Main article

View the most recent version.

1. Summary
2. Canadians spent more of their retail dollar on food and automotive fuels in 2008
3. Automotive fuel sales largest contributor to retail sales growth
4. Only the motor vehicles, parts and services commodity group declined in 2008
5. Growth rate slows for health and personal care products
6. Retail sales declined in the fourth quarter of 2008, the first year-over-year decline in more than 15 years
7. General merchandisers gained market share in 2008

1   Summary

This report is the second of two annual reviews on the retail trade sector in 2008. The first report, "Retail Trade: How the Provinces Fared in 2008" showed that Canadian retail sales in 2008 advanced at their slowest pace since 1996, in large part as a result of lower sales at new car dealers and an overall sales decline in the fourth quarter. The second report focuses on sales patterns for commodities sold by retailers in Canada.

Canadians spent more of their retail dollar on frequently purchased goods such as food and beverages and automotive fuels, oils and additives in 2008 and less on big ticket items such as new vehicles.

The only commodity group to decline in 2008 was motor vehicles, parts and services which made up one-fifth of total spending. This reflects the largest annual drop since 1955 in the price index for the purchase of passenger vehicles as well as lower sales of higher priced vehicles such as trucks and SUVs. The share of the passenger car market held by North American-built passenger cars was the lowest ever recorded.

Market share analysis highlights the changing shopping patterns of consumers in terms of the type of store they visit to purchase their goods and services. This paper illustrates the market share analysis and commodity mix for general merchandise stores compared to other store types. General merchandisers sold more food and beverages, sporting and leisure goods and housewares as a share of their total sales. The main contributor to higher year-over-year sales at general merchandise stores was a 14.6% rise in sales of food and beverages.

2   Canadians spent more of their retail dollar on food and automotivefuels in 2008

Rising prices caused Canadians to spend more of their retail dollar on food and beverages and automotive fuels in 2008. ¹  Food and beverages and automotive fuels, oils and additives accounted for one-third of total retail sales in 2008. At the same time, Canadians curtailed their spending on motor vehicles, which includes both new and used vehicles.

Retail spending slowed in 2008, reflecting the downward turn in GDP and employment in the fourth quarter. For the first three quarters of the year, total retail sales in current dollars were up about 5% over the same quarters in 2007, which was slightly lower than in the previous three years. In the fourth quarter, sales in current dollars were down about 1% compared with the same quarter of the previous year. In constant dollars, sales growth was somewhat less with an increase of 4.1% in the first three quarters of 2008 and a decrease of 0.4% in the fourth quarter. ² 

On a per capita basis, Canadians spent on average $12,752 in retail stores in 2008. This is an increase of 3.4% from 2007.

Food and beverages, motor vehicles, parts and services and automotive fuels, oils and additives accounted for more than half of total spending in retail stores in 2008. Of the $12,752 spent in 2008, $2,801, or 22%, was spent on food and beverages, up 5.5% from 2007. Spending amounted to $1,450 on automotive fuels, oils and additives, an increase of 16.1% from the previous year. Automotive fuels, oils and additives accounted for 11.4% of total spending, the largest share since the beginning of the series. Increased spending on both commodity groups is in large part due to rises in food and fuel prices.

Other commodities which showed above average growth were health and personal care products (+4.2%) and furniture, home furnishings and electronics (+3.5%). The majority of this growth occurred in the first three quarters of the year, as the economic downturn caused growth rates to drop in the fourth quarter.

Canadians spent less of their retail dollars on motor vehicles, parts and services in 2008. Motor vehicles, parts and services accounted for 19.8% of total retail sales, the smallest share since the beginning of the series in 1998. This reflects fewer new motor vehicles sold, lower purchase prices of new motor vehicles and a shift in the mix from trucks to passenger cars.

3   Automotive fuel sales largest contributor to retail salesgrowth

Retail sales of automotive fuels, oils and additives rose by 16.1% to $48.6 billion in 2008, compared with an increase of 12.0% in 2007. The 2008 increase led this commodity grouping to account for almost half of the growth in total retail sales. The growth was due to price increases in gasoline. Although gasoline prices fell in November and December, this was not enough to offset the run up in prices in the first 10 months of the year. While the number of motor vehicles on the road increased in 2008, the distances travelled declined. ³ 

According to the Consumer Price Index, gasoline prices rose 12.7% in 2008, up from the 4.5% increase a year earlier. ⁴  The national weighted average price of regular unleaded gasoline at self-service stations in 2008 was $1.14 per litre, up 12 cents from $1.02 per litre in 2007. A peak was reached in July of 2008, reaching $1.36 per litre. ⁵  However, by December 2008 gas prices were about 26% lower than the same month the year before.

Excluding automotive fuels, oils and additives, retail sales increased 2.0% in 2008.

4   Only the motor vehicles, parts and services commodity groupdeclined in 2008

The only commodity group with a decline in sales in 2008 was motor vehicles, parts and services, which went down 3.2% from 2007. This decline was driven by lower sales of new automotive vehicles.

According to the New Motor Vehicle Sales Survey, the number of new motor vehicles sold in 2008 declined 1.0% to 1.67 million units. The sales levels of new motor vehicles changed substantially over the course of the year, starting out strong and weakening in the second half of the year. Sales in the first half of the year were above the 2007 monthly average. In the latter half of the year, sales began to drop, and in the fourth quarter alone, sales fell almost 20% relative to the previous quarter.

The weakening in sales was driven entirely by lower sales of North American-built trucks. The number of trucks sold (which include minivans, sport-utility vehicles, light and heavy trucks, vans and buses) dropped 6.2% in 2008, led by a decline in North American-built trucks, which accounted for 86% of total truck sales. Sales of overseas-built trucks increased 8.6% during the same time period.

Conversely, the number of new passenger cars sold increased 4.1% in 2008 to reach 894,506 vehicles. Sales of new passenger cars peaked in the beginning of the year and continued to be strong for most of 2008. In the final two months of the year, sales of passenger cars dropped overall by 17.0%.

North American-built passenger cars lost two percentage points of market share to overseas-built passenger cars in 2008, dropping to 62% of total car sales. This is the lowest level of market share recorded since the inception of this series. Overseas-built passenger car sales grew 9.4% in 2008, the largest year-over-year increase since 2002. Conversely, sales of North American-built passenger cars rose 1.2% in 2008 following declines in 2006 and 2007.

The value of new motor vehicles sold declined 3.9% in 2008 to $51.6 billion, bringing sales below 2005 levels. The drop in sales can be attributed to a lower number of vehicles being purchased as well as lower purchase prices. According to the Consumer Price Index, the price paid for the purchase and leasing of passenger vehicles decreased 6.9% from 2007. ⁶ 

Another contributing factor to the drop in the dollar value of vehicle sales came from Canadians purchasing more passenger cars and fewer trucks in 2008 than in 2007. As trucks tend to be more expensive than passenger cars, purchasing fewer would affect total sales in dollar terms.

Lower sales of new vehicles also reflected a slowdown in used car sales. The value of used cars sold declined by 3.7% to $20.8 billion. On a value basis, more than three-quarters of used cars sold through retail outlets are sold by new car dealers. Sales of automotive parts and accessories rose 7.2%.

5   Growth rate slows for health and personal care products

Sales of health and personal care products rose 4.2% in 2008, reaching $37.2 billion. This growth rate was about half of what it was the previous two years and was at its lowest rate since the beginning of the series in 1998. The growth rate in each of the commodities within health and personal care products—consisting of prescription and over-the-counter drugs, cosmetics and fragrances, toiletries and eyewear— was at least a third lower than it was a year earlier.

Sales of prescription drugs accounted for just over two-thirds of the overall growth in this category, increasing 5.2% in 2008, down from 10.5% a year earlier and the lowest since the beginning of the series in 1998. Price is not the main contributor to the movement of this series, as the CPI for prescribed medicines has been relatively flat since 2006. Retailers saw sales of over-the-counter drugs rise 3.9% while there was a slight decline in sales of cosmetics and fragrances during the same period.

For the first time since 2005, pharmacies and personal care stores lost market share in the sales of health and personal care products in 2008. The market share held by pharmacies and personal care stores inched down by a quarter of a percentage point to 68.3%. Pharmacies and personal care stores lost market share in over-the-counter drugs to general merchandise stores and for toiletries and personal care products to clothing and accessories stores.

6   Retail sales declined in the fourth quarter of 2008,the first year-over-year decline in more than 15 years

After moderate growth in the first three quarters of the year, retail sales in the fourth quarter declined 0.8% from the fourth quarter of 2007. This is the first year-over-year decline in more than 15 years.

The hardest hit commodity group was motor vehicles, parts and services which fell 8.8% in the fourth quarter compared to the same quarter of 2007. This drop can be attributed to lower sales of higher priced vehicles such as trucks and SUVs and declining new vehicle prices.

Fluctuations in gasoline prices influenced the sales pattern for automotive fuels, oils and additives. This commodity group saw double digit growth in the first three quarters of 2008. In the final quarter of the year there was a relatively large drop (-7.4%), reflecting sizeable declines in the price of gasoline in November and December of 2008.

Declines were also observed in furniture, home furnishings and electronics (-2.6%), sporting and leisure goods (-1.1%) and clothing, footwear and accessories (-0.5%) in the fourth quarter of 2008. Sales of all of these commodities had risen in the first nine months of 2008 compared to the same period in 2007.

Not all commodities observed declines in the fourth quarter compared to the same quarter of 2007. Sales of food and beverages grew 6.6% in the final quarter of 2008, mainly due to higher food prices. According to the Consumer Price Index, the price paid for food purchased from stores increased 8.4% in the fourth quarter of 2008 compared to the same quarter of 2007.  ⁷  Growth was also noted in health and personal care products (+3.0%), all other goods and services (+1.6%), hardware, lawn and garden products (+1.4%), and housewares (+1.7%).

Sales gains in food and beverages were the main driving force behind the growth of general merchandise stores in the final quarter of 2008. General merchandise stores increased their sales by 4.5% in the fourth quarter compared to the same quarter of 2007. General merchandise stores along with food and beverage stores and pharmacies and personal care stores were the only sectors to see sales gains in the fourth quarter of 2008.

7   General merchandisers gained market share in 2008

After losing market share in 6 of the 10 commodity groupings in 2007, general merchandise stores either held or increased their market share across all commodity groups in 2008. Sales in this sector increased 5.9% from 2007, with almost half of this growth attributed to a rise in sales of food and beverages. It was the first time since 2004 that the growth rate of general merchandise stores was higher than for retail trade as a whole.

The main contributor to higher sales at general merchandise stores was a 14.6% rise in sales of food and beverages. This reflects higher food prices and higher volumes resulting from a near one percentage point rise in their market share to 11.0% in 2008. This gain was widespread across various categories of food and came almost entirely at the expense of food and beverage stores. This is the sixth consecutive year in which food and beverage stores have lost market share to general merchandise stores. General merchandisers have increased their market share more than three percentage points in the sales of food and beverages since 1999, with most of the gains coming since 2005.

General merchandise stores' share of the clothing and accessories market remained relatively steady in 2008, breaking a downward trend over the last few years. Clothing and accessories stores remained the number one retailer of clothing and accessories, even though they lost some market share in 2008 to other retailers such as miscellaneous retailers (which include sporting goods stores, which sell a lot of clothing and footwear).

The market share of sporting and leisure goods held by general merchandise stores rose one percentage point to 33%. This gain came from miscellaneous retailers, influenced in part by a four percentage points increase in market share for pre-recorded CDs, DVDs and video and audio tapes.

General merchandise stores' market share of health and personal care products held relatively steady in 2008. Since 1999, their market share has increased one and a half percentage points, but has been relatively stable since 2001.

While the market share held by general merchandisers for furniture, home furnishings and electronics held steady in 2008, its composition changed. There was a loss of more than one percentage point in the market share held for televisions which was captured by furniture, home furnishings and electronics stores. This was compensated by gains in other commodities. General merchandise stores have lost four percentage points in market share of furniture, home furnishings and electronics between 1999 and 2008.

There was a two percentage point rise in general merchandise stores' market share of housewares in 2008. General merchandise stores sold nearly half of all housewares sold in Canada in 2008, even though they represented just 7.0% of their total sales. This market share was taken mostly from building and outdoor home supplies stores.

Over the past 10 years, the commodity mix sold by general merchandise stores has changed. Ten years ago, clothing, footwear and accessories was the top selling commodity group among general merchandise stores, contributing 23% of total sales. In 2008, the share of clothing, footwear and accessories had fallen to 16% and no longer held the largest share of total sales. Since 2006, general merchandise stores have seen double digit growth in the sales of food and beverages, making it the top selling commodity in 2007. By 2008, it captured 20% of total sales by general merchandise stores.

Health and personal care products have become more important in the commodity mix of general merchandise stores, increasing three percentage points over the past ten years to account for 11% of overall sales. Although they are selling more health and personal care products, it has not lead to an increase in market share.