Canada / Analyst Insights
Price Check: Top 3 Canadian Retail Industries Poised for Growth

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by Ediz Ozelkan Analyst
Jan 03 2018

Amid a growing economy, it is tough to pinpoint where exactly growth is concentrated. In particular, retail industries have been mired by the ongoing transition from brick-and-mortar establishments to the digital world. Indeed, the retail sector has been shaken to its core by declines in brick-and-mortar sales, while stuck in a liminal space between holding onto traditional business models and digitizing its operations. Within this confusing context, Canadian retailers have generally been growing and IBISWorld expects Canadian retail trade, in total, to increase at an annualized rate of 1.6% over the five years to 2022. Still, some industries are projected to decline, failing to offset the looming threat of e-commerce, which is anticipated to grow at an annualized rate of 5.9% during the same period, representing the fastest rise of all Canadian retail industries. The turn to online retail is a sharp transition worldwide and influences domestic retail trends even if that shift lags behind that of the United States and Europe. Importantly, while Canada has been a significant market for online purchases, the domestic industry was slow to adapt, with businesses gradually making their way online and maintaining their brick-and-mortar establishments, while Canadians made purchases online from international retailers like Amazon or Walmart.

canadian retail graph

The imposing edifice of online retail has been a boon to some retailers that had the resources to adapt to this dynamic landscape. Others, however, succeeded because they did not need to digitize their sales. Some industries are shielded from online competition and these retailers are expected to grow robustly over the five years to 2022. Underpinning their expansion, IBISWorld expects per capita disposable income and consumer spending to increase during the five-year period at an annualized rate of 3.0% and 1.5%, respectively. As 2017 draws to a close, IBISWorld analysts have examined their data and specified three Canadian retail industries that are poised for growth over the next five years. While these industries led the way during the current period, growing strongly over the five years to 2017, their outlooks are promising as well and may provide an insight into how the retail sector can combat the spectre of online competition.

Health Stores

The Health Stores industry in Canada is set for a healthy outlook period, bolstered by an increasingly health-conscious populace. With this industry forecast to grow at an annualized rate of 4.3% reaching $3.6 billion over the five years to 2022, retailers in this industry have emphasized superior customer service to offset online competition. Bolstered by the rising popularity of alternative medicine and organic products, the Health Stores industry is projected to jump 5.0% in 2018 alone. Meanwhile, an aging population is pushing sales of other health products like convalescent care and orthopedic equipment, which represent 9.5% and 19.5% of industry revenue, respectively. At the same time, sports nutrition products, including protein and weight-gain powders, meal replacement, nutrition bars, sport drinks and pre- and post-workout supplements, which comprise 25.1% of industry revenue, are projected to grow as well alongside the expected expansion of the Gym, Health and Fitness Clubs industry in Canada at an annualized rate of 3.1% over the five years to 2022. Ultimately, increasing health consciousness and the ability to consult with health experts on-site have offset the influence of online sales for health products, catalyzing an anticipated boost in revenue during the outlook period.

Lingerie, Swimwear and Bridal Stores

Similarly, the Lingerie, Swimwear and Bridal Stores industry in Canada has been exposed to a litany of positive external factors with changing fashion trends and the expansion of international stores into the Canadian market, boosting revenue over the five years to 2017. These trends are expected to persist over the five years to 2022, resulting in an anticipated increase in revenue at an annualized rate of 3.4%, totalling $2.7 billion. Bolstered by forecasted growth in travel agencies and international trips by Canadians, rising at an annualized rate of 1.9% and 4.1% during the five-year period, respectively, sales of swimwear are expected to rise. Moreover, the industry’s largest product segment, lingerie and sleepwear, which makes up 52.9% of industry revenue, is expected to benefit from rising disposable income alongside the aforementioned fashion trends, which emphasize designer products from major players in the domestic industry like Victoria’s Secret. Sales of bridal gowns, conversely, are expected to decline during the outlook period. Representing 18.0% of industry revenue, bridal gown sales have decreased, even though more Canadians are getting married, due to the increasing costs of weddings overall. Still, the overall trajectory of the industry will likely offset these declines because of the hands-on aspect of industry operations. Consumers are often hesitant to purchase industry products without trying them on or getting them tailored to fit their individual needs and this will ultimately shield these retailers from having to compete with their online counterparts during the outlook period.

canadian retail graphic

Eye Glasses and Contact Lens Stores

The Eye Glasses and Contact Lens Stores industry in Canada has grown strongly over the five years to 2017 and is expected to continue this pattern over the five years to 2022. Growing at an annualized rate of 3.1% reaching $2.8 billion during the outlook period, the industry is expected to benefit from an aging population, growing consumer preference for designer products and a regulatory environment that puts a premium on brick-and-mortar stores. For example, Health Canada considers contact lenses to be a medical device, limiting the extent of online competition. Plus, studies suggest that there are widespread inconsistencies and a high number of incorrect prescriptions when dealing with online retailers. Furthermore, since retailers in this industry rely on value-added services like having an optometrist on-site and consultants to help choose glasses and contact lenses, it lessens the impact of online competition. Therefore, faith in retailers in this industry is derived from their services, which is expected to bolster industry revenue over the next five years.

An Ambiguous Outlook

IBISWorld’s forecast for the retail industry in totality is positive but altogether lacklustre when compared with the growth of e-commerce. Therefore, to balance the deleterious impact of online competition, brick-and-mortar stores need to differentiate and expand their services to encourage more foot traffic. The three aforementioned industries are projected to grow robustly over the five years to 2022 and share a few common traits. They are all shielded from online competition because of the services they offer: health consultants, tailored products and optometrists. Moreover, most of these industries sell discretionary items that cater to a changing population that focuses on designer brands, aesthetics and health, which all garner high price premiums for specialized and individualized products. Other notable growth during the outlook period includes nursery and garden stores, jewellery stores, pet stores and specialty food stores, all of which are expected to grow at an annualized rate of over 2.0%, and are focused on discretionary purchases while providing individualized services. Ultimately, these retail industries are primed for growth during the outlook period because operators have expanded their services to eradicate online competition. To stay up-to-date on these industries and for more information on their projected growth rates over the five years to 2022, refer to the industry reports on the IBISWorld website