Pressure is mounting across Canada’s retail sector at its most critical time. Ahead of Black Friday and the holiday season, retailers are struggling to protect margins, keep shelves stocked and stay competitive as inflation continues to squeeze households.
Behind the scenes, they’re starting to own key parts of their supply chain: investing in logistics, warehousing, and even bio labs. It’s a shift that will influence everything from trade policy to consumer prices.
Vinayak Madappa, Retail Advisory Partner at Capgemini Canada, said retailers have faced constant disruption over the past few years. Post pandemic aftershocks, rising tariffs, geopolitical tensions, and volatile commodity prices have made global supply chains unpredictable.
“As a result, cost pressures are mounting, especially for those reliant on imports. In a lot of instances, these added costs are being passed to consumers, which isn’t sustainable. Capgemini’s 2025 Global Supply Chain Report found that profit margins across retail have declined by up to 18% since 2020, and more than 60% of Canadian retailers now cite supply chain control as their top strategic priority for the next two years,” he said.
“At the same time, shoppers’ behaviours are changing fast. Consumers are expecting products to be available instantly, whether they’re ordering online or in-store. To meet that level of expectation, retailers need tighter control and visibility over how products move through their networks.”
Madappa said a lot of investment is going into local infrastructure. Many retailers are expanding domestic warehousing and regional distribution hubs to reduce dependence on cross-border shipping.
“Canada is in a prime position to invest and leverage the geography advantage, offering access to both Atlantic and Pacific trade routes.
We’re also seeing the rise of “digital twins” — virtual models that help retailers predict disruptions, optimize inventory, and monitor product flows,” he said.
“Capgemini has used this technology with global clients to cut waste by up to 12% and boost fulfillment accuracy by 20%. Some retailers are going further, exploring vertical integration through local partnerships or investment in areas like vertical farming and biolabs. These strategies are particularly relevant in grocery and wellness, where sustainability and transparency drive consumer trust.
“Transformation doesn’t have to start at full scale. The most successful retailers test new models in focused markets first, proving results before expanding. It’s a “start small, learn fast” mindset that keeps them agile. We’ve seen this firsthand in Capgemini-led pilot programs, where regional warehouse trials evolved into network-wide optimization within a year. All of it comes down to better control; less waste, smarter pricing, and faster response to demand shifts.”
Madappa said artificial intelligence is leading the way. Retailers are using AI to automate routine tasks, forecast demand, and plan logistics in real time. Generative AI is now being used to analyze data, improve collaboration, and model scenarios like supply shortages or sudden demand spikes.
“When paired with digital twins, it gives retailers an almost live view of their operations – allowing faster, more confident decisions. Capgemini’s 2025 Supply Chain research shows retailers using AI-driven forecasting have seen up to a 25% improvement in supply chain efficiency. The key is making sure technology and human decision-making work together,” he said.
“Many retailers are moving to hybrid cloud setups, keeping what needs to run in-store local while using the cloud for analytics and planning. It’s a balance between speed, security, and flexibility, and it only works when people are ready for it too. A big focus for us is helping retailers develop their people, not just their systems, so new technology takes hold and drives lasting impact.
“Finally, data-driven personalization continues to grow. Retailers are using customer insights to tailor offers and experiences more effectively, improving engagement and managing inventory more intelligently.”
Madappa said policy can make a real difference by supporting local infrastructure. Incentives for investment in warehousing and distribution hubs would go a long way toward strengthening Canada’s logistics network and reducing reliance on global shipping routes.
“Tax credits or grants for companies building micro-fulfilment centres or sustainable transport systems could also encourage innovation and job creation at the same time,” he said.
“When it comes to affordability, the focus should be on helping companies lower their operating costs through modernization, rather than relying solely on monetary policy to manage inflation. If businesses can bring down their costs, that stability will eventually reach consumers through fairer, more predictable pricing.”
Over time, consumers will see more consistent product availability and fewer price swings, explained Madappa.
“Localized supply chains are more stable, allowing retailers to respond faster when costs or demand change. Convenience will keep driving innovation as subscription models and smarter delivery options are growing fast and shoppers look for simplicity and reliability,” he said.
“Transparency will also become standard. People want to know what’s in the products they buy and where they come from. Retailers are responding with clearer sourcing and sustainability data. Capgemini’s 2025 Consumer Behaviour Report shows 72% of shoppers now say transparency directly influences their purchasing decisions, turning it into a true competitive advantage.
“In the end, the retailers that move early, stay adaptable, and keep consumers at the centre will be best positioned for whatever comes next.”
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