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The Future of Retail in Canada 2021

Customer browsing in a retail store during the spring shopping season.

In this guide we explore how businesses are embracing emerging technology and changing customer behaviours to meet the challenges of an increasingly competitive retail landscape.

6/17/21

Table of contents

Intro

Introduction

The year 2020 rapidly altered the landscape of retail. On its face, it appears a disruption—but it’s actually a transformation. It’s allowed retailers the ability to slow down and reevaluate how they do things. It’s allowed retailers to invest in smarter business movements—both online and in-store.

You might think that these changes are merely short-term—a way to get through these difficult times. But the altered landscape of retail is permanent. It has redefined what a meaningful shopping experience can look like for everyone, from consumers to the businesses that serve them.

Suddenly, the changes and pivots you had to make seem less like a challenge and more like an opportunity. When you arrive in that sweet spot where taking genuine chances leads to increased efficiency, it lets you be wherever your customers are. It lets you engage and interact with them in the way they choose.

How does Canada’s retail landscape appear currently? There’s a great divide between the retail experience, value, and efficiency of small retailers versus that of larger, online-only retailers. The retail landscape as a whole has become even more fiercely competitive. Retailers now have to focus on their own specific niche and the value they offer customers—focused on a transformation from in-store and online to omnichannel, the integration of multiple shopping methods.

What should retailers know about “showrooming” shoppers? “Showrooming,” or browsing products in-store and then purchasing online to get lower prices, is a benefit for online retailers simply because they can afford to provide goods at lower prices than physical retailers. But this isn’t good for physical retailers, especially those who have no online presence.

Local retailers add to the unique vibrancy of our neighbourhoods. It’s retailers like you that support local youth sports, donate to local charities, and employ members of our communities. While supporting your respective communities, local retailers still have rent, taxes, and employees to pay. It’s not easy for the average local small business to do all these things and simply serve as a “showroom” for competitors or online businesses.

Consumers supporting local businesses are actually supporting their local community—meaning it’s time for small, local retailers to embrace an omnichannel approach with an online presence to meet these shoppers where they are—and where their wallets are.

How are the greatest retailers succeeding? They’re latching onto the chaos and adapting by pivoting to embrace trends, emerging technology, and changing customer behaviour. But, they’re not neglecting the in-store experience for online—they are making the retail environment more productive. Their tactics include implementing new strategies in employee management, harnessing technology more effectively, and experimenting with methods of in-store conversion rates.

How do these different channels play a role in retail? Retail growth overall is somewhat flat—but there’s a shift. eCommerce is growing steadily. What does that mean, exactly? While eCommerce growth is rapid, cohesively focusing on online strategies while keeping tabs on the physical aspects of retail is a big part of that success. A retailer’s physical presence accounts for most sales and is the perfect marketing vehicle if executed properly. This is a big reason why former online-only retailers, such as Amazon and Frank & Oak, have opened up physical stores.

So, what does the future of retail look like?

The future of retail is a balance between online and in-store options with owners investing in digital technology, such as a digital assistant, artificial intelligence (AI), automation, and more.

Fast-paced tech advancements, like ambient commerce, are causing a rise in consumer expectations, and they transformed the retail industry globally over the last decade. But most would agree that the recent pandemic caused the most disruption to the retail industry. In a recent analysis by Frost & Sullivan, they suggest that the four aspects of retail in a post-COVID landscape include:

  • Physical spaces
  • Points of service
  • Customer types
  • Processes

Retail is in a constant state of change. Retailers must understand the current trajectory of the industry and plan strategies for edging out competitors, while still maintaining their financial standing. Frost & Sullivan’s analysis can act as a jumping-off point to help you develop a roadmap to your own future.

Frost & Sullivan suggest that retailers should focus on:

  • Aggressively partnering with or acquiring companies with strong physical footprints, effectively offering an on- to offline experience.
  • The upcoming Generation Alpha, a group poised to become the dominant population by 2025.
  • Continuing the contactless shopping methodology, which won’t go away just because COVID does. Investing now in tech like ambient commerce, augmented reality, and data analytics will prove competitively advantageous.

Square’s own advice for retailers includes:

  • Investing in business digitization. Catalogue your inventory digitally, and add high-quality photos of every item. Yes, it is an upfront investment—but you’ll be set up to sell your products on several platforms.
  • Leveraging the efficiency of channel expansion. Whether this takes the form of selling on social or getting your business selling online, it’s necessary. Foot traffic patterns will change—but you can keep your customers engaged online and even expand your base.

All the above strategies can help you differentiate your retail business. Besides, you have something that large retailers can’t offer—unique goods and services. You’re more closely connected with your customers. If you play up these strengths, you can stay a step ahead of your rivals. And investing in the right tools means this transformation can be fairly effortless.

Going Online Unlocks New Potential

How you make a move to online commerce might look quite different from a larger rival’s methods. It’s important to make moves that make sense for your business and your customers.

One of the best things you’ve got going for you is the fact you can connect with consumers in your local geographic area in ways other retailers can’t. But making a move to online commerce offers infinite reach to consumers around the globe who have interests similar to your current customers.

Over 72% of Canadians shop online—and they spend $2.9 billion monthly doing so.

Retailers capitalized on this by improving their online presence or using the pandemic’s slowdown to create one. Square is a partner of Digital Main Street, whose shopHERE program helps brick-and-mortar businesses, including local retailers, establish or grow their presence online to stay connected with their customers during and long after COVID-19.

Canadian retailers are also experimenting with other ways of operating their businesses, with many trying out wholesaling, new product lines, or new industries entirely. Having an online presence has made these out-on-a-limb ventures more successful Canadian retailers make a combined $37 billion from sales online.

Most Canadian retailers are a mix of in-store and online sales, with a great majority offering online and a few still in-store only. Some physical storefronts are considering online-only sales in the coming years.

The nice thing about moving your own business online is that it doesn’t have to be one or the other. You don’t have to commit to online-only sales, and you don’t even have to move your entire inventory online. It’s not an all-or-nothing venture.

“What works for your business and your customers? What is the easiest way to begin that also allows you to branch out as you feel comfortable? Figure that out and do that,” said David Rusenko, Head of eCommerce at Square. “You know, when you ask someone about the future of retail, the first answer you’ll usually hear will be something about omnichannel—that’s great! But it’s jumping the gun for some business owners. It’s not necessary to get out on all channels right away. Find out where your customers are, start there.”

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Combining Forces with Online and In-Person Shopping

Your physical storefront is much more than a place in your neighborhood—it’s likely your customers consider your store a staple of the town, perhaps even a local landmark. Storefronts are part of what makes a town a community, offering energy, culture, and personality not found elsewhere. Expanding to online retail services won’t change that. Quite the contrary—it actually allows you to build even stronger relationships with your current customers and cultivate new ones with those who’ve never heard of your store.

Your customers are eager to return to in-store shopping. In fact, according to a survey by PwC Canada, the top three activities customers most look forward to are:

  1. Shopping at the local grocery store
  2. Shopping in-store with local retailers
  3. Dining out in local restaurants

This shows that shopping online isn’t so much a replacement for shopping in-store but more of a complementary activity.

What this shift in shopping habits means for retailers

You’ve likely had to adjust to several shifts in the retail industry, even prior to COVID. This is an especially true statement for grocery retailers. Even before the pandemic, these retailers were facing the challenge of providing online shopping and delivery. The pandemic merely brought that demand to a head.

Even once the pandemic has passed, many Canadians will probably return to pre-COVID shopping habits. But this doesn’t change the fact that retailers must still adapt and develop new ways to serve their customers. Adapting to trends that were in motion pre-COVID is important. For instance, grocery stores should:

  • Cater to the “microtrip” shopper
  • Offer more fresh food items
  • Consider more ready-to-eat hot foods or deli options

Even though a grocer may offer online shopping and delivery, the current offerings aren’t enough. For example, according to the PwC survey mentioned above, Generation Z—those born in 1996 or later expects grocery stores to invest more heavily in eCommerce solutions for meeting customer expectations and handling customer pain points. This has been a challenging aspect for retailers, as PwC explains that “only 7% (of shoppers surveyed) agree that shopping for groceries online is easier.”

Grocery stores are at the busiest they’ve ever been, but other retail categories, such as apparel, have found the past year to be much different. Among the hardships imposed by the pandemic, previously celebrated trips to the local mall have become a concern. More and more Generation Z shoppers, for instance, want an enhanced shopping experience to justify leaving home, meaning retailers must not only address the health and safety worries of this group but the role the store plays in the shopping experience, as well.

“Locals don’t view physical stores as mere places to buy products,” said Rusenko. “These stores are the backbone of the community, offering customers joyful experiences when physically shopping in-store.”

Expanding to online sales offers you the opportunity to connect the two experiences: those of shopping online and in-store. The increased visibility can result in more sales, loyal customers, and the ability to offer experiences your customers want, where and when they want them.

Same-Day Delivery is a Chance to Stand Out

As a local retailer, you have something bigger outfits don’t—the ability to deliver an order the same day you received it.

“Same-day delivery is a powerful way to reach your customer base and compete with the bigger eCommerce stores and sites,” suggested Rusenko.

According to a survey by ProdegeMR, over 57% of shoppers would rather have their products delivered compared with just over 16% preferring in-store pickup. Retailers that can offer same-day delivery could better compete with big-name retail operations like Amazon. For those retailers not offering same-day delivery, they’ve met the challenge by offering BOPIS, or Buy Online, Pickup In-Store abilities. But only 31% of Canadian retailers currently offer this shopping method.

“The percentage of stores offering BOPIS is quite likely to change as more small, local retailers begin offering same-day delivery in an effort to compete with their larger rivals,” observed Rusenko. “It doesn’t just delight your customers—it encourages them to keep coming back to your shop for future purchases. It even has been shown to lead to more products in-cart. Say your shipping or delivery fee costs the same as a product the customer has meant to purchase. They’ll likely just throw that product in the cart to justify the delivery fee. What may have been a small, $10 cart suddenly becomes $50 or $100 worth of items.”

Recommended Reading:

Set up in-store and curbside pickup with Square Online
Thank your regulars with a loyalty program
Why the Growth in BOPIS Will Continue to Accelerate (and How to Make the Shift Now)

Did you know you can offer same-day delivery with Square Online?

Why Social-First Selling is Giving Local Retailers a Leg Up

Social selling isn’t anything new—remember Tupperware? Only now, retailers have a much brighter advantage: you can still be in the homes of your customers but on their terms and their timeline.

Competition for consumers’ attention is at an all-time high, meaning small, local businesses have gotten creative in their approaches. For instance, TikTok recently partnered with Shopify, offering Canadian retailers an innovative way to reach their target audience. But this also has created a sense of urgency: how does one get started with social selling? And what tools do retailers need to do it?

For instance, consider a flash sale on TikTok where your customers directly message you to place their orders. That’s easy for customers, sure. But how do you keep track of these sales, collect payments, and deliver the goods?

Having an online storefront helps you manage your orders and simplify the entire process. Sure, it’s still social selling, but it’s totally facilitated through your online storefront. The great thing about social selling is it puts you in the homes of your hyper-local customers and helps you build a sense of community around your establishment.

Just think, what do you think most people prefer? Seeing social posts from famous celebrities touting the wares of a big box chain or a small, local retail store that posts stories from their local community and sells the products that cater to its members?

“There are Square sellers right now who have turned their social feeds into shopping experiences tailored to their local customers. Others simply use their social channels to keep customers in the loop about up-and-coming in-store sales and new products,” said Rusenko. “No matter what a retail business uses social for, it’s a highly engaging way to keep customers involved and to build meaningful relationships.”

Consumers are becoming more comfortable buying products in the comfort of their homes right from the social media apps they use.

Next-Gen Selling is Letting Customers Virtually Step Into Stores

Social selling may seem like a new enough frontier for retailers. But there’s an even newer kid on the block, so to speak: live streaming. This new sales model has allowed retailers to recreate the same type of connection customers feel when they step inside their favorite store. Except now, they feel that connection from wherever they choose to view the stream.

Live streaming sales normally have a host who demonstrates products via live video. This is an exciting new way to sell. It’s unfiltered, sometimes unscripted—and it’s set up for a huge year. Retail sales in-store dropped by nearly 35% between February and April 2020, while online sales grew by almost 95% in the same time period.

While live streaming for sales is just beginning to take hold in Canada, brands are experimenting with the potential. Speaking of experiments, Well.ca has opened the first-ever virtual store in Canada. It’s just a trial run at this point. Still, shoppers will get the opportunity to check out the convenience of perusing shelves of product pictures, scanning the QR code with their phone to make the purchase, and having the item shipped directly to their home for free until April 30, 2021.

Recommended Reading:

QR Codes: What They Are and How to Generate One
Small Business with Mighty Hearts
5 Ways Retailers Can Help Front-Line Employees Work Safely

The Rise of the Multi-Hyphenate Local Retailer

As a retailer in a local community, you likely are hyper-tuned to your local customers. You have a sense of exactly what they’re looking for. This is why retailers fortunate enough to have this type of connection are totally reinventing how they sell and what they sell. Trying new verticals helps them stay relevant in a time when certain products and services have become more important to consumers. Just think of the distilleries that made a fast pivot to create hand sanitizers.

The lines—those well-defined verticals most retailers would never cross—have been blurred in response to the pandemic. For instance, some restaurants are now offering grocery items, and retail businesses offer online cooking classes.

Consumers are prioritizing convenience, and retailers are the lifeblood of the communities they live in.

“This vertical blending is a huge trend,” Rusenko pointed out. “It has the potential to turn many one-sector establishments into multi-hyphenates. The restaurant on the corner is now the restaurant-grocery-cooking school, for instance. They might sell ready-made meals, deli items, and culinary classes in addition to their base business of serving patrons.”

It’s these timely pivots that have resonated with consumers. Finding a necessary product or service in a place where they wouldn’t assume but already trust can instantly make them loyal customers.

Recommended Reading:

How to Use Instagram Shoppable Posts to Sell on Social Media
5 Ways to Boost eCommerce Sales
How Some Businesses Are Adapting Their Product Offerings

Accurate Inventory Allows Local Retailers to Make Bolder Moves

Competing with large retailers and having the flexibility to adopt new practices means staying on top of inventory. As small local retailers continue to expand beyond their physical storefronts, they’re investing in inventory management. Consumer needs seem to be in a constant state of flux. Retailers who want to anticipate those needs and multi-hyphenate require a reliable way to predict what inventory to order and when.

As proven by the toilet paper and paper towel shortages in 2020, staying on top of inventory and clear communication with vendors is a must, especially as many local retailers have had to turn to new vendors when their go-to suppliers have fallen short—not to mention keeping tabs on their various sales methods. Having a real-time inventory management tool makes omnichannel sales possible regardless of the size of the retailer. Those best able to pivot and adapt are the businesses with the strongest handle over their inventory.

“Counting your inventory, taking high-quality photos, and tagging your images with the right descriptions offers flexibility that can strengthen your business,” suggested Rusenko. “It’s no longer just something you should do. Today, innovative inventory management is a must.”

Recommended Reading:

Inventory Management 101: How to Manage Small Business Inventory

Did you know that Square for Retail lets you manage all your inventory right within your POS or your Square Dashboard? Create items, search for an item, control stock levels, view inventory at a glance, and even print barcode labels and more. Learn how by watching this video.

The Future Belongs to Local Retailers

It’s the small, local retail businesses that have the drive and spirit to hunker down through trials and give their businesses everything they’ve got. But it’s more than this drive and spirit that’s winning the race for them. They’re winning because they’ve redefined what the local shopping experience looks like for their clientele. By digitizing their inventory, selling on several channels, and embracing a flexible back-of-the-house approach, small retailers find themselves right where their customers are, in real-time.

Speedy deliveries, blurred industry lines, seamless in-store shopping, and new avenues of social and live streaming might have been far-fetched a mere year ago. But now they’ve redefined what it means to be a small retail business and set trends all their own. They’ve given their shops the freedom needed not just to survive but thrive.

It’s this same freedom that can help you own your store’s future. Trying new tools and ways of doing business can help you accomplish what you set out to truly connect with your customers and make sure your patrons can see you love what you do.

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