The following is an analysis by Toronto-based retail consultant Ed Strapagiel, who publishes a monthly report with his perspective on the state of the Canadian retail industry. Mr. Strapagiel's discussion appears to be a good news story as retail sales numbers come in for the remainder of 2017, and we look forward into the new year ahead.
By Ed Strapagiel
According to the latest Statistics Canada unadjusted data, total year-to-date Canadian retail sales were up 7.0% by November 2017. This leaves just one month to go to fill out the year, and retail sales growth is on track to come in at a 20 year high. Current momentum indicates that December is unlikely to disappoint.
As the chart above shows, the underlying 12 month growth trend (green line) improved considerably during much of 2017. The 3 month trend (orange line) has weakened slightly in the last few months but is still running at a historically high pace.
The Automotive & Related sector has boosted total retail sales throughout the year. On the other hand, Food & Drug sales have been a drag on the market, and sales growth has further softened in recent months. The Store Merchandise sector, on yet another hand, has been particularly strong in 2017.
Food & Drug: Retail sales growth in the Food & Drug sector weakened at the start of the year, recovered somewhat in mid 2017, but has fallen off again in recent months. The underlying 12 month trend (green line in the above chart) now stands at 3.3% and will likely end the year even slightly lower, at less than half of the overall retail average.
The main issue in this sector is supermarkets and other grocery stores, where retail sales are up a scant 1.0% year-to-date thus far in 2017. The one bright spot is the small specialty food stores segment, with year-to-date sales up 8.0%.
Health & personal care stores are faring better than supermarkets and grocery stores, with year-to-date retail sales up 6.0%. Nevertheless, the gain for health & personal care retailers is less than half of their 13.8% annual increase recorded in 2016.
Store Merchandise: The Store Merchandise sector continues to post high retail sales growth levels. After 11 months of 2017, year-to-date sales are running 7.0% ahead compared to 2016. Retail sales are also up 7.6% year-over-year for the 3 months ending November 2017, indicating that there's more upward potential left. The underlying 12 month trend (green line in the chart) has improved significantly since about Q1 2016.
Building material & garden equipment/supplies dealers and electronics & appliance stores are leading the way, with double digit year-to-date retail sales growth of 13.0% and 12.5% respectively.
All retail store types in this sector are posting positive sales increases. Home furnishings stores are up just 1.6% year-to-date after 11 months of 2017, but even this is ahead of what grocery stores are producing.
Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the table below are estimates based on previous trends.
Automotive & Related: The Automotive & Related sector continues to post strong retail sales gains. The underlying 12 month trend has relentlessly increased for the last 2 years. But it has now caught up to the 3 month trend so that retail sales increases going forward may not be quite as robust.
New car dealers hit a bit of a speed bump in November 2017, but this was not necessarily unusual. They are likely to have an all-time high in sales 2017. Year-to-date retail sales are up 9.7% after 11 months of the year.
Gasoline station retail sales are up 13.2% year-to-date. This is very high compared to any other retail segment, but still represents some steadying off compared to the 22.5% year-over-year gain recorded for Q1 2016. Gasoline prices appear to be stabilizing.
By The Numbers:
Canadian E-Commerce Stats: StatsCan started providing ecommerce retail sales data in January 2016. While the amount of data is limited, some trends appear to be emerging. Here are some results.
Overall, e-commerce represents about 2.6% of Canadian retail sales for the 12 months ending November 2017, including both pure play operators as well as the online operations of brick & mortar stores. Canadian consumers however also buy online from foreign websites, spending which is not captured in these numbers.
Year-to-date results for 2017 (11 months) show that Canadian e-commerce sales are up 36.6% from a year ago, a much higher gain than for retail in general.
Note that location based retail is the same as that in the preceding large "By The Numbers" table. It's what's normally reported as Canadian retail sales. Except that it isn't. Location based retail excludes another section called Non-Store Retailers (NAICS code 454), which covers electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce businesses are. For the 12 months ending November, electronic shopping and mail-order houses had an estimated $8.7 billion in e-commerce sales.
But that's not the only source of e-commerce, as (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending November, this group had an estimated $6.8 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $15.5 billion in e-commerce sales by Canadian operators over a 12 month period. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include purchases made by foreigners at Canadian e-commerce businesses.
For electronic shopping and mail-order houses, an estimated 82.7% of their sales are allocated to e-commerce. For the (mostly) bricks & mortar crowd, it can be estimated that just 1.2% of their total sales come from e-commerce.
In the final section of the above table, (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generate an estimated 56.1% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 43.9%.
For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.
This analysis is updated monthly as new numbers are published by Statistics Canada. [Connect with Ed Strapagiel on LinkedIn]