Canadian retailers rosy on the future

A new survey shows a positive outlook in all sectors, with expanding product offerings a high priority.

Retailers in Canada have high hopes for their businesses over the next year, and they believe improved customer service will allow them to stand out from their competition and retain customers, according to the third edition of American Express’ Merchant Services Monitor.

High Road Communications, on behalf of American Express, engaged Nielsen to survey 375 Canadian businesses in five retail sectors: restaurants, QSRs, grocery stores, gas stations and general retailers (the apparel and pharmacy sectors were removed from this year’s study). The data was weighted to be representative of each business type within a region.

Among those surveyed about their individual businesses, overall positivity for the year ahead remained steady (with 88% saying they felt either somewhat or extremely positive, compared to 83% last year), but their outlook on the wider industry has improved (with 84% giving either a somewhat or extremely positive response, up from 76% last year).

That positivity was reflected in nearly every sector, with the highest increase in positive business outlooks coming in grocery (93%, up from 80% in 2014) and QSR (92%, up from 87% in 2014) and in outlooks for their industries as a whole coming from grocery (89%, up from 70% in 2014) and general retail (87%, up from 71% in 2014).

Despite fluctuations in oil prices, gas retailers also saw a jump in the number of positive outlooks for the industry (87%, up from 71% in 2014), though they also had a 1% drop (to 88%) when it came to their own businesses. Only restaurants experienced a significant drop, with 79% having a positive outlook for their business (83% in 2014) and 74% for their industry as a whole (76% in 2014).

The reason for retailers’ rosy outlook for the future likely comes from their performance over the last 12 months: 56% said their sales had increased this year (compared to 47% in 2014), with only 12% saying sales had decreased (compared to 20% in 2014), a trend reflected across every sector. The top reason cited for increased sales was improved customer service at 82% (up from 64% in 2014), followed by reaching new customers (81%, up from 74%) and new product offerings (69%, up from 52%). Among those who said their sales fell, 94% cited changes in the economy (up from 77%), with 77% saying their customers were simply shopping less frequently (up from 61%).

Improving customer service was also the top way retailers are attempting to drive customer loyalty, with 87% saying so, up from 77% last year. Nearly every person surveyed said customer service was the key driver of loyalty, with the same amount saying it was something customers expected “more than ever” and 97% saying it was a key point of differentiation from their competitors (up from 89%).

When it comes to plans for the following year, 47% said they planned to do more work in expanding their product offering, with 37% saying they planned to do more marketing and advertising. Expanding product offering was the top priority in every category except for fast food, with grocery (60%), general retail (58%) and gas (52%) leading the pack. Fast food (46%), grocery (39%) and gas (38%) had the most respondents saying marketing was a priority.

On the flip side, 69% said they had no plans for expansion to international markets, with 56% saying the same for opening new stores or expanding to new markets within Canada.

Only 21% planned to do more e-commerce in the year ahead, with 19% saying they would do the same amount, 2% planning to scale back and 40% saying they weren’t involved in e-comm and had no plans for that to change. General retail was the only category where e-commerce was among the top priorities, with 40% in the sector saying so.

The rising cost of doing business (21%) and attracting new customers (20%) remain the highest challenges retailers say they are facing, although those numbers are lower than they were three years ago. The results were similar in every category except for general retail, where 21% said increased competition was the top challenge. The majority of those surveyed (85%) agreed that their industry was getting more competitive, with 76% saying they had to fight harder to keep customers. When it comes to new competition, 61% said they were at least somewhat concerned with new competitors entering their sector, with 60% saying they were concerned about existing competitors expanding their product offering.

Twenty-eight percent said increasing sales would be their top business focus over the next year, while 24% said it was reaching new customers, and 15% saying it would be retaining current customers. That makes 39% with customer-focused goals, although that’s down slightly from 43% last year.

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