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COVID 19 dealt a body blow to the Canadian retail sector in 2020. And with the pandemic raging on across the country, prospects of a recovery look quite bleak in 2021. The arrival of vaccines will not be enough to salvage this year – they need time to make any impact.
Meanwhile, lockdowns and social distancing remain in place across provinces, as authorities try to rein in the infection rates during a terrifying second wave. This is the “new normal” and it will continue to influence retail trends across Canada (and much of the globe) for the foreseeable future.
Le Chateau, Swimco, Mendocino, DavidsTea – the list of companies that closed their physical stores across Canada in 2020 is quite long indeed. And it is not just smaller, regional brands that face this dire fate – even big global corporations like Starbucks, Microsoft, Victoria’s Secret have all reduced their bricks and mortar footprint in Canada.
With infections at an all-time high, things will undoubtedly get a lot worse in the coming months. The only reliable way to keep a lid on the virus is through strict lockdowns – and those measures are lethal to offline retail stores.
Last year, survival in retail depended on a combination of Darwinism and pure luck – survivors were either financially strong, selling merchandise that was in high demand, or agile enough to change gears and adapt to the changing retail landscape. That will remain the case in 2021.
One clear winner amidst the ruins of the pandemic has been online retail. Both Amazon and Walmart posted record profits in 2020 as demand soared thanks to lockdowns and quarantines. This is nothing new – even before the virus, online was slowly edging ahead of traditional bricks and mortar businesses in Canada.
The pandemic simply exacerbated this trend. Now, even smaller retailers will have to enhance their digital capabilities to have a fighting chance. Innovation will be key as it is not often possible to switch over from a bricks and mortar system to full e-commerce.
Groceries, home improvement products, and other daily essentials retailers were largely immune to the shocks of the pandemic. But they experienced a surge in demand for online shopping services, which will continue to accelerate as most parts of Canada remain under strict lockdown in 2021.
The pandemic has caused significant changes in how people live and work. These changes have affected retail in unprecedented ways. For instance, with a drastic reduction in travel, social activities, and office hours, demand in some sectors of fashion retail is in free fall.
The big winners here have been brands specializing in athleisure and loungewear – Lululemon is an excellent example of a Canadian retail brand that has seen an increase in demand in 2020. As Canadians are forced to stay and work from their homes, brands like Lululemon and Urban Outfitters will see sustained demand.
On the other hand, fashion wear, shoes, and office wear brands do not have much to look forward to in 2021. Brands specializing in these niches will face massive challenges of inventory management as stocks remain unsold. Even a return to pre-pandemic life after 2021 may not be enough to save many in these segments.
There is no doubt that offline retail is on a downward trend in Canada and many parts of the developed world. But despite the pressures exerted by the pandemic, consumers have not abandoned offline retail in Canada.
In 2020, after the early slump, there was a marked upshift in demand for offline retail, particularly towards the holiday season. And a PWC survey indicates that close to 60% of the consumers are more than willing to return to offline stores once the infection rates are under control.
But the economic slump will play a dampening role in that – despite a rapid recovery in the latter half of 2020, the Canadian economy still faces prospects of an extended recession and high levels of unemployment. That will surely hurt consumer spending levels in 2021.
Omni-channel retail will assume greater importance in Canadian retail in 2021 and beyond as smaller retailers start offering both store and digital shopping experiences to customers. Apps, eCommerce websites, virtual reality and other innovative technologies will become more mainstream.
Despite their inclination towards e-commerce platforms, Gen-Z buyers are still willing to give physical stores a chance. But they will need some convincing – traditional methods of selling will not be enough. Instead, retailers will have to focus more on delivering an “experience.”
Stores will need to add interactive sessions, additional services like spas/coffee bars, or other forms of entertainment to attract younger buyers. The focus is no longer just on buying something – there needs to be a fun quotient involved.
For instance, Yankee Candle introduced a store concept where customers could create personalized scents. Canada Goose launched a store where visitors are welcomed with a multi-sensory experience – a combination of visuals, sounds, and climate conditions to show how their merchandise (coats) can make a difference.
Consumers these days have priorities like sustainability and ethical supply chains. The pandemic has added new factors as well – for instance, how well a retailer treats its employees, in terms of work hours, pay, and personal safety (PPE kits, masks, and so on).
Likewise, stores that invest more in biosecurity measures will inspire confidence among buyers, guaranteeing increased visitors. Extra resources will have to be directed towards disinfecting and creating safe sales points. The use of robots and other automated checkout measures will become more commonplace soon.
The arrival of vaccines has undoubtedly brought some much-needed cheer to the retail sector. But it will take at least one more year before any significant changes to the “new normal” will materialize. Until then, retailers in Canada will have to learn to adapt to the realities of a pandemic that, at least at the beginning of the year, shows no signs of letting up.
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