Hindsight 2020: Canadian Retail in the Rearview Window

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Many are no doubt pleased that the year 2020 has come to an end. The past 12 months have been unlike anything in recent memory, with some saying that a ‘retail apocalypse’ was playing out. While that’s up for debate, there’s no question that thousands of store locations have closed permanently while many of the trends towards digital seen pre-COVID were accelerated due in part to sheer necessity.

Things were already challenging for retail in Canada at the beginning of 2020. Retail Insider had mapped out hundreds of individual store locations that were set to close in Canada in early 2020 due to various challenges. Some retail chains had too many store locations and rents had become an issue, which resulted in some companies looking to downsize footprints. Some retailers had been over-extended financially following the 2019 holiday shopping season and investments in merchandise and experience were being made in anticipation of a successful 2020.

Many were enthusiastic that 2020 would be a good year for retail — it was the start of a potential “roaring twenties”, though there was talk of a coronavirus illness that was spreading outside of China. The chatter grew to become concern as COVID-19 spread into North America and the disease became better known in terms of its transmission. Restaurant patronage decreased while ‘panic buying’ of some items such as toilet paper began to challenge the supply chain.

In March, a group of large retailers banded together in an effort to stop the spread of the virus by agreeing to temporarily close their stores. Many more retailers joined them prior to government mandates that businesses deemed ‘non-essential’ would have to shutter temporarily by law. Stores remained closed for weeks or months depending on where they were located in the country. The closures put a financial strain on retailers and other businesses that were no longer able to rely on foot traffic as in the past.

Le Chateau storefront at Square One Shopping Centre – Photo by Square One

To address the shutdowns, retailers launched curbside pickup, contactless payments, and other innovations that were previously not commonplace in Canada. Ecommerce became a lifeline rather than another sales channel, resulting in unprecedented growth in online shopping in Canada as well as a surging stock price for Ottawa-based ecommerce platform Shopify. The supply chain expanded rapidly and companies involved in logistics and warehousing have done well. Many of the trends seen before COVID-19 were accelerated during the pandemic with some saying that the country moved five years into the future digitally in a span of about five months.

Despite the innovations, retailers across the country were struggling and some filed for bankruptcy protection. Some retailers such as Le Chateau announced that all stores would close. With people working from home, fashion categories struggled as an example. Travel bans and closed borders eliminated international tourism, again hitting retailers and other businesses reliant on visitors.

Consumers remained cautious and masks became increasingly mandated in businesses. The less-than-comfortable shopping experience saw many more look to online channels and convenience. The work from home movement also resulted in struggles for many businesses that catered to work places.

A quiet day on Toronto's King Street East. Photo: Dustin Fuhs
A quiet day on Toronto’s King Street East – Photo by Dustin Fuhs

The relationship between landlord and tenant became, in many instances, strained over the weeks and months of closures. Some retailers, including the Hudson’s Bay Company, did not pay rent on their retail spaces during the closures, and in some instances beyond. Landlords also struggled to meet financial obligations which were made worse by retailers not paying rents due. Government assistance helped to a degree though it was deemed generally inadequate overall. Thousands of retailers, foodservice businesses, and fitness facilities closed permanently due to strained finances.

The summer of 2020 saw increased retail sales as the deemed ‘non-essential’ businesses remained open. Precautions were put into place and case counts remained low in many parts of the country. For a time, Canada was looked at as being a country that was successfully controlling the spread of COVID-19.

Case counts again began to climb in many parts of the country in the fall of 2020, resulting in temporary business shutdowns in November in Ontario, Quebec, and Manitoba — and some lockdowns have unfortunately extended into 2021 with some saying that Toronto will be locked down through February. This is hitting retailers and other businesses hard and the full extent of the damage won’t be known for a few of months at least. While stores have been closed in the Toronto area since mid-November, southern Ontario is now seeing record-breaking COVID positivity numbers exceeding 3,000 daily. It’s likely that in the future we’ll look back at this time and realize that many grave and unfortunate mistakes were made.

The Christmas season saw non-essential retail lockdowns in the Toronto area as well as in Manitoba, while foot traffic was down significantly across the country. The physical Boxing Day shopping holiday was cancelled in Ontario and Quebec, again hitting the bottom line of many retailers. The destruction to the retail industry because of the lockdowns will be known as soon as this month as bankruptcy filings begin and businesses shutter.

At the same time, ecommerce shopping exploded in Canada and continues to be very popular. Condominium lobbies have become receiving centres as purchases for goods including groceries are done online. Amazon’s market share in Canada has expanded greatly. Small businesses have quickly either developed websites or have expanded ecommerce capabilities in order to just survive.

Small businesses have also been embraced in Canada much more than in the past, with many campaigns launched to save small businesses. Websites, associations, and even web tools have been developed to help the consuming population support small businesses. Many hope that the trend will continue into the future, particularly given that large international chains were continuing to gain market share in this country prior to the pandemic.

Thousands of people in the retail industry lost their jobs in 2020. With thousands of stores closing came thousands of job losses on the sales floor and on up. A surprisingly high number of managers within retailers and at major landlords were terminated in 2020, almost none of which was reported in the mainstream press. The same goes for other support industries. Many entrepreneurs also lost their retail businesses. Government monies have supported some hit with unemployment though the end of that will be in sight this year.

Hudson's Bay, Queen Street, Toronto - Photo by Hudson's Bay
Hudson’s Bay, Queen Street, Toronto – Photo by Hudson’s Bay

Interestingly, some luxury retailers said that sales had been up in 2020. Brands that were able to interact virtually with clients, such as on mobile devices, were able to make sales even higher than in 2019. Shoppers buying high-end items such as jewellery and bags were buying “treats” according to retailers, as opposed to taking trips or having an expensive evening out.

It’s not yet clear exactly how many individual store locations closed in Canada in 2020, though we know it is extensive and will continue into this year. Malls and urban streets across Canada are seeing increasing vacancies that are concerning. The expense of opening physical businesses will keep some leasing deals from happening for the short term, though things are looking up.

Some retailers are looking at a longer-term situation — where rents are currently going down, they are looking to find the right spot and are willing to do a lease deal. That means that new stores and restaurants will be opening, which is good news — Point Zero, for example, could see 50 new stores. Some are seeing 2020 as a catalyst for innovation which will ultimately make the world a better place.

The Canadian retail industry will never be the same as things begin to recover from the current pandemic. Many retail chains will have been lost and some brands will gain or regain popularity, while new brands altogether will come on the market (likely with some sort of celebrity endorsement). It will be interesting to see what happens in 2021 and beyond as we move more rapidly into the digital age than ever.

Article Author

Craig Patterson
Located in Toronto, Craig is the Editor-in-Chief of Retail Insider and President/CEO of Retail Insider Media Ltd. He is also a retail analyst and consultant, Director of Applied Research at the University of Alberta School of Retailing in Edmonton, and consultant to the Retail Council of Canada. He has studied the Canadian retail landscape for over 25 years and he holds Bachelor of Commerce and Bachelor of Laws Degrees.

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