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Expert: Top 10 Trends that will Shape the Near- and Long-Term State of the Retail Industry in Canada [Feature Part 1]

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The past couple of years have been chaotic, to say the least. Impacts of the COVID-19 global pandemic have wreaked havoc on the lives of people all over the world, transforming the ways we engage, communicate and go about our daily routines. For retailers, the consequences have been just as dramatic, perhaps more so than those occurring in other sectors and industries. Highlighted by a sharp shift in consumer behaviour and preferences, it’s a period of time that has challenged merchants everywhere to examine, evaluate and rethink the entire retail journey and experience from all angles. And, blighted by ongoing disruptions and uncertainties, our current circumstances will also serve to symbolize a moment in retail history remembered in large part by the disparity of outcomes experienced by those within the industry. From the business-saving pivots and innovative tactics displayed by some brands to the unfortunate demise and ruin of others, Canadian retail has seen it all over the past 24 months or so. And, according to Bruce Winder, expert retail analyst and author of RETAIL Before, During & After COVID-19, the cumulative effects that retailers across the country have undergone have resulted in a changed landscape, precipitating an evolution within the industry.

“The state of the retail industry in Canada is still one that’s being defined by a lot of uncertainty,” Winder asserts. “And, as a result, it really depends on who you are. If you’re a larger retailer with a really strong balance sheet, you’re probably doing well and have survived, perhaps even thrived. Some were lucky enough to have been deemed essential. And others simply had the resources to get in front of the disruption and work through it. These were some of the organizations that didn’t even really blink an eye in the face of the pandemic, some of whom actually picked up some business. And there are many within the industry who have either shut down their operations altogether or whose future is ambiguous at best. All told, consequences of the pandemic have changed the way retailing is done and will likely pave the way toward a new frontier of sorts in which new formats and business models will be developed and executed, helping the industry rise above these current challenges. In a way, the past couple of years have served to accelerate a natural evolution of retail, challenging merchants everywhere to keep up with the change.”

For the retailers and brands that have survived the sustained turbulence caused by COVID-19 and the related mandatory lockdowns, closures and restrictions, the next 6 to 12 months are going to be critical in their continued success and growth. And, with the prosperity of Canadian retailers in mind, Winder suggests a list of ‘top 10 trends’ that are set to test the resiliency and resolve of businesses, open doors of opportunity, and significantly influence the near- and long-term future of the industry.

Transition to a new normal 

Perhaps the most immediate issue that retailers will be faced with, suggests Winder, is the transition that we’ll all eventually embark on toward a new normal. It’s a transition into a post-restriction retail environment that will demand critical decisions to be made by retailers concerning their continued requirement for vaccine passports for entry, maintained capacity restrictions and the wearing of masks by employees and customers. It’s all centred around a matter of health and safety and has already resulted in a division of philosophy and attitudes across the country – a division that was recently highlighted by the so-called ‘freedom convoy’ and its anti-mandate message. And, although the dissenting voices reflected by the protesting truckers may be few, Winder suggests that the decisions that retailers make heading into the post-pandemic period will need to be made carefully.

“Retailers have some tough decisions to make over the course of the next few months or so with respect to whether or not they continue to ask for vaccine passports and if they will still require store staff and customers to wear masks,” he says. “It might seem like an obvious decision to make given the fact that government has said that we don’t need them anymore. But there’s a second tier to the issue involving the way consumers and store staff feel about these restrictions. The country’s incredibly polarized over the issue at the moment. There are many customers who have gone to lengths to make sure that they got vaccinated and that they wear masks and take the proper precautions and who may not want to shop, dine or be in close proximity with those who didn’t. It’s a very serious issue that’s been pushed on retailers by government for political reasons, forcing each business to navigate the challenge independently. For some brands, it’s going to become an issue of protecting their customers and staff, placing them in a no-win situation in which they essentially have to pick a side, resulting in lost customers, despite the decisions they make.”

Growing inflation

Another trend – one that retailers can’t pick a side on – is that of inflation and its associated repercussions on the business’ bottom line. An unprecedented recent rise in Canada’s inflation rate, which rose to 5.1 percent in January 2022, has resulted in subsequent increases in the cost of wages, raw materials, freight and finished goods, adding significantly to the cost of operating within the industry. It’s a predicament that’s placed many retailers in the perils of economic strain, particularly those within sectors and verticals with very low margins. The trajectory of inflation has ultimately led to a substantial increase in the cost of living for Canadians which has been starkly evidenced by soaring food prices. And, according to Winder, it’s only a matter of time before the rest of the industry follows suit by raising their prices, bearing inevitable ramifications with respect to consumer behaviour.

“Retailers are getting hit by cost inflation on all fronts,” he points out. “In fact, I haven’t seen inflation like this in the past thirty years. And from the merchant’s perspective, they have to raise their prices at some point. However, what that will do in the end is influence and change consumer behaviour. When wages for the average Canadian don’t increase inline with the cost of product on the shelves, they’ll look to cut back on their spending. Whether it’s felt in the sale of discretionary items, travel and hospitality, food service or anything else, there will be many retailers who will suffer as a result of inflation. Some consumers may also channel down from one retailer or brand to another that offers similar product at a lower price. Many within the industry are going to need to wrestle with this dilemma, not wanting to lose their competitive advantage and price perception, but unwilling or unable to eat the cost increases that they’re facing. It’s posing a massive challenge for everyone to overcome.”

A broken supply chain

Loblaws on Jarvis Street in Toronto on March 1st (Image: Dustin Fuhs)

One of the longest standing impacts of the COVID-19 pandemic is the disruptions it’s caused within the global supply chain. Emphasized by a slew of port closures that have resulted in significant congestion and delays around the world, as well as ongoing container shortages and an inflated cost of freight, the current state of the global retail supply chain can most accurately be described as unpredictable at best, perhaps even broken. It’s causing headaches for retail planners and industry forecasters, adding another layer of complexity to the challenges currently faced by retailers everywhere. As Winder points out, the issues impacting the supply chain are not isolated, but systemic and negatively effecting the performance of retailers throughout their entire organization, adding that it may be a while before the equilibrium and assurance of global supply returns.

“The real challenge is that the whole supply chain has been slowed down,” he suggests. “Most of the time when there’s a supply chain crunch, it’s related to a pocket of the supply chain which can be worked around. But, as a result of the pandemic, every piece within the supply chain has slowed down, from the factories and truck drivers to the ports, vessels, trains, warehouses and stockers in the stores. And, here at home, we’ve had some unusual challenges, including the B.C. floods and recent mandate protests across the country, that have added to those present within the global supply chain, disrupting further Canadian retailers’ ability to move product. However, there are some retailers that are smartly consolidating skus and products and focussing on the 20 percent of their product that represents 80 percent of their sales. Everything passes eventually. But it may be another couple of years before the challenges currently disrupting supply chains are sorted out and things go back to something like normal.”

Shortage of retail talent

Uniqlo Hiring Sign at CF Toronto Eaton Centre
Uniqlo Hiring Sign at CF Toronto Eaton Centre – Photo by Dustin Fuhs

Causing just as much disruption as any other trend impacting the industry is the ongoing labour shortage that persists across the country. Dubbed the ‘Great Resignation’ by some, a lack of prospective employees to fill positions within organizations, primarily in customer-facing roles, is hindering retailers’ efforts to staff their stores. However, the issue around labour extends far beyond simply filling positions with the more pointed issue centred around a shortage of retail talent. Without the proper skilled individuals on the floor, retailers’ efforts to provide the exceptional and knowledgeable service that consumers are seeking are severely impeded. It’s a trend whose impact is perhaps more noticeable than most others as it impacts the consumer directly. And it’s one, suggests Winder, that is currently coming to a head.

“It’s quite a fascinating situation,” he says. “There are a number of reasons that have led many to leave the industry, including concerns related to health and safety and inadequate wages and benefits. But, what’s happened, generally speaking, is that a lot of Canadians across the country have done some soul-searching over the past couple of years. And some of those who had been working within the industry have decided that it’s just not worth it anymore. It’s causing real problems for retailers everywhere. But what’s worse is the fact that customers are starting to notice it. People out shopping retail are recognizing that stores aren’t properly staffed or merchandised, and customer service offered in-store is really starting to suffer. And what’s going to happen as a result is that we’re going to reach a tipping point where retailers will need to make the retail job better and more attractive to prospective employees and the right retail talent. Retail is about people and engagement. Going forward, the brands that keenly understand this, providing customers with the service and care that they’re looking for, will differentiate themselves from their competitors.”

Continued rise of ecommerce

TheBay.com Order Pickup at Hudson’s Bay Bloor & Yonge (Image: Dustin Fuhs)

Perhaps the most explosive effect of the pandemic, one that’s completely altered the entire retail operation, is the accelerated rise in ecommerce. Precipitated primarily by the Canadian consumers’ inability or unwillingness to shop in-store for product during lockdowns and restrictions, online ordering soared across the country. And, although ecommerce gains have levelled out somewhat, the shift in consumer behaviour toward digital channels to make purchases certainly isn’t showing any signs of receding. The ease and convenience that’s inherent in online ordering for a range of different products are aspects of the shopping journey that Winder says consumers have come to expect. And, he adds, there are a number of retailers across the country that are actively working toward making improvements to the digital experience they offer consumers.

“From my perspective, Canadian retailers have always been kind of dragging their feet while other nations embraced ecommerce years earlier,” he asserts. “But those operating in the country are realizing that the digital channels aren’t the boogeyman and that they can actually help the business. And for the smaller retailers, they aren’t necessarily looking at some of the bigger players like Amazon as the enemy anymore because they’ve recognized that they can get on their marketplace and get noticed by a lot more customers than they could have otherwise. And the rest of the big guys are running fast to keep up. Walmart, as an example, has committed to investing $1.5 billion in their omnichannel infrastructure. Canadian Tire has also ramped up their ecommerce capabilities and have seen some great gains from those efforts through the pandemic as well. For years in Canada, we’ve been talking about an ecommerce tipping point. We’ve gone beyond it now and can expect a lot of innovation and creativity from brands over the coming months with respect to the continued enhancement of online offerings and service.”

With so many pressures and constraints currently faced by retailers operating across the country, there’s no doubting that the collective resolve of the industry is being tested like never before. However, as Winder points out, where there are challenges, the very best retailers are often able to navigate the turbulence, turning those challenges into opportunities and ensuring that they continue to carve out a path toward further growth and success. 

Watch for part 2 of Bruce Winders ‘top 10 trends’ that will shape the near- and long-term state of the retail industry in Canada on Retail-Insider.com soon. 

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Article Author

Sean Tarry
Sean Tarry
Sean Tarry is an experienced writer who leverages his unique storytelling abilities to bring retail industry news and analysis to life. With 25 years of learning, including over a decade as Editor-In-Chief of Canadian Retailer magazine, he’s equipped with a deep understanding of the unique world of retail and the issues, trends, and innovators that continue to influence its evolution and shape its landscape.

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2 COMMENTS

  1. The image used for supply chain interruptions at Loblaws is due to the Frito Lay “stop sell” – more an issue with inflation and rising costs that pits supplier vs retailer vs consumer to see who will absorb these increases

    • Hi Michael,
      The image was chosen specifically as a representation of the supply chain issues, as the product planogram in the photo are PC brand skus. Unless PC utilizes Frito Lay as a white-label producer of their own products.

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