The Slow Death of Brick and Mortar? What a pandemic economy means for online shopping during the holiday season
Sandrine Jacquot, Online Staff Writer
December 9, 2020
For many, online shopping is easier than it ever has been before. With the pandemic preventing mass in-store shopping rushes during the holiday season, what does this mean for brick and mortar retailers and the Canadian economy?
With economies being more integrated and connected through free trade, the movement of goods, services, information and people in this era of globalization has never been easier. The increasing ease with which one is able to purchase items on the internet has slowly been squeezing out the brick and mortar retailers who have been unable to keep pace with the transition to online shopping.
Que the COVID-19 pandemic, where Canadians were forced to stay home and retailers were forced to close. Stuck indoors, many Canadians turned to online shopping out of necessity and safety. 2020 is on track to be a record year for online shopping in Canada. E-commerce is the electronic transaction that allows individuals and firms to buy and sell items on the internet. From February to May of 2020, retail e-commerce sales more than doubled. In September, retail e-commerce sales rose 74.3 percent year over year.
On the flip side, Brick and Mortar retailers are feeling the consequences of the pandemic, shifting consumers’ focus online. The Canadian Federation of Independent Business estimated that earlier in 2020, roughly 160,000 businesses could permanently close due to the pandemic, and could increase to 225,000 closures if restrictions persist. Additionally, in the second quarter, Canadians collectively lost $23 billion in wages. While large retailers like Walmart have seen its e-commerce sales increase 79 percent in the third quarter, and Amazon’s increasing 37 percent with its profit also being up 200 percent, many predominant Brick and Mortar retailers are filing for bankruptcy or creditor protection.
Now with the holidays looming, a season typically marked by shopping and mall rushes, COVID-19 cases in Canada have been increasing at concerning rates. Canadians will turn to online shopping either because they have no other option, or out of fear of leaving their homes. Online shopping during this holiday season will intensify the impact on Brick and Mortar retailers in Canada, further hurting small businesses, but the Canadian economy as a whole.
With Toronto as Canada’s biggest city heading back into lockdown, a survey of 600 adults from Google Canada suggests that 70 percent of respondents were going to look online for their holiday shopping. Many small businesses are seeing their busiest time of year become their slowest. Despite some government assistance throughout the pandemic, many are scrambling, having to ask their landlords for rent relief and take on more debt. From the consumer perspective, the financial toll of the pandemic coupled with extended family and friends likely not gathering this year to exchange gifts means curtailed spending in general.
The rise of e-commerce and the simultaneous decline of Brick and Mortar is not a uniquely Canadian problem. Since January 2020, there have been widespread closures of department stores around the world, the UK’s Debenhams is set to close more locations in 2020-2021. While the American department store J.C Penney filed for bankruptcy after a decade of losses.
The pandemic has caused a shift in consumption patterns and producer spending, as demands for certain services decline such as movie theatres or cruises, and companies look to save money by shifting away from offices to have their employees work from home. It is undeniable that the pandemic has significantly impacted the Canadian economy, revealing its weaknesses and forcing consumers to rethink how they spend their money.
Many Brick and Mortar retailers are closing during the pandemic mainly because they cannot generate enough revenue to cover their costs, either due to lockdowns or restrictions. While there has been a push to support local and small businesses, and some financial support from the government, the total effect of government imposed restrictions has overall done more harm to these businesses than good. The loss of Brick and Mortar to the economy would be devastating and would cause a ripple effect: rising unemployment, decrease in income, rising debt, pressure on social services, and more.
However, it is unlikely that Canada will ever see the total loss of Brick and Mortar retailers. Despite the current difficulties of Brick and Mortar retailers during the pandemic, we will not know the true effects of the pandemic and the holiday season on the economy until it is over. There is still hope for Brick and Mortar retailers as people will always want some level of in-person interaction, a feature that online shopping will never be able to offer. Therefore, there will always be a demand in some capacity for Brick and Mortar retail. Nevertheless, for the time being, the pandemic will continue to cause decreases in revenue, job cuts, and store closures around the world.