Retail industry is an important sector that delivers goods to customers. Retail sector plays a huge role in Canadian economy, and has generated approximately $589 billions from retail stores in 2017 (Statistics Canada, 2018a, p. 14). We can see that retail sales have a stable growth dynamic (Table 1). There are different types of retail sales such as department stores, ecommerce, vending machines and others. Ecommerce is the new direction in retail market. It has appeared recently and quickly developed with the growth and accessibility of Internet. Ecommerce generated almost $16 billions last year (Statistics Canada, 2018a, p. 21). This is far away from retail store revenue but still it is a huge amount that will likely grow every year. Retail Industry employs 2.8 million people (Statistics Canada, 2018b).
Table 1. Dynamic of Retail Trade (Statistics Canada, 2018d.).
Canadian retail industry has a large variety of products such as vehicles, furniture, electronics, food, clothing, building materials and others. Motor vehicles and auto parts are leaders in sales in money equivalent. Combined, they were generating roughly 13 billion per month in 2018. Food and beverage occupy the second place and brought in more than 10 billion every month in 2018 (Statistics Canada, 2018c).
Canadian retail can be categorized into Brick-and-Mortar Store Retailers (physical buildings) and Non-Store Retailers. Latter consists of vending machines, catalogue sales, and ecommerce.
Canadian building retails landscape includes shopping malls, big box stores and chains, power centers and power nodes. Shopping malls has first appeared on the Canadian landscape in the 1960s and are still playing one of the major roles in the Canadian retail industry (ISED, 2013). Initially, shopping malls appeared in cities downtowns, but due to lack of space, retailers have started relocating them outside. At first just outside of the center but eventually retailers started moving their stores into the power centers and power nodes.
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Shopping malls. “Shopping malls continue to be a staple of the Canadian retail landscape” (ISED, 2013. p. 4), but lack of space in cities doesn’t give the opportunity to build new ones. Some of the malls had been renovated by adding additional floors up. Retailers started to look for new ideas and added malls in the power centers, that gives them a big number of customers (ISED, 2013).
Big Box Store and Big Box Retail Chains – stores that have a large floor space usually more than 50,000 square ft., structured in a form of a big box. Big box stores appear on the market in the 1980s and significantly decrease the role of independent retailers (Lovejoy & Handy, 2014). Examples of big-box stores are Wal-Mart, Best Buy, Costco, and others.
Power centers – agglomeration of several big stores in one location. It gives their owners opportunities to reduce their expenses, for example, by sharing the parking, and attracting a lot of customers to one place (Hernandez & Simmons, 2006). Power centers first appeared in USA in 1986, and within ten years the number of them increased to 500 (Hahn, 2000). In the beginning of 1990s, power centers came to Canada where they quickly gained their popularity with customers (Lorch, 2005).
Power nodes – “extended clusters of big box stores and/or other power centers located within one kilometer of a power center or major mall” (Hernandez & Simmons, 2006, p.474).
Retail market includes big retail companies (Wal-Mart, Canadian Tire, Costco, etc.) and independent retailers. While big retail companies own a bigger market share, customers still spend a lot of money buying from independent retail stores. Small businesses are often identified as the backbone of the Canadian Economy (ISED, 2013). To succeed in a trade war against larger competitors, independent retailers focus more on their product, and on a way to differentiate them from the competitors. Independent retailers can give customers unique products with good customer service (Retail Council, 2014).
Competition/rivalry. The competition in the retail industry is extremely high. This is because huge variety of retailers is currently present on the market. While big chains are able to focus on the price of its products by leveraging supplier base, independent retailers can focus more on the product itself (quality, uniqueness).
Entry barriers. As the competition is high in retail industry, it becomes a barrier to enter for the new companies. Another barriers to entry are: capital, investment that needed for a new player to open a store; loyalty of customers, customers can have a strong preference for existing brand or product, and for a new player it might be difficult to change this and gain a market share; differentiation of the product, since the retail industry has a lot of competitors, new players need to make product different and special – make it better but keep the price within the expected range.
Substitutes. The development of Internet and its accessibility has changed the business, and now it provides a fast growth for ecommerce. The biggest players on this market are companies such as Amazon, eBay, and Alibaba. Ecommerce is a direct substitute for physical retails stores. Technology has always played a role as the primary enabler of change in the evolution of retailing (Hopping, 2000). Bricks-and-mortar retailers now are preparing for competitions with online retailers (Willems, Smolders, Brengman, Luyten, & Schöning, 2017).
Buyers and Suppliers power. The power of suppliers and power of buyers are low in retail industry. There are a lot of suppliers on the market, as well as buyers. The significant amount of suppliers’ companies and big customers’ population make those powers weak.
Retail industry is changing rapidly in Canada and all over the world. One of the factors of this fast changes are new technologies. We have already mentioned that ecommerce plays an important role in retail sector nowadays, because of the easy access to Internet. Retail pay a lot of attention to online shopping in order to satisfy their customers. This fast environment drives retailers to look at the customers and shopping experience differently. Relationships with customers, their satisfaction, distribution system, and differentiation of the product also play a vital role in retails.
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Unique relationships with customers. Retailers must ensure to make their consumers feel comfortable in all ways. They can improve the facilities provided to their customers by implementing on the feedback that they get from the buyers. For the convenience of their buyers, they must provide shelves right in their hands and online marketing. Building a personal connection with customers by giving them time-to-time updating of new products and offers also works for retailers to get to know more about their customers and their needs.
Technology. With the invention of technology, retailers can perform online transactions and issue electronic receipts for the comfort of customers. They also gather data of their customers and keep a track. Retailers require new-age organizing answers for managing the fundamental data and with Internet they are able to do so.
Distribution network. The retails should have deep knowledge about the marketing policy, strategy, and distribution network to attract customers and manage rising needs from good shopping experiences and conveniences for customers. The effective distribution channel helps business to grow efficiently. This also helps in reducing the cost of distributing the product and enhances profit. The company’s number of outlets and other supporting facilities in strategic locations to come closer to customers are important factors of their success.
Diversification. This includes strategy of investing in different securities to lower the risk in products, store formats, target customers and geographic coverage in an effort to maintain better profits. In general, excellent strategy of product merchandise is to fulfill its target market’s necessities, appropriate store formats to serve different customers’ margins and geographic diversity of the company’s outlets to improve sales are important factors in retail industry.
Competition, as an important part of business activities, is always deemed to “the overarching logic of business” (Ford & Håkansson, 2013, p. 1017). Competition exists in every industry in business, and retail trade is no exception. Companies can concentrate more on the quality of their products under the competitive landscape (Nickels et al., 2016).
In retail industry, competition usually consists of three resources, which are oligopolistic competition, multi-store settings, and the presence of economies of scale (Villenas & Araneda, 2017). According to Cho and Tang’s research (2014), unequal distribution is a factor of competitive landscape in retail trade. A study in 2015 shows that, there is also intensifying competition between traditional retail locations and online services (Li, Huang, Cheng, & Ji). Main players can have deep influence in the whole market. According to MarketLine, retail market in Canada is keeping rising in last several years, lending, and savings & investments have raised by 5.1% (2018a, p. 7) and 7.9% (2018b, p. 7) in 2017. The market value of retail trade is still powerful.
Loblaw Companies Ltd. and Canadian Tire Corp. Ltd. are two of the main players in Canadian retail industry. Loblaw operates through its retail stores, discounted stores, and shopper’s drug mart. Its major competitors are almost all chain retail brands. Despite the tough competitive environment, incomes of Loblaw keep increasing in recent years (MarketLine, 2018c).
Canadian Tire is a complete retail company. By 2018, it has over 1700 retail locations. It also develops e-commerce business online. Among its major competitors, most of them are tire companies (MarketLine, 2018d). It is because there is no alternative for tires. Tires are the necessity for cars’ owners.
A lot of big retails stores come to Canada from USA. Costco came in 1985, Home Depot in 1992, Wal-Mart in 1994, and Staples in 1991, and all of these companies become main retailers in Canada. Canadian Tire and Loblaw survived in this increased completion by creating a big box store too (Hernandez & Simmons, 2006).
Retail Industry is a very important sector for Canada and plays a huge role for its economy. It generates about 600 billions dollars revenue, and employs approximately 2,8 million people. The challenge for this industry comes from technology. Ecommerce has a chance to significantly change retail in a next decade or two.
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