A new report from Statistics Canada found that total retail sales fell by 17.9% as Canadians increasingly sheltered in place between February and May and brick-and-mortar stores closed their doors. However, online sales surged 99.3% during the period. 

Statistics Canada says e-commerce sales hit a record $3.9 billion in May, a 2.3% increase over April and 99.3% increase over February. E-commerce sales more than doubled year over year, with a 110.8% increase compared with May 2019.

Kostya Polyakov, partner and national industry leader for KPMG’s consumer and retail practice in Vancouver, says that “the split between e-commerce purchases and in-store purchases has changed forever,” but that it won’t always be as extreme as the numbers reported by Statistics Canada on July 24. “I spend a lot of time with all the top retailers in the country,” says Polyakov. “I think the consensus is certainly you will see a return (of shoppers) to stores.”

The report from Statistics Canada found that all 11 retail subsectors with e-commerce sales saw those sales increase. The record gains in e-commerce occurred as total retail sales experienced record declines, the report says, with April data showing the most stark contrast. Retail sales that month plummeted to $33.9 billion, down 29.1% from February and 26.4% from the prior year. Meanwhile, e-commerce increased 63.8% in April.

From February to April, only the food and beverage subsector saw an increase in in-store sales, which were up 3.3%, while e-commerce sales surged 107%. In-store sales declined for general merchandise stores, building material and garden equipment and supplies dealers, and health and personal care stores.

Other retail trade subsectors such as furniture and home furnishings stores, sporting goods, hobby, book and music stores, and clothing and clothing accessories stores saw much sharper declines in in-store sales from February to April 2020. As in-store sales decreased for these subsectors, e-commerce sales increased.

Marty Weintraub, national Retail leader at Deloitte Canada, says that not all retailers face the same level of challenges when it comes to the move to online shopping. For example, consumers may still be delaying large purchases on some types of items, out of fear that unemployment may still be around the corner, said Weintraub.

“We don’t believe the e-commerce rates we have seen will stay at the levels we have seen them. We are already starting to see a little pulling back, most notably in apparel,” said Weintraub. “But (e-commerce rates) will be higher than where it was before the pandemic, absolutely.”

Statistics Canada said it will continue to update the e-commerce data to assess the long-term changes after the pandemic, noting that as stores reopened in May, the proportion of e-commerce sales was 10%, down from a record high of 11.4% in April.

“Will the COVID-19 pandemic have a lasting impact on the retail trade sector? Small businesses are increasingly turning to e-commerce platforms, and are using these platforms in innovative ways,” the report said.

Brick-and-mortar stores, particularly small ones with little online presence, may scoop back some of the recent online sales by making sure their inventory is up-to-date, Polyakov says.

Polyakov expects there is a group that bought something online during the lockdown that they’d rather try in store. Second, a group of consumers have had to learn e-commerce systems, and were previously less accustomed to online shopping technology, such as some members of Baby Boomers or Generation X. These two groups helped push online sales higher during the lockdown, said Polyakov.

Some, particularly older generations, may keep taking advantage of the convenience of online shopping, says Polyakov, especially as some shopping malls are prioritizing appointments over browsing. The bigger questions, says Polyakov, is whether people will continue to buy items online that they prefer to try in the store, such as winter coats.

The new data from Statistics Canada is the latest peek into a changing retail sector, also reflected in two other recent data releases. “Where we settle will depend on how the pandemic unfolds,” said Weintraub. “The longer we are in this state of being, the greater the likelihood that this (online shopping) behaviour will stick.”

Source: Toronto Star