Ed Strapagiel, Consultant
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Canadian Retail Sales Not As Good As You May Think

Recent media headlines have touted a strong increase in Canadian retail sales in January 2017, according to the latest data from Statistics Canada. Total retail sales in January were up 3.3% year-over-year on a not seasonally adjusted basis. The above chart does indeed show an upswing in the 3 month trend (orange line) and a generally improving underlying 12 month trend (green line).

But there's a problem. The hot results for January are almost all due to gasoline stations, which recorded a whopping 19.6% year-over-year retail sales gain for the month. If gas station sales are taken out of the picture, then all other retailers' sales were up only 1.4%. The chart below is the same as the first one except with gas station sales omitted, and the trend lines are significantly weaker.

We've seen this before, by the way. When pump prices went up in 2009-2010, gasoline station retail sales took off and made it appear that there was a retail boom going on, but it was just not so.

Food & Drug

Food & beverage stores had a difficult January, with all store types suffering year-over-year sales declines. This was in part due to 2 fewer weekend operating days compared to last year. Even so, food & beverage stores' retail sales were up only 1.0% for the 3 months ending January 2017, which was even lower than their previous 12 month trend. In particular, grocery stores, which account for a little over half of the overall Food & Drug sector, gained only 0.3% on a last 3 months basis.

Health & personal care stores however continue to perform well and shore up sector results. Their January 2017 retail sales were up 6.5% versus a year ago, and up 6.4% on a 3 month basis.

Store Merchandise

The Store Merchandise sector had a relatively weak January, with retail sales gaining only 0.7% year-over-year. On a last 3 months basis, sales were up 3.4%, which probably provides a better perspective. Nevertheless, the 3 month trend (orange line in the above chart) continues to underperform the 12 month trend (green line), so there does not appear to be much strength in the sector going forward.

Several store types had a particularly poor month in January. Clothing stores' retail sales were down 6.6% year-over-year, home furnishings stores were down 3.9%, and sporting goods, hobby, book & music stores were off by 2.9%. Almost joining this list were shoe stores which gained only 0.1%, and general merchandise stores whose retail sales increased by just 0.2%.

There was only one bright spot in the sector, building material & garden equipment/supplies retailers. Their January sales were up 6.9% versus last year.

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 roller coaster ride in the Automotive & Related sector is on another cycle, so hang on to your hat. This time it's driven by increasing gasoline prices. Gasoline station retail sales were up 19.6% in January year-over-year, the highest one month gain in over 5 years. Pump prices were depressed for much of the first half of last year, so the same pattern of high sales increases can be expected for the next few months.

Automobile dealers' retail sales were up 5.6% in January and up 5.3% on a last 3 months basis. This is actually slightly off the pace of recent years, but still ahead of general retail average sales growth.

By The Numbers

For definitions of store types, see Statistics Canada NAICS.

New Canadian E-Commerce Stats

StatsCan is now providing new data on ecommerce retail sales. There is not enough information yet to consider trends or even growth rates, but we can add up the figures to at least get some sense of size and share. Here are the results.

Overall, e-commerce represents about 2.3% of Canadian retailers' sales, including both pure play operators as well as the online efforts of brick & mortar stores. Canadian consumers however also buy online from foreign websites, spending which is not captured in these numbers.

The January 2017 results give the first indication of growth rate. Canadian e-commerce sales were up 17.2% from the same month a year ago, which seems to be more or less in line with other estimates. Results for just one month however are too speculative to claim a trend.

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 does not include another section called Non-Store Retailers (NAICS code 454), which includes electronic shopping and mail-order houses, which is where (mostly) pure play e-commerce players are. For 2016, electronic shopping and mail-order houses had an estimated $7.6 billion in e-commerce sales.

But that's not the only source of e-commerce retail sales, because (mostly) bricks & mortar location-based retailers also sell online. For 2016, this group had an estimated $4.9 billion in e-commerce sales. Added to electronic shopping and mail-order houses gives a grand total of $12.5 billion in e-commerce sales by Canadian operators in 2016. 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 82.5% of their sales are allocated to e-commerce. For the (mostly) bricks & mortar crowd, it can be estimated that just 1.0% of their total sales come from e-commerce.

In the final section of the above table, it is seen that (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generate an estimated 60.1% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 39.9%.

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.

Monthly Update Notification

This analysis is updated monthly as new numbers are published by Statistics Canada. If you would like notification of when an update becomes available (and you've read this far), please connect with Ed Strapagiel on LinkedIn.

22 March 2017