Coronavirus lockdowns shuttered much of regular retail activity more than two months ago. A clear line was drawn between “haves” and “have-nots” by one word: essential. If you met the definition, you were open, and likely struggling to stock the shelves. If not, you were mandated to close shop. To make things worse, this happened almost overnight; essential retailers had no time to stock up and non-essentials, no opportunity for last-minute discounting. Essential retailers are having some of their best weeks ever. The rest face a serious existential threat. What does COVID-19 mean for the future of retailing?

The pandemic added to the woes of a sector already in distress. Smaller retail outfits were long since the casualty of big-box titans; the prospect of a hollowed-out High Street in cities and towns everywhere compressed margins, forcing one-outlet operations to carve out a unique creative niche just to ensure survival. Online shopping piled on the pressure, with giants like Amazon even threatening big-box chains and forcing them to up their digital offerings. Costs of digitizing were a further barrier to smaller retailers, giving rise to easily-accessible digital platform services. Still, this low-margin space remained a struggle for the smaller operators.

It was hardly a party, but COVID-19 crashed it anyway. Suddenly, there was no commute, so the immediate need to trade in the clunker was gone. Auto sales are one of the worst-hit retail segments globally. Also, no driving, no filling up with gas—service stations are also way down. Luxury and specialty goods are clear COVID-19 casualties, while clothing and footwear stores succumbed to pressure to close down. Work-from-home seems to have stabilized sales of home electronics. 

On the other end of the spectrum, food retailing has soared as panicked consumers stocked up on goods rumoured to be in short supply. Sales at health-care stores are also in the positive zone. Clearly, online purchases have spiked and retailers that managed to adapt quickly to an online model or curbside delivery have been able to shore up their sales. Among them are restaurants that have shifted to online food sales and meal kits—creating a new brand of retailer popularly known as grocerants. 

Two broad impacts will affect Canadian business. First, exporters of consumer goods, including autos and parts, apparel and footwear and other final sale goods, are experiencing demand and border issues and fallout from the flurry of recent Chapter 11 filings by major United States retailers. They also face problems raising liquidity for purchases of next-season merchandise, which could also be compromised by persistent COVID-19 restrictions. Second, domestic non-essential retailers face similar issues, with pummelled revenues already producing 735,000 layoffs, and missed payments on everything from rent to inventory and utilities. Data are still plumbing the depths to which the sector has sunk; partial reopenings are increasing cash flows, so we have likely experienced the worst, but the road back to normal is currently a slow one for most.

The outlook will be affected by a number of key factors, as outlined in an Export Development Canada retail sector report, which published June 2. Consumer confidence is critical: willingness to return to shopping as it was done pre-COVID-19 is an essential driver of most retail businesses. As such, making provisions for safety will add to retailers’ costs, and could be a more-or-less permanent feature of bricks-and-mortar retailing. An element of that is an expected drop in the use of paper cash and coins. Traditional retailing does face a more serious threat from the abrupt rise in online shopping and home delivery; retailers and their landlords will have to be especially creative to avoid the broad emergence of retail ghost towns.

On a more positive note, it’s equally important to realize the accumulation of pent-up demand over the shutdown period. This is true for everyone, although those who aren’t drawing a paycheque over the shutdown period will have a harder time catching up post-COVID-19. It’s clear that for those who are still earning, money is piling up in the bank account, and is one of the brightest signals of potential demand as economies get back up and running again.

The bottom line?

COVID-19 has been a nasty shock for retailers the world over. Many won’t have the wherewithal to survive. For others, the existential threat has them thinking more creatively than ever about how they should be doing business. We’ve all learned lots about how to shop online, so we can expect that to take a bigger bite of the retail pie. But don’t expect traditional retailers to stand pat; they won’t go without a good, creative fight. Also, prices are key to luring consumers back into the game; we can expect a fair amount of discounting while the dust settles.


This commentary is presented for informational purposes only. It’s not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.