Hope Springs Eternal OVERVIEW representing a healthy cross section of formats and geographies - Retail Council of Canada
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Published: June 2019
Spring 2019
Hope Springs Eternal
A tough winter gives way to a soggy, late spring but recent sales performance gives a
glimmer of hope that there will be enough momentum to bring 2019 in on plan.
The following results are from an RCC survey of large and mid-size members looking at sales and other
performance metrics for the first 13 weeks of the retail year (February-May MTD) plus the quarter ahead as well
as a perspective on the balance of 2019. The survey was conducted during the period of May 21-24, 2019.
representing a healthy cross section of formats and geographies.
OVERVIEW
For many retailers the first 13 weeks of 2019, plus May month-to-date, have been a challenge. Vexed by a cold
and snowy winter with weather extremes that closed stores and left parking lots icy skating rinks, then left to
face a soggy late spring in central Canada-east, February and March were challenging months for most. The good
news is April (early spring in BC) was an improvement, and May month-to-date another step forward
improvement. Neither April nor May’s positive results were enough though to make up for the soft start to the
year, but the numbers are heading in the right direction and helped narrow the gap. Together record-setting
employment numbers (best in four decades) and positive momentum give retailers optimism that when, not if,
spring blooms in central and eastern Canada the toughest months are behind them and there is enough pent up
demand and momentum to deliver 2019.
Is anyone seeing growth? Yes, several. And if reading through major online pure-play retailers such as Amazon
and Wayfair public results tell us anything, it confirms the consumer is shopping and the shift to online continues
to outpace growth in brick-and-mortar retail with eCommerce up almost 17% year-over-year in March as
reported by Statistics Canada.
Spring 2019
• 57% of respondents say spring sales were down when compared to same store sales from
the year before. Even though some respondents forecasted being down this spring, all
respondents who reported they were down were also down to plan.
• Average same store sales for the period were down -0.38%. Some larger winners brought
up the average, but not enough to bring the average into the positives.
• Most report slower online sales for the start of the year. Online sales continue to
represent a small portion of total sales; just over 7% of total sales (when excluding
retailers who do not have bricks and mortar locations).
• Hope springs eternal – retailers are still positive that they will make plan and see
increased sales. 71% of respondents predict the year’s sales will be up between 1% and
5% overall. On average, respondents suggest a healthy increases of 3.9% .
©Retail Council of Canada 2019. The content of this report cannot be reproduced in whole or in part without explicit written permission and is
intended for members of Retail Council of Canada.Retail Conditions Report – Spring 2019 2
RCC asked respondents to compare sales in spring.
• Spring sales have generally been lower than same
store sales from last year, with 57% of
respondents reporting sales were lower. On
average, down -0.4%
• Similarly, most of the respondents’ report being
down to plan in addition to lower same store
sales (54% of respondents)
CUSTOMER BEHAVIOUR
Notwithstanding dynamic changes in shopping behaviour, the when-not-if spring shoppers should be out in force at
least for their gardening and home seasonal items once the weather turns in early June in central/eastern Canada.
So from that perspective within several categories sales are deferred, not lost. Many retailers though reported a
distinct value conscious bias to consumers for the first part of 2019 – very price sensitive. Canadian consumers have
always been known as value oriented, but this season so far seemed particularly pronounced – and looking at the
latest economic state-of-the Canadian household we begin to see why. The Bank of Canada has hiked the
benchmark interest rate 5 times since mid-2017, home values fell in 2018 for the first time in three decades and
almost 32,000 Canadians filed for insolvency in the three months through December. This is balanced though
nationally by a strong economy that created 122,700 jobs in Jan/Feb, the best start to a year in Canada since 1981.
RCC Factoid!
The Easter Holiday came late this year, April 21 versus April 1 in 2018, so most of the retail sales associated with the
holiday would have been pulled out of March and into April, making month-to-month comparisons a bit tricky.
©Retail Council of CanadaRetail Conditions Report – Spring 2019 3
From Sea to Shining Sea: Results by Region
In British Columbia, while solid enough, growth continues to be difficult to comp off, and now consumers are
dealing with the highest gas prices in North America and what is shaping up to be an early start to the forest fire
season. Hiring remains difficult, and concerns over the cost of living and its effects on crowding out the
discretionary income for many are top of mind for retailers operating in this province.
On the one hand, Alberta offers retailers at the very least percentage growth as sales numbers are relatively easy
numbers to comp-off from a weaker 2018. Retailers are telling us there is light at the end of a long tunnel in the
Province, and there is hope that the new government that can kick-start job creation and take a second look at
regulations that may have been considered as non-business friendly. In the Prairie Provinces, both Manitoba and
Saskatchewan demonstrated strength for most members though there is concern recent trade tussles with China
and their effects on the farm economy might negatively impact consumer spending for the remainder of the year.
Where there is growth: Ontario is playing a big part, though for some, increased competition and a consumer
looking to trade down, particularly on discretionary bid-ticket items, this is a concern. Quebec as a province is a
North Star – a beacon of hope. Statistics Canada tells us that for March (latest numbers available) there was 8%
retail growth in the province - numbers certainly hard to come by elsewhere in the nation. For most, the Atlantic
Provinces are robust, continuing the trend from Holiday, reporting solid, consistent gains.
RCC Factoid!
We observed a bit of jump in Statistics Canada general merchandise numbers for the month of March, released late
in May, and peeling back the results we focussed on the new retail cannabis numbers. For the month of March
retail cannabis sales were $60.54 Million. In absolute terms, as a percentage of March’s retail sales ($29.5Billion –
net auto/gas - up 1.6% YOY) it’s relatively small, but worth remembering that this number was zero in 2018, so that
is a net-new sales number that did not exist in Statistics Canada retail sales numbers last year.
©Retail Council of CanadaRetail Conditions Report – Spring 2019 4
SPECIAL FOCUS: DRIVING STORE TRAFFIC
What used to be a trend is now a feature of modern retail – store traffic continues to decrease, and incremental
store traffic is tough to come by. While the focus for both time and treasure is shifting to higher conversion rates in
the stores, retailers of all formats continue to refine their models and focus on strategies and tactics to drive
footfall. We asked retailers what were their best practices in terms of driving store traffic, and to reflect on what
they did in the past that they found was less effective so far in 2019.
• In-store activations and experiences are now key not only for creating brand and engaging their existing
customer base, but also for bringing customers (back) to the store. Examples include activities such as
product demonstrations to local celebrity chefs to clinics and instruction programs. For those in shopping
malls, in-store activity is attracting shoppers out of the isles and into their stores to check out what all the
excitement is about. Partnerships with shopping malls, within their communities and influencers were
also mentioned, although several are taking a second look at the breadth of their paid influencer programs
in the context of driving traffic.
• Print Flyers are still recognized traffic drivers for many, though the increase print and distribution costs,
plus changing consumer consumption patterns, have accelerated the integration of, or even the complete
move to, digital flyers. Similarly, partnerships with shopping malls, within their communities and
influencers are also effective.
• Ensuring that they do the most with their existing customers. Loyalty Programs are a key element with
retailers utilizing both price and product offer strategies as well as campaigns that offer “soft benefits” such
as early access and exclusive events.
• Price Promotions still work to create excitement, carefully calibrated to generate store traffic. We heard
from several retailers though who are working hard to limit or eliminate price promotion as the sole tactic,
fearing that customers have/will be trained to visit the store only when they are on deal.
• Utilizing the store for online returns or pick-up (BOPIS & BORIS) for those that have the ability and offer an
appropriate assortment, this is a key traffic driver. We heard from many retailers that this capability was in
the development pipeline, but acknowledged the many complexities behind flawless execution.
MARGINS AND INVENTORIES
For most retailers, inventory was up or flat through the spring (67% of respondents), with very few members
reporting lower levels. Accordingly, turns were generally down or flat (79% of respondents)
Through the spring, most reported margins down, with a higher portion of respondents reporting lower margin
dollars (67% of respondents). We continue to see growth in the online space, though online sales represent a
smaller portion of total sales (based on respondents, for those with bricks and mortar, online sales represent just
over 7% of total sales)
©Retail Council of CanadaRetail Conditions Report – Spring 2019 5
• Increases in average tickets slowed in
comparison to December’s numbers. Still,
43% reported a higher avg. ticket in spring.
• Well over half of respondents reported a
higher avg. basket in Spring; taken in
conjunction with falling Margin % and lower
inventory turns, this likely suggests greater
discounting.
RCC Factoid!
We asked retailers if they were seeing any
changing patterns in consumer returns – up,
down or sideways. The general consensus
was there was little to no change year-over-
year in overall percentage/consumer
behaviour.
SPECIAL FOCUS: Thoughts on Artificial Intelligence/Machine Learning (AI/ML)
We wanted to begin benchmarking and understanding where retailers were in Canada in terms of utilizing AI/ML in
their business. What we found was a wide spectrum, from retailers who are just starting to have the conversation,
to those that were baking AI onto the short term strategic roadmap, to merchants operating use-case pilots
through to fully integrated AI programs already entrenched in the business.
Where merchants were utilizing AI, it was in one of three areas:
• Customer Service/Chatbots: helping to efficiently handle routine, frequent requests (e.g. order status) and
triaging incoming issues so they are routed to the appropriate live customer service representative
• Merchandise planning and replenishment: much interest and early use-case development around
harnessing AI’s immense predictive powers to forecast inventory, store-by-store assortments and
warehouse management systems
• Robotics: whether nested in the supply chain operating systems or even on the shop floor running robots
that scan the shelves for stock and stock-outs, the intersection of AI and robotics is already yielding results
Where merchants see AI becoming important:
• Either through partners or directly, managing sophisticated external advertising and promotional
campaigns to yield optimal ROI on marketing programs
• In conjunction with loyalty and CRM programs, helping make the most relevant offers possible to
consumers by looking at vast fields of consumer shopping data and tailoring the right offer, at the right
time, via the right media
©Retail Council of CanadaRetail Conditions Report – Spring 2019 6
APPROACHING THE HALFWAY MARK IN THE CALENDAR: PROSPECTS FOR 2019
In our first survey of 2019, 78% of respondents anticipating growth between 1%
and 5% for the year. We see that the number of respondents who predict the year
will be UP1-5 has fallen: down to 56%. With that change, the number calling
‘Down’ or ‘Flat’ has also increased, with the number predicting UP5+ remaining
nearly flat. Many respondents indicated that they were down to plan, or down
overall in spring. Notwithstanding this, most respondents still expect to make up
for slower sales in the back half of the year. Of participating retailers, the average
year-over-year growth climbed a point, to 3.9%.
Most retailers report that Merchandise Pricing
will remain flat over the course of 2019. That
said, 18% predict that costs will rise.
While Retail is continually dedicated to keeping
prices low, we see that some 15% of
respondents are predicting increases to their
retail prices this year, under the pressure of
increased merchandise costs, as well as ongoing
adjustments to a wave of increases to labour
costs from 2018.
The Voice of RetailTM podcast
The Voice of RetailTM is a weekly podcast produced
& hosted by retail pioneer and veteran Michael
LeBlanc brought to you in conjunction with Retail
Council of Canada.
Each and every week we talk to some of the most
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the world.
Listen on iTunes or Spotify, or wherever you listen
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retailcouncil.org/the-voice-of-retail-podcast
©Retail Council of CanadaRetail Conditions Report – Spring 2019 7
RCC ASKED RETAILERS: “WHAT KEEPS YOU AWAKE AT NIGHT?”
As the year begins to unfold, the sleepless nights are starting to add up – here is a glimpse of what retailers are
thinking about when they are counting sheep:
• Consumer confidence & discretionary spending
A perennial issue with several different nuances, retailers are concerned that between the high cost of housing in
Canada’s major cities, Vancouverites facing the highest gasoline prices in North America, various and sundry
government taxes, there isn’t much left on the table for consumers to spend at retail, particularly higher-end
discretionary purchases.
• ROI for technological investments
Retailers are committed to investing in the technology that it takes to compete and drive their business forward, but
they worry that the days of seeing lasting incremental improvements are in the past – that the dollars invested are
only allowing them to keep up, not get ahead of the curve. So in other words the satisfaction and longer-term
benefits of technological investments are harder fought, and the victory laps shorter.
• Climate change
As the many instances of extreme weather begin to impact different regions across the nation, merchants and
operators alike are trying to assess the short term risk and long term implications of changing weather patters, short
term extreme weather episodes and the collision of seasons into one another. Whether it is spotting an “out-of-the-
blue” cost line item related to the purchase of additional salt for their parking lots, multiple days of store closures due
to extreme weather or a delayed spring and extended summer, retailers are wondering how and where to adjust.
Most retailers are now increasing focus on disaster planning. But how should retailers adjust their seasonal fashion
buys and promotional strategies when customers are still wearing capris in October?
A SPECIAL THANKS
RCC and the authors would like to express their thanks and gratitude to the many retailers that participate in this
report, both new and long-standing. We hope that the brief 1:1 phone interviews that form the body of knowledge
for this report add some value to the participating members. They certainly are crucial to the publication of this
report and the retail industry as a whole. Please contact mleblanc@retailcouncil.org if you would like to learn more
about contributing to Retail Conditions Report.
©Retail
©Retail Council of Canada 2019. The content of this report cannot be reproduced in whole or in part without explicit Council
written of Canada
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