Inside Logistics

Shopping in Canada going through a radical change

From our print edition: Changing consumer expectations and habits threaten to see even more Canadian retailers close in 2018


April 20, 2018
by MM&D Staff

Changing consumer expectations and habits threaten to see even more Canadian retailers close in 2018, says KPMG’s Willy Kruh, global chairman, consumer and retail national leader, high growth markets Canada.

“Retail is not in disruption but is disrupted,” says Kruh. “Consumer behaviour is changing rapidly and many Canadian retailers are not keeping pace with the fact that consumers and their shopping habits are undergoing fundamental change.

But this is not just a Canadian phenomenon. Retailers in the US are grappling with the same issues. A record 8,600 stores are expected to close up shop stateside this year. Previously, the worst year for closures was the 6,163 stores in 2008 – and that was at the height of the financial recession.”

Kruh notes that the fundamental changes impacting domestic retailers have been somewhat masked by a couple of key factors that likely won’t continue into 2018 – a robust economy and low interest rates.

“With the economy expected to slow next year and interest rates already up twice this fall, consumers are going to be hard-pressed to keep on spending. Debt is at record levels and the Bank of Canada has made the cost of carrying that debt even higher. So as consumers feel the squeeze, so will retailers –especially those who need to do more to optimize the shopping experience.”

In addition to the expected drop in retail spending next year, Kruh says we are also currently witnesses to the collision of three revolutions that are disruptive and industry-defining – creating a perfect storm that will hit retailers head-on.

Demographic revolution

In two years the millennial generation will be the world’s largest single demographic grouping, as well as the largest demographic in the workplace. Close to 40 percent of millennials live with their parents and these parents are closer to their kids than any generation before. As a result, each generation is having a profound effect on the way the other shops. As millennials tend to be very tech savvy that is rubbing off on their parents, accelerating the shift to online and experience-based shopping.

Technological revolution

As the proliferation of connected devices continues to pervade all corners of society –
from how we communicate, to how we transact, to how we operate our homes, or manage our health and wellbeing – the next decade will see another billion or more humans connected to the Internet.
Game-changing automation developments in robotics, machine learning and artificial intelligence, as well as virtual and augmented reality will have profound impact on how we shop.

Geopolitical revolution

Population growth in Canada is driven by immigration, so it is critical that domestic retailers understand and adapt to the shopping habits of new Canadians. A growing wave of populism and nationalism is affecting retailing in the US and Europe with spill-over effects in Canada.

Six critical steps

Kruh says there are six critical steps retailers need to understand and improve upon if they want to navigate the storm and avoid the same fate as the host of Canadian bricks-and-mortar retailers who’ve closed their doors for good in recent years.

  1. Unify data and analytics. Break down organizational silos that isolate consumer data. Create a culture and business structure that provides a unified view of the customer.
  2. Go beyond the sale. Don’t just focus on the holiday sales transaction. Improve the consumer’s experience before and after. Let them discover and research merchandise. Make sure orders are accurate and delivered quickly. And offer convenient, speedy returns and refunds.
  3. Upgrade technology. Update and rethink legacy systems for more advanced and agile technology. Integrate commerce and mobile technology to support automation of routine interactions with retailers and customers.
  4. Tackle supply chain issues. Brands often struggle with inventory and supply chain issues. Come up with a better way of anticipating supply chain disruptions, and make sure partners and suppliers are aligned with your customer strategy.
  5. Improve ties between brands and retailers. Although brands are increasingly exploring direct-to-consumer selling, they still rely on retailers for the bulk of their revenue. Brands need to invest in digital technologies to improve the performance with existing retail outlets.
  6. Expand partnerships. Go beyond the traditional retail outlets and work with fulfillment centres. Integrate your e-commerce operation with social media, and provide digital content to all your partners.

“Investing in these areas is only part of the equation,” notes Kruh. “Retailers also must have a clear understanding of where and how they’re investing so they can fully benefit from the connected-customer approach. Only then will they be able to deliver what consumers want.”