UNDERSTANDING EMERGING SHOPPER
AND RETAIL TRENDS IN CANADA
October 23 2018
Understanding Canada’s Online Retail
The Rules of Effective Grocery
Big Beats in the Retail Landscape
Big Beats in the Retail Landscape
Changing Macro Trends and Demographics
The Canadian retail landscape is changing
Online shopping provides convenience and competitive prices
Whereas brick-and-mortal stores are evolving to provide a sensory experience
Changing shopper demographics and new economic realities are influencing where and how
and Labrador +6.8%
Canadian retail sales show moderate growth early in 2018
8 Source: Statistics Canada, Kantar Consulting research and analysis
2018 year-to-date seasonally adjusted brick-and-mortar sales, including gas and auto*
* Year-to-date refers to year-over-year growth through May 2018.
** Average national growth 3.2%. Improved or slower is relative to 2017 annual growth.
2014 2015 2016 2017 2018
Source: Bloomberg Nanos
Consumer confidence has been gradually declining since the end of last year amid NAFTA
and trade wars uncertainty
Canada consumer confidence
* 2018 YTD through May 2018, while 2017 is for all twelve months. Data is the seasonally-adjusted average each month so data is still comparable.
Source: Statistics Canada
But Canadians consumers are also hamstrung by interest and debt
Growth in household income and credit payments
(principal and interest)
Housing affordability has worsened in Victoria and
Vancouver due to soaring house prices in these markets. Policy
interventions at the federal and provincial levels have marginally
dampened the house prices in Toronto, but the cost of home
ownership is still very high. Affordability remains mostly stable in
the rest of Canada.
Interest rate hikes are reducing housing affordability: The
Bank of Canada has gradually increased the short-term interest
rate, resulting in higher mortgage rates for homebuyers. A sharp
decrease in housing prices, should homebuyers fall back, could
threaten existing homeowners who purchased or refinanced at
higher home values.
Long Term: Tough mortgage rules and rising interest rates
can sharply decrease prices and potentially destabilize the
The housing market is still hot, particularly in Vancouver, Toronto, and Victoria
Costs are above the historical average in Montreal and Calgary as well.
11 Source: Statistics Canada, RBC Housing Affordability Measures, Kantar Consulting analysis
Housing Affordability Measure*
Ownership costs as % of median household income
0 20 40 60 80 100
*The RBC Housing Affordability Measure shows the proportion of median pretax household income required
to service the cost of mortgage payments (principal and interest), property taxes, and utilities based on the
average market price for single-family detached homes and condo apartments. The higher the measure,
the potentially less affordable the market. The measure is an indicator of housing imbalance, and does not
represent the ownership costs for most homeowners given that it is based on average home prices and
rates from the most recent quarter, not necessarily when all current homeowners purchased their homes.
The ratio of household debt to disposable income decreased in Q4 2017 to it’s
lowest level since Q1 2016. Less borrowing and income gains have helped the
metric. Still, it remains starkly higher than its historical average and that of most
other developed countries.
Tighter mortgage-borrowing restrictions by the federal government and provincial
governments, as well as a three quarter percent-point increase in mortgage rates
by the Bank of Canada since last July are aimed to ‘cool down’ the housing market,
and thus contain borrowing.
Retail implications: Negative
• In the short term consumer spending will be dampened by less use of credit and
more saving among households.
• In the long-term, there is a palpable threat of a hard fall in the housing market,
rising mortgage loan delinquencies, and a sharp pull back in consumer confidence.
And the high household debt can potentially destabilize the housing market
12 Source: Statistics Canada, Kantar Consulting analysis
Adjusted retail sales (excluding autos and
fuel) grew 2.5% year-to-date, sharply slower
than annual 2017.
Grocery stores’ growth dampen by softer
Drug store sales posted marginally lower
sales in 2018, following strong growth in the
previous two years.
General Merchandisers have fared better
than the consumables channels in the first 5
months, albeit slower than their 2017 average.
Source: Statistics Canada, Kantar Consulting analysis
The declining consumer confidence has dampened the sales of consumables
Topline growth is more subdued after excluding sharply rising prices at gasoline stations
Canada’s Brick-and-Mortar Retail Sales*
Year-to-Date Percent Change, Seasonally Adjusted
Autos & Fuel
2016 2017 2018 YTD
Consumer spend has also declined, particularly on durables, autos, and home furnishings
14 Source: Statistics Canada, Kantar Consulting analysis
Goods vs. Services
• Total household spending has softened versus 2017.
• Canadians spending on autos and durable goods in the first
3 months has weakened compared to FY 2017.
• Spending on services has accelerated in early 2018 and leads
the spending average.
• Consumers spent more of their disposable income on pet products,
food services, and healthcare goods in 2018.
• Once, high-flying auto sales slumped in Q1.
• Food and beverage at home growth has been resilient
despite softer inflation.
• Clothing and footwear category growth kept a moderate pace in Q1.
• Home furnishings & appliances were a weak spot in Q1 2018.
*YTD ended Q1 2018
Canada Household Category Spending Trends
(includes fuel & autos)
goods (less autos)
(less fuel goods)
2016 2017 2018 YTD
Food services Pet products Autos
Food & beverages
Personal care &
Home furnishings &
Total retail sales on a non-sea