Retail Shopping Industry in Canada
Retail shopping is a process through which services and goods are sold to from businesses or individuals to the final consumer. A retailer is a business or an individual who procures goods from the manufacturers and other wholesalers at a lower price, which is commonly referred to as wholesale price and sells products to the final consumer at a profit. Over the years, there has been an increase in the number of players in the retailing industry both in Canada and across the globe. This is largely attributed to the high levels of demand for retail goods. There are different ways through which business and people can take part in the retail industry. One of the main ways of taking part in this industry is by participating in retail shopping through setting up of supermarkets (Plunkett, 2009). This paper will perform an external analysis of the general environment for the retail shopping industry in Canada.
Economic Environment
In Canada, the retail sector is among the major economic contributors. This sector contributes both indirectly and directly to the overall income of the country. In the year 2009, it is estimated that the retail industry in Canada contributed approximately $74.2 billion to the GDP of the country (Government of Canada, 2010). The retail shopping industry in Canada performs the vital function of linking consumption and production. It ensures that consumers are able to acquire the products that they desire in a convenient and cost effective manner. The retail shopping industry has also developed innovative supply chain management systems that have been replicated in various industries across Canada. The replication of these supply chain management systems has brought about the enhancement in the level competitiveness, in various industries, in the country.
Manufacturers of fast moving consumer goods also benefit from the existence of retail shopping industry. In Canada, there is quite a significant number of manufacturers who produce fast moving consumer goods, which are normally sold in retail outlets such as Walmart. These retail stores facilitate the producers to be able to avail their products to consumers in a manner that is efficient (Dorland, 1996). As a result, they are able to minimize their costs as well as maximize their levels of profit. The existence of the retail shopping industry has indirectly led to the increase in the level of success in the manufacturing and production sector. This is because the retail shopping industry and the manufacturing and production industry are exhibiting a relationship that can be considered to be complimentary.
During the past few years, there has been a decline in the number of people who are purchasing take away foods from the retail stores. This is partly attributed to the decline in the level of incomes as well as the number of people in formal employment. In the year 2008, Canada and the rest of the world suffered from the negative effects of the global financial crisis (Plunkett, 2009). As a result, there was a widespread loss of employment and some businesses were closed. This brought about a situation whereby the overall purchasing power of majority of the people in Canada declined significantly reducing the purchase of consumable goods by the people.
Social Cultural Environment
Across the globe, there has been a tremendous shift in the eating habits of the people, as people become more health conscious in their eating habits. As a result, manufacturers have been forced to change their ingredients and rebrand their products in order to perform well in the retail shopping industry (Minakakis, 2006). This is because when most the consumer are visiting the retail outlets they want to procure products that have zero or minimal adverse effects on their health. Unlike in the past years, consumers are becoming more conscious on their health in regard to their eating habits. This has brought about a situation whereby producers and manufactures of junk foods have to look for innovate ways of increasing demand for their products. Most of the retail shops are being forced to stock more healthy foods, and this is mainly attributable to the significant rise in the demand for healthy foods. Retail stores such as Walmart have ensured that they have put in place a designated section for the purpose of retailing groceries.
The negative effects of both the global financial crisis as well as the Euro zone crisis have brought about a situation whereby most of the retail outlets reduced their inventory of luxury products. This is because most of the people reduced their demand for luxury products and they concentrated on acquiring investments and basic commodities. However, in the recent years there has been a significant rise in the level of demand for luxury products more especially the mid – range luxury products. This is partly attributed to improvement that has been witnessed in the financial sector (Lipsey, 2006). The economy is displaying better levels of performance in contrast to the preceding years. Due to this, there has been an increase in the level of confidence amongst the consumers and this has consequently brought about an increase in the level of spending by Canadians on luxury products. In line with this, the retail store and outlets have thus been progressively increasing their inventories of luxury products so as to meet the prevailing demand.
Technological Environment
The retail shopping industry has developed and put in place various technologies that are geared towards ensuring that the industry remains competitive. Most of the technological innovations developed and implemented in the retailing industry in Canada pertain to supply chain management. Supply chain management is the management of supply chain functions in order to maximize customer’s value at the minimal cost possible (Mentzer, 2001). A supply chain involves all stakeholders involved in maximizing customer's value. The stakeholders include suppliers of raw materials, transporters, warehouse personnel, production personnel, distributors, wholesalers and retailers. Supply chain strategy is the planning and design of the end–to–end sequence to maximize the probability to meet the demands of customers at the least cost possible.
One of the ways through which the players in the retailing shopping industry have managed to improve their performance is through Outsourcing. Outsourcing is the practice of contracting business processes that an organization used to carry out internally to another organization that is better equipped to perform the processes effectively and efficiently. An organization usually contracts business process that it used to perform in order for the organization to concentrate on its core business (Sokolov & Ivanov, 2010). Business process outsourcing has become the new way of doing business throughout the world.Business process outsourcing can be conducted in various departments in an organization.
Technology services outsourcing enable organizations to access the latest technologies for managing the supply chain. This ensure that the organization is able to utilize modern technology in supply chain management thus minimizing cost of production as well as ensuring the production of high quality products (Mentzer, 2001). Use of modern technology in the industry increases efficiency and reduces the cost of production leading to lower prices of the product. Products, which are produced using the latest technologies, have a lower cost per unit. An organization that has outsourced its technology services has access to diverse technologies. This enables the company to implement the most suitable technology in the production of different products offered by the company.
Companies operating within the retail shopping industry need to outsource their technology services. This is because technology services outsourcing enable organizations to access the latest technologies for managing the supply chain (Minakakis, 2006). This ensure that the organization is able to utilize modern technology in supply chain management thus minimizing cost of production as well as ensuring the production of high quality products. Access to the latest technology in the industry facilitates the organization to be more effective and efficient with regard to matters pertaining to production. This plays a vital role when it comes to pricing of the commodities. Products that have been produced through the use of the latest technologies normally have a lower cost per unit. An organization that has outsourced its technology services has access to diverse technologies. This enables the company to implement the most suitable technology in the production of different products offered by the company.
Political – legal Environment
In the year 2012, the Government of Canada passed legislation on the sixth month of the year 2012, and it has in turn brought about the negative impact on the retail shopping industry in Canada (Retailing in Canada, 2013). The retail shopping Industry in the United States is renowned for offering its consumers relatively lower prices compared to those that are being offered in Canada. This has resulted to a change by consumers in Canada as they prefer to import products from the United State. There was a change of the of duty-free exemptions for Canadians returning from trips abroad, which were increased from $50 to $200 for a 24-hour stay. In addition, a 48 hours stay away or more, increased from $ 400 to $800 per person (Kopun, 2012).
The consumers in Canada also prefer to carry out their bulk shopping in the United States, and this is partly because the retailers in the country are known to offer larger discounts compared to their Canadian counterparts. The passing of this legislation has led to the declined profitability in the Canadian retail shopping industry. This has made the industry become less attractive to both foreign and local investors. The Government of Canada needs to review this law so as to prevent the retail shopping industry from collapsing, and ensure its attractiveness to both foreign and local investors.
Demographical Environment
It is estimated that approximately 42% of the total population in Canada is composed of persons who are between the ages of 25 – 54 years (Index Mundi, 2013). It is also estimated that approximately 81% of the total population of Canada is comprised of persons who are living in the urban centres. In light of this, it is evident that the country has a sizeable population that contribute effectively in the retail shopping industry. This is because the most of the products being offered in the retail shopping industry are similar and a company needs to different its products so as to make them competitive.
Conclusion
All the factors analysed above impact the retail shopping industry in Canada in one way or another. In order to ensure that the industry is able to attain smooth and steady growth, the government and the companies operating within industry need to work hand in hand. The companies should indicate the areas which require the development of government policies so as to improve the performance of the industry. On the other hand, the government needs to ensure that it develops policies that seek to promote the retail shopping industry in Canada.
References
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Dorland, M. (1996). The Cultural Industries in Canada: Problems, Policies and Prospects. Toronto: James Lorimer & Company Ltd, Publishers.
Government of Canada. (2010, June 25). State of Retail: The Canadian Report 2010. Retrieved from Industry Canada: http://www.ic.gc.ca/eic/site/retra-comde.nsf/eng/h_qn00281.html
Index Mundi. (2013, March 20). Canada Demographic Profile 2013. Retrieved May 29, 2013, from Index Mundi: http://www.indexmundi.com/canada/demographics_profile.html
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Kopun, F. (2012, Aug 22). Business. Retrieved May 30, 2013, from thestar.com: http://www.thestar.com/business/2012/08/22/new_dutyfree_limits_send_canadians_on_overnight_shopping_trips.html
Lipsey, R. G. (2006). Services Industries and the Knowledge-based Economy. Toronto: University of Calgary Press.
Mentzer, J. (2001). Supply Chain Management. New York: Sage Publications.
Minakakis, G. (2006). Last Retailer Standing: Relevant Leadership Relevant Brand. New York: Freisen Press.
Plunkett, J. W. (2009). Plunkett's Retail Industry Almanac 2009. New York: Plunkett Research Ltd.
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