THE IMPACT OF COVID-19 ON RETAIL IN CANADA - Active International
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WEEK OF JUNE 8, 2020
THE IMPACT OF COVID-19 ON RETAIL IN CANADA
The Retail industry has been one of the hardest hit by the
COVID-19 pandemic. Supply chains have been completely
disrupted as retailers have seen an unprecedented
demand for disinfectants, toilet paper, and even yeast.
Retailers have quickly pivoted their strategies to keep
their employees and their customers safe.
This report covers the impact of COVID-19
on retail in Canada, including a 2020
industry forecast, insight into global
consumer behaviour, and an interview with
a Canadian retailer to offer a brand
perspective.
Governments across the country are in
different stages of easing restrictions, and
retailers that were previously deemed non-
essential are now re-opening.
What can these businesses do to make
customers feel safe when returning to their
stores?
2020 RETAIL FORECAST
2020 RETAIL FORECAST: eMarketer
predicts total retail sales in Canada will be 2020 Retail Sales (Billions)
$598 billion in 2020, down from $638
billion in 2019.
This is a year-over-year decline of 6.2%, $52.04
more than double the drop that occurred
in 2009 during the global financial crisis.
The decline for Q2 alone is expected to be
15.5%, likely amplified by the fact that
many brick and mortar retailers were
deemed non-essential and forced to close.
RISE IN E-COMMERCE: e-Commerce activity $546.12
has risen substantially and is forecasted to
reach over $52 billion in 2020, an increase
of about 21% from 2019, and a proportion
of about 9% of all retail sales.
PATH TO RECOVERY: It is predicted that a
Retail (Other) E-Comm
recovery to pre-COVID-19 spend levels for
retail may not happen until 2022.
ACCORDING TO STATISTICS CANADA, CANADA’S RETAIL INDUSTRY WILL FALL BY
40% OVER 2X
OF CANADIAN RETAILERS EXPERIENCED THE DROP THAT OCCURRED IN 2009
STORE CLOSURES IN MARCH. DURING THE GLOBAL FINANCIAL CRISIS.
Sources: eMarketer, Statistics Canada
CONSUMER SHOPPING BEHAVIOUR
EXPECTED CATEGORY SPENDING CHANGES, CANADA
According to McKinsey & Company,
nearly every category of retail Jewelry 3% 32% 65%
purchasing is expected to be Footwear 3% 35% 62%
negatively impacted by COVID-19. Consumer Electronics 5% 34% 61%
With high unemployment levels and Apparel 5% 34% 61%
economic fluctuations, consumers
Gasoline
are increasingly cautious of how and 5% 35% 60%
where they spend their disposable Furnishing & Appliances 6% 33% 61%
income. Tobacco 9% 65% 26%
Household Supplies 10% 72% 18%
Jewelry, footwear, apparel, and Alcohol 12% 59% 29%
consumer electronics are categories Grocery 22% 67% 11%
expected to experience the largest
declines. Grocery, as one may expect, Increase Stay the Same Decrease
is the least impacted. (note: expected spending change over the next two weeks vs. before the crisis)
SHOPPING DATA BY CHANNEL, 2020 VS. 2019 INDEX, USA
• With many shelter-in-place Week
Week
Beauty
Gas & C-
QSR Food Dollar Mass Liquor
Home
Improve Online
restrictions, Beauty, Gas/ Convenience Ending Store
ment
Store, and QSR sales are down since 1 5-Jan 94 126 104 105 117 112 104 109 117
the start of the pandemic. 2 12-Jan 96 126 101 104 118 108 106 105 116
3 19-Jan 92 123 106 101 110 104 95 112 116
4 26-Jan 98 126 106 103 116 110 103 106 117
• Food and Dollar channels have 5 2-Feb 94 126 107 103 104 109 106 106 110
maintained strong sales, while Mass 6 9-Feb 91 119 102 107 118 110 94 108 118
and Liquor channels have picked up 7 16-Feb 100 122 105 102 114 110 105 118 108
8 23-Feb 108 120 102 105 113 113 107 118 113
sales in recent weeks. 9 1-Mar 116 118 103 103 116 111 113 113 114
10 8-Mar 108 114 101 118 110 123 105 123 113
• As the weather has improved, the 11 15-Mar 91 109 88 154 151 146 141 126 122
Home Improvement channel has 12 22-Mar 30 82 63 158 146 125 186 119 123
13 29-Mar 7 59 55 106 103 95 100 109 108
surged as consumers prepare to enjoy 14 5-Apr 4 66 59 124 123 106 93 108 142
warmer weather and time at home. 15 12-Apr 4 59 59 118 122 100 103 105 144
16 19-Apr 5 62 68 114 104 103 89 154 172
• The Online channel indexes 17 26-Apr 6 59 70 120 127 110 118 144 162
18 3-May 11 67 76 126 129 117 121 184 166
extremely higher year over year since 19 10-May 15 69 77 127 130 123 144 182 164
the first week of April onward. 20 17-May 33 69 78 122 126 120 131 170 162
LEARNING FROM CHINA’S CONSUMER BEHAVIOUR
In China, the number of grocery transactions declined by 30% during the pandemic, but the average
value per transaction increased by 69% (indicative of “stocking up” behaviour). It is evident that the
pandemic has changed consumer behaviour, and some of these changes may become permanent.
Sources: McKinsey & Company, Numerator
ARE WE READY FOR A RETURN TO NORMAL?
THE IMPORTANCE OF BUSINESS NORMALCY:
According to a study of 20 countries conducted by GlobalWebIndex, 9 in 10 consumers globally
think it is important for businesses to return to normal – opening their shops, resuming their
regular advertising, etc. These figures are highest among Baby Boomers and the higher income
group.
Customers feel ready, so businesses must be prepared well in advance of reopening.
9 in 10 only 63%
CONSUMERS THINK IT IS IMPORTANT FOR OF CANADIAN CUSTOMERS SAY THEY
BUSINESSES TO RETURN TO NORMAL WOULD SHOP AT A MALL IN 2020.
On June 12th, most of the province of Ontario (with the exception of the GTHA and a few other
regions) will be permitted to re-open shopping malls, tattoo parlours, barber shops, hair and
beauty salons, provided proper health and safety measures are in place. We anticipate the GTHA
and other areas will soon follow in the coming weeks.
These businesses can learn from other regions, such as Quebec, which was one of the hardest hit
by COVID-19 in the country.
RETAIL SUCCESS IN QUEBEC
A study done by Leger tracked the proportion of businesses in Quebec that stood out at each stage
of the customer journey in the eyes of the customer. It is imperative that retailers consider these
stages when developing plans for their own re-openings.
CUSTOMER DELIVERY &
ENTRY WELCOME SERVICE AREA PAYMENT
SERVICE PICK UP
16% 30% 60% 9% 8% 7%
Sources: GlobalWebIndex, Ipsos, LegerRE-OPENING CONSIDERATIONS
HEALTH & SAFETY
IMPORTANCE OF CASHLESS
According to a study by the IMI on May 14th
of North PAYMENT OPTIONS:
American customers, the following actions stood out in
41%
terms of instilling customer confidence in retailers:
SANITARY PRECAUTIONS: Providing hand sanitizer at the door
was a critical action (64% important), while greeters wearing GEN Z
masks and providing cleaning wipes was also key (39%)
LIMITING INTERACTION: Respondents would like to see this
done through retailers offering curbside pickup orders (43%),
as well as retailers placing a capacity limit for the number of
42%
MILLENNIALS
people allowed in store at one time (39%).
MANDATORY MASKS: Masks may become a staple, as 41% of
consumers felt it was important for masks to be mandatory for
customers upon retailers reopening.
30%
BOOMERS
30% OF CONSUMERS INTEND TO CONTINUE
USING SELF-CHECKOUTS AFTER THE CRISIS.
OMNICHANNEL MARKETING
Even once stores re-open, it is more important than ever to Canadians Making Online
maintain an online presence. A survey from Numerator shows Purchases of Items They Would
that Canadian customers are purchasing items online that Normally Buy In-Store
they would normally buy in store to a greater extent even as 50%
stores begin to re-open across Canada (45% - w/o 5/31) than
they were doing earlier in the pandemic (31% - w/o 3/31). 40% 45%
If fulfillment or web traffic becomes an issue, retailers can 30%
37%
consider pausing checkout options while allowing people to 31%
browse and add-to-cart but purchase later, rather than
20%
shutting down the website completely and losing out on a
sales opportunity.
10%
Key shopping seasons like Black Friday and Boxing Day are
coming in Q4 – if physical distancing measures are still in 0%
place during those sales, e-commerce will be exponentially w/o 3/31 w/o 4/21 w/o 5/31
more important, so now is the time to start preparing.
Sources: IMI Next Wave, GlobalWebIndex, McKinsey & Company, Numerator, Think with GooglePREPARING FOR A CHALLENGING ROAD AHEAD
The pandemic was a catalyst that triggered a wave
of permanent retail closures across North America.
We recently heard news of Pier 1 closing all stores
in the US and Canada, Aldo and Reitmans filed for
creditor protection, and Neiman Marcus and J. Crew
have filed for bankruptcy.
"Much as it does with human beings,
[the COVID-19 pandemic] finds pre-
existing conditions or underlying
ailments in companies as well.
Some of those may be that a company
is carrying too much debt, that they're
too reliant perhaps on physical stores,
or in some cases, it's just brands that
have had trouble sort of finding their
positioning for years."
- Doug Stephens, Retail Consultant
Investing in key organizational capabilities will
strategically position retailers for growth.
According to McKinsey & Company, the following
are the capabilities executives believe require
greater investments within the next 12-18 months:
• E-COMMERCE OR OMNICHANNEL – Upgraded
online merchandising, ability to interact with
customers on their terms, cross-channel
inventory management.
• DATA & ANALYTICS – machine learning , social
media listening, digital marketing and loyalty
programs.
• FLEXIBLE SUPPLY CHAIN – last mile delivery,
direct to consumer, adaptability, partner terms.
40%
OF PEERS BELIEVE THEY
NEED TO INCREASE
THESE CAPABILITIES 2-3X
Sources: Visual Capitalist/Kantar Brand Z, CTV News, McKinsey & CompanyBRAND RESPONSE
INTERVIEW WITH IRENE DALEY,
ASSOCIATE VP MARKETING, CANADIAN TIRE
WHAT HAS BEEN YOUR BIGGEST CHALLENGE TELL US MORE ABOUT THE MESSAGE OF YOUR AD
THROUGH THE CRISIS? CREATIVE AND WHAT LEAD TO THIS APPROACH?
Keeping up with the changes. We have never Our brand ad shows that although things are different
faced anything like this before as an industry, right now, we are doing everything we can to help
as a nation or as a planet so we are being Canadian communities keep going and we’re making sure
challenged every day to adjust to how to keep the important things stay the same. We also announced a
everyone safe and face this crisis together. pledge of a corporate $5 million Relief Fund consisting of
2 donations of $1 million each to the Canadian Red Cross
and United Way Centraide Canada, as well as $3 million in
WHAT DROVE YOUR DECISION TO CONTINUE
protective equipment (PPE) and other essential products
ADVERTISING DURING COVID-19
to frontline workers. This strategy felt very authentic from
We’ve always been about preparing Canadians Canada’s Store, as it’s a reflection of who we’ve always
for life in Canada no matter what that looks been and what we stand for as a brand.
like, and being dedicated to the communities
we serve has been our mission since 1922. It WHAT HAS THE CONSUMER RESPONSE BEEN TO
made a lot of sense for our brand to have a CANADIAN TIRE’S OVERALL RESPONSE?
voice in the challenge that Canadians are
facing right now and talk about how we’re in it Good, our social sentiment scores increased by 13% points
together, as a fellow Canadian. And it really since the campaign launched but even more important, we
made sense for us to help where we can, its have been able to provide over 400,000 masks, 10,000+
just the right thing to do. hospital scrubs, cleaning supplies and other supplies to
our deserving frontline workers.
WHAT ADVICE WOULD YOU GIVE TO BRANDS AND MARKETERS NAVIGATING COVID-19?
Stay true to your brand and say something meaningful. For Canadian Tire, we’ve always equipped Canadians
for the jobs and joys of life in Canada, but that way of life had changed. As a fellow Canadian, we understood
what Canadians were going through and knew we could help with preserving the things you do for the ones
you love while also taking care of our communities with a tangible commitment to help ($5 million relief
fund).As provinces across the country continue to enter their various stages of re-opening and ease
physical distancing restrictions, it is crucial to remain vigilant of consumers’ shifting habits as
we enter the recovery period. Being attentive to health and safety concerns of consumers is
paramount at this time. Anything retailers can do across media channels to communicate the
steps they are doing to keep customers safe may encourage customers to visit the store.
Once inside the store, the stages of the customer journey are equally critical for maintaining a
positive in-store experience.
Ultimately, a data-driven approach to marketing and media strategy will help brands remain
agile and prepare for what’s next.
There’s no one-size-fits-all approach on how to respond to the pandemic, with many category
nuances. We're here to help you navigate now, and plan for next. We may all be amid uncharted
territory, but together we achieve more.
Thank you for your partnership.
Susanne Morello
SVP Media | Active International Canada
Susanne.Morello@activeinternational.com
To read more of our COVID-19 media and consumer
insights, visit activeinternational.ca/covid-19You can also read
