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02/15/2022

The road to recovery begins here

When convenience stores are in peril, it has a ripple effect: Now is the perfect time for governments to take actions to bolster a thriving industry.
Anne Kothawala
President & CEO, CICC
Anne Kothawala profile picture

What will 2022 bring for the convenience industry?

It’s a simple question that doesn’t have a simple answer. As we look back over the past 24 months of the pandemic, it’s no surprise that our industry has changed forever.

While the resiliency of our channel in the face of COVID-19 has been amazing, stores are closing, particularly in rural Canada. Governments need to understand that when convenience stores are in peril, it has a ripple effect. It impacts tourism, it hurts communities, and it reduces the amount of tax dollars collected.

However, the difficult business climate of decreasing sales and growing costs has also brought opportunitya chance to look at the future of the industry.

As we enter the recovery phase, CICC has worked as the industry’s chief advocate, focusing on how governments can help us move to a post-pandemic world. We’ve been actively involved in stakeholder roundtables at both the federal and provincial levels. While the issues may be different, the message is the samegive us the tools to ensure the industry thrives and not just survives.

Provincially, we have been focused primarily on two key issuesintroducing the sale of beverage alcohol products in our channel and the problem of contraband tobacco.

In order to be successful in a post-pandemic economy, our stores need to innovate and diversify the product mix. More importantly, they need to be able to meet customer demand. Our research indicates that the majority of consumers favour enhanced choice and convenience including the purchase of beer, wine and coolers at their corner store.

That’s why we’ve been working with many provincial governments on making this become a reality. We’ve developed a local solution, a pilot project that would see the convenience channel sell locally made craft alcohol products. This is a win-win-win that would not only help our channel but give a much-needed boost to local producers.

Given our industry’s remarkably strong record in retailing age-restricted products, this is the next logical step in alcohol modernization efforts across Canada.

In addition to focusing on new product categories, we have to guard against erosion of our existing business. Provincial governments across the country must address the growing contraband tobacco market. Illegal tobacco sales continue to undermine legal sales in our stores.

An EY report commissioned by CICC found that the provincial treasuries are collectively losing billions of dollars annually to the illegal tobacco trade. A contraband market that still represents upwards of 20%40% in some regionsof total product sold is not good for law-abiding retailers, not good for public health and certainly not good for government finances. Contraband tobacco is inexpensive tobacco, and inexpensive tobacco thwarts governments’ efforts to reduce smoking.

Our message to all provincial governments is hold the line on tax increases until contraband levels have dropped, while making the necessary investments to empower law enforcement to combat the illegal market.

On the federal side, our key issue is credit card swipe fees.A simple Google search on “Why are swipe fees so high in Canada?” results in more than 13 million results dating as far back as 2013.

Not surprising. The exorbitant fee structure to process credit cards has been a longstanding bone of contention with Canada’s retail industry and one that disproportionately impacts our channel due to the high level of layered taxation on the products we sell.

That’s why we’ve been steadfast in our opposition to excessive credit card fees, while other associations have turned their focus to other issues during the pandemic. It’s a telling statistic that after labour and real estate, swipe fees are the third-highest cost of doing business in Canada for convenience stores.

Recently, we’ve ramped up our advocacy efforts on this important issue, presenting the results of a member survey on a possible path forward to Finance Canada officials.

Our research highlights that despite past commitments by credit card companies to reduce fees, any costs savings that may have occurred have been eroded by the introduction of new fees elsewhere in the system. Our members are adamant that any reduction in interchange fees must be accompanied by strict rules that prevent acquirers from passing through additional costs directly to the merchant. Simply put, banks should not be able to force the marketing costs for their high-end credit cards onto corner stores.

Enhancing the industry’s commitment to the consumer, CICC members are overwhelmingly against passing any surcharge along at the point of sale, because it does absolutely nothing to address the fundamental problem.

The feedback received from federal officials has been very positive as they are quite aware of the impact this has on small business. And there are rumblings that the federal government has heard our rallying cry and may take action in this year’s federal budget—stay tuned. With increased credit card usage likely here to stay it is an issue that the federal government can and must solve once and for all.

While it’s not clear what 2022 will have in store for our industry, we know that change will continue and there will be an ongoing need to remain resilient. The industry can be confident that CICC will continue to be a strong voice and work on your behalf to encourage governments to make the necessary changes to ensure your business remains successful.

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