The retail industry has enjoyed its most recent roaring success, with some analysts predicting that the sector will become the fastest-growing sector in Canada over the next decade.
But it is no longer as big a part of the economy as it once was, according to an analysis by the Conference Board of Canada and the Canadian Council for Independent Business.
The study estimates that the industry generated about $11.8-billion in annual sales in 2016-17, up from $10.7-billion a decade earlier.
But the retail sector has also suffered some of the deepest downturns since the recession of 2008-09, when many of the big retailers closed stores and lost billions in revenue.
A decade ago, the sector had a surplus of about $2.4-billion, but that was largely offset by a $1.9-billion deficit that year.
The latest recession has reduced those numbers by almost $1-billion to about $1 billion, and the overall recession has cost the industry $9.1-million a day.
“The retail sector is not in the same place as it was in 2008-2009,” said Andrew Lohse, the CEO of the Conference for Independent Commerce.
“I think the recession is making it hard for some retailers to get back on track.”
The recession was the worst since the Great Depression in the 1930s, and it hit retail particularly hard because the industry has grown at such a high rate.
“It’s really tough,” said Scott Fauci, an analyst with BMO Capital Markets.
“Retailers have a lot of assets that they’re using up.
They’ve got debt loads they can’t pay off, and they have a bunch of big companies that are struggling.”
In addition, the recession has hit the industry hard because of changes to provincial and territorial laws.
The provincial government passed a series of laws that have forced the closure of many retail chains.
The federal government has also tightened the rules for business licences.
The recession also forced retailers to cut hours and lay off workers.
In a statement, the Retail Council of Canada said the downturn has also forced some companies to lay off thousands of employees and slash their spending.
“While the overall impact on the retail economy is not as significant as many might have expected, many retailers have been impacted,” the statement said.
“We are seeing a slowdown in spending and a marked increase in layoffs.
As a result, the industry is in a stronger position than it was a decade ago and continues to see positive growth in sales.”
Lohser said that although the recession may have hurt the sector, the impact has not been as severe as some would have expected.
“What you are seeing is a lot more of these companies are not even going to be in business at all,” he said.
Lohsel said that while many companies are doing well, some are struggling to stay afloat.
“Some retailers are struggling,” he added.
“They’re having trouble keeping up with their expenses, which is a big part of their bottom line.”
The Conference Board’s analysis also found that the number of retailers with fewer than five full-time employees fell by 10 per cent between 2015 and 2016, and by 14 per cent since 2011.
The industry was the fastest growing sector in the country during this period, but it was the only one that experienced a decline in full-year revenues.
It also lost $6.9 billion in the first six months of 2017.
“There are many reasons why there has been a slowdown,” said Doug Porter, the president and CEO of Retail Economics.
“One is that retail is becoming more competitive, and we’re seeing a lot less growth in the retail business in Canada.
We’re seeing some consolidation of the market, and many smaller companies are going out of business.”
The other factor is the impact of the Affordable Care Act.
In addition to raising health-care premiums for Canadians, the law has increased the number and size of health-insurance plans available.
And there are many changes to the federal tax code that could reduce the amount of revenue that retail can generate.
“Many of these businesses are still struggling to come out of the recession,” Porter said.
The Canadian Council also says the downturn is affecting the business community.
“When the recession happened, the business world was in a very tough spot,” said Chris DeGroote, the vice-president of policy and research at the Canadian Chamber of Commerce.
The downturn has created some uncertainty about where the country will be in 20 years, he added, adding that many companies “are not ready to make investments in infrastructure or new ideas.”
“In some cases, they are going to have to rethink the way they do business.”
In the long run, some analysts believe the recession will have negative consequences for the economy.
“As the economy continues to recover and the economy improves, I think there will be a lot to gain,” said DeGroose.
“But there are some risks.”