2023 Canadian retail sales ended in a lackluster way, growing only 0.9% YOY for All Stores in December. Discretionary spending decreased in December, decreasing -1.0% YOY for All Stores Less Automotive, Food, and Pharmacies. The year-to-date sales grew in 2023 over 2022 to 2.1% and 0.4% respectively. The economic conditions in December were not ideal considering inflation remained high, and there were numerous layoffs announced at the end of the year.
Regardless of deep Boxing Day sales, consumers were sticking to their budgets. As mentioned last month, Black Friday and Cyber Monday both experienced record sales, with increases of 7.5% and 9.6% YOY respectively. This likely resulted in the majority of consumers completing their planned shopping before Boxing Day, and the needs and wants within their budget had already been acquired.
Discretionary spending overall took a big hit in December, with various categories decreasing over 2022, and others down throughout the entire year overall, including:
- Furniture Stores were down -7.9% YOY and -6.8% YTD as the category struggled throughout 2023. This is likely still related to the COVID-era highs the category experienced while we were spending more time at home. Major players, such as GTA’s Lastman’s Bad Boy have even filed for bankruptcy.
- Sporting Goods, Hobby, Book and Music Stores were also down -7.2% YOY and -1.7% YTD, as the category that stood strong through COVID also continues to fall. Warmer weather through the winter is partially to blame, as skiing, skating, etc. have all been much more difficult to do throughout 2023. According to Canadian Tire, this was a contributing factor to their disappointing Q4 results.
- Beer, Wine, and Liquor Stores were down -7.1% YOY and -2.5% YTD as consumer preferences are clearly changing. This category, which is often popular for gifting, struggled as consumers attempt to lead healthier lifestyles and/or opt for options from Cannabis as an alternative vice. This will certainly be a category to watch over the next couple years, both because of lifestyle changes, but also since there are major changes coming to how the product is able to be sold in Ontario.
Last month we discussed the increased revenues in Motor Vehicle and Parts Dealers, which continued to be up 5.2% YOY and 6.8% YTD. As the Canadian International AutoShow is currently on in Toronto at the time of writing this article, this category is top of mind. While the average price of a new vehicle in Canada remains high at $67,817, the AutoShow is reporting their third highest attendance in their 50-year history. The increased sales in this category may, however, be slightly misleading. With the average price of a new car rising almost 20% over 2022 in September 2023, this may be merely increased prices rather than increased demand. It may not be consumers shopping for new cars more frequently, but the prices being highly elevated.
2023 was a tumultuous year for retail sales in Canada. The exit of Nordstrom, the numerous layoffs/store closures, and inflation all made the market difficult to predict. 2024 has started similarly to how 2023 ended (in the US), but hopefully there are strong sales on the horizon. As we are now more than half way through the first quarter of 2024, JCWG is thinking about:
- Through 2023, JCWG felt like we were seeing/saying the same thing month after month (lower discretionary spend, increased inflation, etc.). Will we continue to experience this status quo through 2024?
- What major shifts will we see in the retail industry in Canada if interest rates come down?
- With people moving back to cities, and therefore increasing their costs of living in most cases, what effect will this have on discretionary spend? Will smaller towns/suburbs experience sales decreases as a result?
- Retail leadership, according to a survey conducted by the Ebeltoft group, is not optimistic about 2024 sales projections. Have smaller retailers been preparing for this to the extent of larger players?
- How have YOU prepared for the uncertainties that 2024 brings?
For support with your 2024 strategy in times of uncertainty, reach out to the strategy team at JCWG!
Thank you J.C. Williams Group for this report.
