian Fashion Brand SMYTHE Expands with New Standalone Calgary Store [Interview/Photos]

It's the second store location for the Toronto-based brand, which is seeing success with its exclusive womenswear collections.

Toronto’s CF Sherway Gardens Hits Sales Milestone with Exciting Retail Growth and Future Plans [Interview]

The shopping centre is adding new retailers as sales per square foot hit an all-time high, with plans to re-tenant Nordstorm as foot traffic grows following Eataly's opening in the mall a few months ago.

ECS Coffee Opens Canada’s Largest Coffee and Espresso Equipment Gear Showroom and Retail Space in Toronto [Interview]

The new Etobicoke location is unique to Canada if not North America, according to its founder, with coffee roasting, equipment showroom, over 500 varieties of coffee, Youtube studio and various in-store experiences. He has plans to expand the concept nationally.

New Loblaws City Market Opens in Vancouver’s ‘The Post’ Building, Adding Grocery Competition to the Downtown Core [Podcast]

Craig and Lee discuss the opening of a new Loblaws City Market in downtown Vancouver's renovated Post building, and they explore its potential impact on local grocery shopping.

Loblaw Announces $2 Billion Investment in Canada for 2024 with Dozens of New Stores and 7,500 New Jobs [Expert Comment]

The retail behemoth will be growing substantially this year, following backlash over profits as inflation continues to impact Canadians.

Dubai-Based Asian Street Food Concept ‘Wok Boyz’ Expands into Canada with Plans for Multiple Locations [Interview]

The company's founder says the popular concept, with personalized meals, has an opportunity to grow substantially with its high-quality ingredients and theatrical flare, complete with fiery customer-facing woks.

Calgary Surge Basketball Team Launches Innovative Pop-Up at CF Chinook Centre to Boost Community Engagement [Interview]

The retail activation, which opened this month, is resulting in heavier foot traffic in a quieter part of the mall.

Upscale Pusateri’s Fine Foods to Close Yorkville Grocery Store in Toronto After 20 Years

The 5,500 square foot store opened to much fanfare in 2003, with valet parking, private chefs and pricey goods. 

Loblaw and Walmart Could be Forced to Adhere to Grocery Code of Conduct with Legislation [Op-Ed]

Sylvain Charlebois says that it's rare for all of Canada's political parties to agree, signalling a shift that could force grocers to comply amid record inflation.

Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

The company, founded in 1995, is one of Canada’s largest privately owned discount retailers which struggled with declining sales and increasing costs following the pandemic.

What to Expect for the Canadian Retail and Hospitality Sectors in 2024 [Video Interview]

Michael Kehoe provides an expansive overview of what's expected for Canada's retail industry in 2024, and how the commercial real estate industry is becoming more dynamic than ever.

Anatomy of a Leader: David Lui, CEO of Kit and Ace and Co-Founder of Unity Brands

Lui has an extensive background in retail with over 30 years of experience and is known for his award-winning brand transformations, e-commerce and digital knowledge along with his passion for scaling businesses.

Robotic Retail Gaining Traction in Canada, But Some Consumers are Being Left Behind [Op-Ed]

Automated retailers without in-store staff are opening across Canada, such as Aisle 24, RC Coffee and PizzaForno -- but consumers without smart phones, credit cards, or with vision issues may not be able to access these retailers says a researcher.

Oakridge Park Announces 1st Luxury Retailers, Attracting Top Brands to Vancouver [Podcast]

Craig and Lee discuss the latest Oakridge Park announcement, highlighting the addition of luxury and upper contemporary brands to Vancouver's retail landscape and how it will impact downtown.

Interview on What it Takes: Lee Valley Tools Named Top Retailer in Ontario for Customer Service

The company's COO Jason Tasse discusses the retailer's secret sauce for having an engaged workforce, while also discussing plans to expand with more stores and retail concepts.

Survey Data Shows Canadians will Prioritize Romance Over Budget Cuts This Valentine’s Day [Interviews]

David Litwin of Moneris notes that Valentine's is an interesting bellwether for what businesses might expect from consumers for the rest of the year.

Anine Bing to Open 2nd Canadian Storefront at the Four Seasons Hotel in Toronto 

The US-based women’s fashion brand recently opened its first Canadian store at Yorkdale, and will open its second location in a downtown luxury hotel. 

Retail Burnout Crisis in Canada: The Call for Empathetic Leadership and Proactive Solutions Amid Operational Strains [Feature]

It's never been more difficult to work in retail, with store managers burning out amid lower staffing numbers, increased task and store robberies. Two industry experts discuss the situation.

RECENT RETAIL INSIDER VIDEOS

Advertisment

Subscribe to the Newsletter

Subscribe

* indicates required

RECENT articles

Iconic Flo’s Diner in Toronto’s Yorkville Forced to Close After 33 Years Amid Landlord Dispute 

Retail Insider interviewed Flo’s co-owner who discusses the “heart wrenching” situation where he is being forced to close his business that began on Bellair Street in 1991.

Anatomy of a Leader: Teresa Spinelli, Owner of Alberta-Based Italian Centre Shop Ltd.

Spinelli discusses her leadership of the popular retailer which has expanded over the years, describing how she struggled to run the company at first and grew to love it.

Upscale Canadian Fashion Brand SMYTHE Expands with New Standalone Calgary Store [Interview/Photos]

It's the second store location for the Toronto-based brand, which is seeing success with its exclusive womenswear collections.

Toronto’s CF Sherway Gardens Hits Sales Milestone with Exciting Retail Growth and Future Plans [Interview]

The shopping centre is adding new retailers as sales per square foot hit an all-time high, with plans to re-tenant Nordstorm as foot traffic grows following Eataly's opening in the mall a few months ago.

ECS Coffee Opens Canada’s Largest Coffee and Espresso Equipment Gear Showroom and Retail Space in Toronto [Interview]

The new Etobicoke location is unique to Canada if not North America, according to its founder, with coffee roasting, equipment showroom, over 500 varieties of coffee, Youtube studio and various in-store experiences. He has plans to expand the concept nationally.

New Loblaws City Market Opens in Vancouver’s ‘The Post’ Building, Adding Grocery Competition to the Downtown Core [Podcast]

Craig and Lee discuss the opening of a new Loblaws City Market in downtown Vancouver's renovated Post building, and they explore its potential impact on local grocery shopping.

Loblaw Announces $2 Billion Investment in Canada for 2024 with Dozens of New Stores and 7,500 New Jobs [Expert Comment]

The retail behemoth will be growing substantially this year, following backlash over profits as inflation continues to impact Canadians.

Dubai-Based Asian Street Food Concept ‘Wok Boyz’ Expands into Canada with Plans for Multiple Locations [Interview]

The company's founder says the popular concept, with personalized meals, has an opportunity to grow substantially with its high-quality ingredients and theatrical flare, complete with fiery customer-facing woks.

Calgary Surge Basketball Team Launches Innovative Pop-Up at CF Chinook Centre to Boost Community Engagement [Interview]

The retail activation, which opened this month, is resulting in heavier foot traffic in a quieter part of the mall.

Upscale Pusateri’s Fine Foods to Close Yorkville Grocery Store in Toronto After 20 Years

The 5,500 square foot store opened to much fanfare in 2003, with valet parking, private chefs and pricey goods. 

Loblaw and Walmart Could be Forced to Adhere to Grocery Code of Conduct with Legislation [Op-Ed]

Sylvain Charlebois says that it's rare for all of Canada's political parties to agree, signalling a shift that could force grocers to comply amid record inflation.

Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

The company, founded in 1995, is one of Canada’s largest privately owned discount retailers which struggled with declining sales and increasing costs following the pandemic.

What to Expect for the Canadian Retail and Hospitality Sectors in 2024 [Video Interview]

Michael Kehoe provides an expansive overview of what's expected for Canada's retail industry in 2024, and how the commercial real estate industry is becoming more dynamic than ever.

Anatomy of a Leader: David Lui, CEO of Kit and Ace and Co-Founder of Unity Brands

Lui has an extensive background in retail with over 30 years of experience and is known for his award-winning brand transformations, e-commerce and digital knowledge along with his passion for scaling businesses.

Robotic Retail Gaining Traction in Canada, But Some Consumers are Being Left Behind [Op-Ed]

Automated retailers without in-store staff are opening across Canada, such as Aisle 24, RC Coffee and PizzaForno -- but consumers without smart phones, credit cards, or with vision issues may not be able to access these retailers says a researcher.

Oakridge Park Announces 1st Luxury Retailers, Attracting Top Brands to Vancouver [Podcast]

Craig and Lee discuss the latest Oakridge Park announcement, highlighting the addition of luxury and upper contemporary brands to Vancouver's retail landscape and how it will impact downtown.

Interview on What it Takes: Lee Valley Tools Named Top Retailer in Ontario for Customer Service

The company's COO Jason Tasse discusses the retailer's secret sauce for having an engaged workforce, while also discussing plans to expand with more stores and retail concepts.

Survey Data Shows Canadians will Prioritize Romance Over Budget Cuts This Valentine’s Day [Interviews]

David Litwin of Moneris notes that Valentine's is an interesting bellwether for what businesses might expect from consumers for the rest of the year.

Anine Bing to Open 2nd Canadian Storefront at the Four Seasons Hotel in Toronto 

The US-based women’s fashion brand recently opened its first Canadian store at Yorkdale, and will open its second location in a downtown luxury hotel. 

Retail Burnout Crisis in Canada: The Call for Empathetic Leadership and Proactive Solutions Amid Operational Strains [Feature]

It's never been more difficult to work in retail, with store managers burning out amid lower staffing numbers, increased task and store robberies. Two industry experts discuss the situation.