UPFRONT // MAIN STREET MATTERS
Shopping local to support contributions made by small businesses It’s time for Canadian consumers to act on good intentions by engaging and shopping with their local small businesses // By Andreea Bourgeois, Director of Economics, Canadian Federation of Independent Business
The retail industry is of significant importance for the economy. It contributes approximately 5 per cent to the Canadian GDP, and it employs 12 per cent of the total workforce. The vast majority of businesses (99.9%) operating in retail are small or mid-sized firms (1 to 499 employees). How is it going? Optimism in the retail sector has been running at abysmal levels. It has been on an overall downward trend for the past year with a minor uptick mid-year. Retail businesses are lagging all other businesses in optimism. This gap started mid2021 and has been widening gradually. Not all retailers are affected to the same degree by this lack of confidence. For example, businesses selling essential items, such as grocery stores, specialty food stores, and health and personal care stores are reporting somewhat better optimism. And, it’s not surprising, since their products are essential, and consumers tend to substitute rather than give them up altogether. On the other hand, retailers that are selling big-ticket items such as automobile and other motor vehicle dealers, furniture stores, building materials dealers, and electronics and appliance stores are the ones suffering from the lowest optimism. 8 | Retail Insider the magazine | Volume two Issue four
Why do retailers feel rather pessimistic nowadays? This is the time of the year when many businesses are beginning to see the first results of newly employed strategies, making tweaks to their websites, planning wage adjustments as we head deeper into the new year, or looking into changes in product lines or technology. Some are still doing these things, but very few are looking forward to the year ahead with much excitement. The vast majority hope to make enough revenues to cover expenses. Except during the pandemic, we have never seen such a muted current business sentiment for retailers. But the main culprit of feeling so down is the lack of demand, an indirect consequence of high interest rates and higher prices. High interest rates directly affect the demand for expensive items where financing is usually part of the deal. Therefore, retailers selling big ticket items feel the pinch much more than others. No appetite for financing at high rate, no new car, or new appliance and so forth. Consumers are very reticent to make large purchases, therefore retailers are
