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Canadian Retail Sales Go Soft in Q3, Plus New Ecommerce Stats

(If you prefer to go straight to the e-commerce section, you can click New Canadian E-Commerce Stats.)

Total Canadian retail sales were up 3.0% in September 2016 versus a year ago, according to the latest not seasonally adjusted numbers from Statistics Canada. While some press releases saw this as an improvement, it's really not worth getting too excited about.

The 3 month trend (orange line in the above chart) is tracking below the underlying 12 month trend (green line). This implies things are going to get softer still going into the holiday sales season. As previously noted, Christmas 2016 is likely to be more ho-hum than ho-ho.

This can also be seen in 2016's quarterly year-over-year sales gains: total retail in Q1 was up 5.6%, Q2 up 3.8%, and Q3 up 2.0%. The trend lines don't look good for Q4.

Food & Drug

The Food & Drug sector seems to have settled into a fairly steady sales growth rate of around 2.75% year-over-year. But this is a result of sales growth trends by the two largest players cancelling each other out.

Health & personal care stores continue to lead the sector, with sales up 7.5% in Q3 2016 year-over-year. This is the second highest such gain among all store types (only shoe stores did better). Sales at food & beverage stores however were up only 1.2% in Q3, accounting for the lackluster performance of the overall Food & Drug sector.

While convenience stores' Q3 sales were up 2.7%, specialty food stores were down 1.6%.

Store Merchandise

A general pattern of retail sales growth trailing off is evident in the Store Merchandise sector. In 2016, year-over-year increases for the first three quarters have been 6.5%, 4.6%, and 3.4% respectively. It's another the trend lines don't look good story, especially going into the Q4 holiday sales season. Nevertheless, Store Merchandise is still outperforming the other major retail sectors.

As usual, results vary by store type. In Q3, retail sales increases were significantly higher than average at shoe stores (up 9.5%) and building material and garden equipment & supplies dealers (up 7.0%). But Q3 year-over-year retail sales declines were recorded for home furnishings stores (down 1.6%) and at jewellery, luggage and leather goods retailers (down 0.2%).

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

Conditions in the Automotive & Related sector have become a roller coaster ride. At the start of 2016, double digit sales increases at automobile dealers more than made up for continuing sales declines at gasoline stations. But this is no longer the case.

For the first three quarters of 2016, year-over-year sales increases at automobile dealers were up 15.2%, up 7.2%, and up 3.1% respectively. Sound familiar? It's the same thing as what's going on in the Store Merchandise sector, namely, quarterly retail sales growth dwindling down at a precipitous rate.

Meanwhile, back at the gas station, retail sales just keep on slipping. Gasoline station sales were down 5.7% in Q3 2016 year-over-year, slightly worse than the Q2 decline of 4.3%

By The Numbers

For definitions of store types, see Statistics Canada NAICS.

New Canadian E-Commerce Stats

Here's a shocker: e-commerce is only 2.0% of total Canadian retail sales. With its latest release, StatsCan has provided two new data series for the first 9 months (to September) of 2016, a total of 18 numbers. This is way too few to discern trends or even growth rates, but we can add up the figures across the 9 months and at least get some sense of size and share. Here are the results.

First, one has to get a handle on just what these measures are. Location based retail is the same as that in the preceding large "By The Numbers" table. It's what is normally taken and 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 the first 9 months of 2016, electronic shopping and mail-order houses had an estimated $5,167 million 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 the first 9 months of 2016, this group had an estimated $2,951 million in retail sales. Added to electronic shopping and mail-order houses gives a grand total of $8,117 million in e-commerce sales by Canadian operators for the first 9 months of 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 considered e-commerce, including any revenue from the odd physical location. For the (mostly) bricks & mortar crowd, it can be calculated that just 0.8% 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, electronic shopping and mail-order houses) generated 63.7% of all e-commerce sales in Canada in the first 9 months of 2016. The (mostly) bricks & mortar location-based retailers' share of e-commerce was 36.3%.

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.

27 November 2016