Despite economic uncertainties, high costs of living, and some big stores closing their doors recently, Canadian retail sales have managed to stay strong. In March 2023, Canadian retail sales rose 2.4%. In comparison, US retail sales only rose 1.6%, and retail sales dropped in the UK, France, and Germany over the same period.1
Let’s look at the key factors behind this resilience, shedding light on why Canadian retail continues to thrive.
Canada's population growth plays a pivotal role in bolstering strong retail sales across the country. In July 2023, Canada saw the highest population growth rate recorded for a 12-month period since 1957, with its population reaching 40 million.2 The increasing number of households due to population growth results in higher consumption patterns, and the need for retail services, from local boutiques to large chains, grows with the population.
A Stable Economy and Consumer Confidence
One of the primary factors behind the strength of Canadian retail sales is the nation's stable economy. Canada's financial system is characterized by strong banking regulations, prudent fiscal policies, and a resilient labor market. This stability has instilled confidence among consumers, encouraging them to continue spending.
Brick & Mortar and E-Commerce Growth
In recent years, there has been significant growth in online retail sales in Canada, especially during the COVID-19 pandemic and the following years. In early 2022, e-commerce retail was around $3 billion/month, and e-commerce revenue in Canada is expected to surpass $124 billion by 2025, nearly double the revenue in 2021.3
Interest in brick-and-mortar retail shops is also growing. With continued demand for physical space and a historically low shortage of new spaces, the supply of retail can’t keep up with the demand. Many retailers have successfully integrated both physical and online retail channels, offering consumers a seamless shopping experience.
A Diverse Retail Landscape
The diverse Canadian retail landscape plays a crucial role in maintaining its strength. Canada is home to a wide range of retailers, from local boutiques to global giants. This diversity offers consumers a wide variety of choices and price points, catering to different needs and preferences.
Government Support and the Need for Experiences
During the COVID-19 pandemic, the Canadian government implemented several support measures and stimulus packages to bolster the economy and provide financial relief to consumers. This support helped many Canadians grow their savings, but they had nowhere to spend it.
Fast forward three to four years later, and we are seeing increased spending on not only goods but also, more substantially, increased spending on services. The increased demand for restaurants, travel, and entertainment reflects the lingering pent-up demand from the pandemic. Restaurant spending rose by 20% in the first half of 2023 over the first half of 2022.4
Canadian retail's ongoing strength can be attributed to a combination of factors, including significant population growth, a stable economy, an increase in both in-person and online shopping, and the desire to spend more money on experiences after the pandemic. These factors ensure that retail sales remain strong and position Canada as a retail success story in an ever-evolving global market.
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