Canadian retailers are urgently moving to boost productivity amid mounting competitive pressure – and they are doing it with fewer employees.
More than 45,000 jobs were lost in the retail sector between 2008 and 2011, and modest hiring so far in 2012 has been outpaced by retail output.
Canadian stores are seeking ways to drive productivity and protect their margins in the face of wary consumers and intensifying competition from foreign retailers, such as U.S.-based Target Corp. and Nordstrom Inc., some of which are also luring Canadian consumers to make more purchases online from stores outside of Canada.
It appears Canadian companies are rising to the challenge to become more productive, but they are saving costs by hiring fewer people and focusing on online retailing, which requires fewer workers.
Productivity in retail grew at a pace of between 2 and 2.5 per cent each year between 2007 and 2011, said Paul Ferley, assistant chief economist at Royal Bank of Canada. So far in 2012, that pace has quickened to 3.1 per cent.
"[It appears] they're trying to increase output per individual employed in the sector," he said.
Retailers that are hiring appear to be doing so in their online divisions.
Best Buy Canada plans to increase head count of both its Best Buy and Future Shop e-commerce teams by 30 per cent, said Robert Pearson, the company's vice-president of e-commerce.
Mr. Pearson said online sales have grown by 50 per cent over the past year.
"We've noticed that many Canadian retailers have underinvested in e-commerce, so we have seen a huge opportunity for us to invest in this space to better serve our customers and grow our business," he said.
Relative to American competitors, Canadian retailers have a long way to go to increase sales online.
Even for prominent Canadian retailer Indigo Books & Music Inc., which does have an Internet sales channel, online sales comprise just 9.5 per cent of total revenue.
At comparable American retailer Barnes & Noble Inc., online sales account for 17.5 per cent of overall sales.
"An increasing number of American retailers now have Canadian websites or they're willing to ship to Canada for free," said Sherry Cooper, chief economist at Bank of Montreal.
"Most of the Canadian retailers, though they may have a website, it's not a transactional website," she said.
With consumer spending slowing to 0.2-per-cent growth in the first quarter of 2012 compared with 0.7-per-cent at the end of 2011, what little money Canadians are willing to spend seems to be going outside the Canadian retail space.
Retail sales have been essentially flat since November, 2011, edging up 0.3 per cent in May, 2012, after falling 0.5 per cent in April, according to the latest data from Statistics Canada.
"Consumers are being much more cautious … and that's showing up in the hiring numbers [for the retail sector]," said Leslie Preston, an economist at Toronto-Dominion Bank.
Between 2008 and 2011, 40,701 jobs have been lost in the food and beverage segment of the retail industry, and about 3,000 positions have been eliminated at sporting goods, hobby, book and music stores.