‘This is not a high-margin business in the best of times’: Reopening retailers face tough road to recovery

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As restrictions due to COVID-19 ease and stores begin to reopen, ​retailers are working to make customers feel safe enough to come in. But measures such as limits on the number of shoppers could also hinder their ability to recover after weeks of shut-downs.

“The [shopping] experience will be lovely, but we expect we’ll be operating at, who knows, maybe 40 per cent of normal levels ... financially, this will be absolutely brutal," said Heather Reisman, chief executive officer of Indigo Books and Music Inc. “This is not a high-margin business in the best of times. … So if you lose 10 or 15 per cent of your business, you lose your profitability. If you lose 40 or 50 per cent, you’re dug into a very, very deep hole.”

For retailers, digging out of that hole will not be easy. Most industry leaders expect that physical-distancing measures, and shoppers’ own hesitation about their safety, will continue to inhibit store traffic to some degree. E-commerce has helped, but does not make up for lost sales in brick-and-mortar stores, and the cost of filling online orders is high. Add to that the financial pressure from the shut-downs, and in some cases seasonal inventory that may have to be sold at a deep discount, and it is clear the recovery will take some time.

“We’re making a lot of decisions around cost savings,” said Meghan Roach, CEO of apparel chain Roots Corp., adding that the company is preparing for different scenarios as the wider economy begins to recover.

The extent of the retail shut-downs has differed province by province, as will the speed of re-openings and recovery. Ontario, Saskatchewan and PEI are allowing some retailers to reopen this week, while Alberta and Quebec are among the provinces that eased restrictions on stores earlier this month.

In April, consumer spending fell nearly 30 per cent from a year earlier, according to a Royal Bank of Canada report published on Tuesday based on millions of transactions from the bank’s debit and credit card holders.

“In the last two weeks of April, it looks like spending recovered somewhat,” said RBC economist Colin Guldimann. As more stores reopen in May, consumer spending should continue to strengthen, he said. But he noted that some people may not be able to buy like they once did. “It’s one thing for the government to say people can now go and do certain things. The big question is: Will Canadians feel comfortable doing those things, and will spending in those categories pick up?”

Retailers have been busy attempting to persuade shoppers to return. Roots has changed its store layouts, taking merchandise off display tables and putting more items on hangers to minimize the amount that customers are touching items. Apple Inc. has announced a global policy of mandatory temperature checks for customers before they enter its stores. Twelve of 29 Apple stores in Canada will open as of Wednesday, in B.C., Alberta, Manitoba and Nova Scotia. Aritzia Inc., which has reopened 10 of its stores, is limiting traffic as well. At its Robson Street store in Vancouver, every other fitting room is closed, and staff will clean the rooms after each use.

Signs in Mastermind Toys instruct littler shoppers that proper physical distancing is the width of three scooters. And the company has introduced curb-side pickup for the first time, loading orders directly into customers’ vehicles and allowing them to tap credit cards through a closed car window. Mastermind has been working to improve the purchase experience on its website, and expects features such as contact-less pick-up to remain in the long term -- 66 of its 69 stores across Canada are street-facing.

“One quarter of the customers have continued to use the curb-side option even as our stores reopened,” CEO Sarah Jordan said. “We want to do this in order to support our stores and to support the customers in whichever way they want to shop with us.”

Not everyone is steering clear. On the Victoria Day long weekend, “some of the businesses opened up to lineups that were about 40 [people] deep,” said Teri Smith, executive director of Vancouver’s Robson Street Business Association. The retail industry was never ordered to shut down in B.C., although many stores did.

As school closings have dragged on and it has become clear that many families will not travel for summer vacations, Canadian Tire Corp. Ltd. has seen demand surge for products to spruce up people’s homes and to keep kids busy. That includes healthy sales for patio furniture, games, and outdoor equipment such as bikes and basketball hoops, as well as products related to baking and gardening. While Canadian Tire stores were allowed to remain open in many places, they were closed in Ontario until this week, and the company also had to shut its Marks and Sport Chek banners. The experience has accelerated Canadian Tire’s approach to e-commerce.

“We had to change on the fly and do things in a very, very rapid way in order to meet consumer demand,” said TJ Flood, president of Canadian Tire Retail.

In stores, retailers have invested in new protective equipment such as plexiglass shields at checkouts, masks and gloves for staff, and hand sanitizer stations. Indigo will provide masks for customers as well.

In Saskatchewan, which has had substantially fewer COVID-19 cases than some provinces, retail stores and malls were permitted to reopen on Tuesday.

Men’s clothing store Caswells in Saskatoon has one employee exclusively tasked with cleaning. A worker at Brainsport, a running store in Saskatoon, built a plexiglass shield to separate customers and workers during shoe fittings. Meanwhile, Quinn and Kim’s Flowers will continue curbside pick-ups and deliveries, but not allow customers inside.

All of these measures put financial pressure on retailers.

“All the extra work that it creates for us to have customers in the store -- the trade-offs are not worth it,” co-owner Quinn Brown said.

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