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Retail sales ‘hit a wall’ in July after two months of significant gains

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Retail sales in Canada “hit a wall” in July after big gains in May and June, a sign that the economic recovery could be slow and bumpy.

Statistics Canada said Friday overall retail sales in July rose 0.6% to $52.9 billion, helped by higher sales at motor vehicle and parts dealers and gasoline stations, after posting gains of more than 20% in both May and June.

However, core retail sales, which exclude those two sectors, fell 1.2% in July, with building material and garden equipment sales dropping 11.6%. Core retail sales were up 10.8% in May and 14.1% in June.

“It looks like retail sales hit a wall in July,” CIBC senior economist Royce Mendes said. “It’s a pretty sharp pullback after some explosive growth in retail spending in June.”

Economists had expected an increase of 1.0% for the month, according to financial markets data firm Refinitiv.

Sales were up in six of 11 subsectors in July, the agency said, with the motor vehicle and parts dealers subsector contributing the most to the increase with a 3.3% increase. Sales at gasoline stations rose 6.1%.

Robert Carter, industry adviser with StratonHunter Group, said the surge in gasoline sales could be explained in part by “staycations.”

“As the economy opened up and people could move around, there were a lot of staycations,” he said.

Carter said the uptick in vehicle sales is likely due to improved household savings and pent-up demand.

“People may have felt they had a little bit of extra income to buy that vehicle that they were putting off.”

Meanwhile, sales at food and beverage stores dropped 2.1% in July, potentially the result of stockpiling in previous months, Carter said.

“People probably had a higher inventory of products in their houses than they historically would have,” he said. “I think that resulted in a bit of softening in the general household spending category.”

Retail Council of Canada president and CEO Diane J. Brisebois said the latest figures show the retail recovery is slowing.

“The July numbers continue to reflect the many challenges facing retailers during this pandemic,” she said in a statement.

“We can presume that the June numbers released by Statistics Canada last month included some pent-up demand for various products and so the July numbers really present a more accurate state of Canadian retail.”

Mendes said the slowdown could be explained by a shift in spending towards the service sector.

“It’s possible that households actually just tilted some of their spending away from goods and back towards services,” he said, noting that consumers may have spent more on eating at a restaurant or going for a haircut.

A preliminary estimate for August suggested that retail sales increased by 1.1%, by Statistics Canada also said Friday.

Going forward, Mendes said the “recuperation phase” of reopening after COVID shutdowns will likely be slower and rockier, as predicted by the Bank of Canada.

He said ongoing restrictions and household cautiousness will likely lead to slower growth in the coming months.

While BMO chief economist Douglas Porter agreed retail figures will continue to be more subdued in the coming months, he said the latest numbers also included many positives – most importantly the preliminary estimate for August.

“It’s almost comforting to see an economic report that is somewhat back to `normal’ in today’s moderate retail sales gain,” he said in a note to clients.

“While the headline gain was a bit shy of expectations, the much bigger and more important picture is that retail and wholesale activity just carved out perfect V-shaped rebounds.”


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Price and location power gas sales: C-store IQ National Shopper Survey

What do people consider important when they are making a gasoline buying decision? We found out in the C-store IQ National Shopper Study from Convenience Store News Canada and OCTANE. The findings offered an in-depth examination of the convenience channel and were revealing. 

Screen Shot 2020-04-14 at 12.40.36 PMC-Store IQ is the first convenience and gas specific study that delves into the wants, needs, perspectives and habits of Canadian consumers. We surveyed more than 1,000 convenience shoppers across the country to bring our readers and our partners the insights and data necessary to better understand customers and achieve business success. 

With average visits to gas stations running 4.67 times a month, our study found that price and location were and continue to be the two biggest drivers when it comes to gasoline purchase decisions. When it comes to preferences younger generation shoppers visit c-stores much more often and would rather visit a c-store than purchase gas from a gas-only retailer when compared to older generations. This indicates a desire to make the most of weekly gas purchase trips either to buy daily staples or a quick meal.

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Millennials (6.8 X a month) report a much higher average number of gasoline ‘trips’ over a monthly period compared to Gen X (4.51 X a month) and baby boomers (3.65 X a month). And, while male to female gas purchase decisions showed an even split in c-store gas purchase decisions, more males (54%) than females (42%) were interested in buying fuel from gas-only retail sites.

We found that 47% of respondents were dedicated to gas-only sites. In turn, 34% bought fuel solely at c-store, 16% looked to warehouse clubs such as Costco and 12% looked to grocery and supermarket sites with gas for their fuel buys. Here, millennials (17%) were most likely to buy gas from a grocery/supermarket than older boomer (9%) generation shoppers.

 Price (74%) and location (64% ) continue to be the most important factors for shoppers when deciding where to purchase gasoline. Store appeal (34%) and store/gasoline brand (35%) were found to be much less influential. A convenient location is of higher importance to females (68%) compared to males (59%). Millennials (39%) rate store appeal as more important compared to boomers (31%).

 The bottom line is that a convenient location with additional services and a competitive price is the formula for gas sale success. Convenience, service and price bring in customers. What operators do to maximize this opportunity determines the overall business viability.