Decline of Traditional Retail

By Geoff Mason.

The holiday season brings many things to mind. Wrapping presents while sipping a glass of rum and eggnog. Playing hockey with friends on a frozen pond.

Geoff Mason Kent Employment Law

And, of course, being packed into a frenetic supermall like a sardine.

For those who never found the traditional Christmas shopping experience very appealing, respite may be on the horizon, but likely at a cost.

Data suggests that the decline of traditional retail is well underway. Reuters reported that, in August 2017, retail sales in Canada declined in eight out of 11 retail sectors (making up 57% of all retail trade). The drop in both sales and volumes was the biggest decrease since March 2016. Given this, it’s no surprise that Toys ‘R’ Us filed for bankruptcy in Canada in September 2017 and Sears announced it would be shutting down a month later.

Of course, the in-person shopping experience has not gone the way of the Dodo just yet. According to Forbes, roughly 90% of retail shopping still occurs in physical stores.

Still, the move from main street to online is undeniable and will likely only continue.

Although there are many explanations for this, the most likely culprit is the rise of ecommerce. As Toronto Star Business Editor Francine Kopun reported earlier this year, Colliers International estimates that “online sales of $23 billion in 2014 replaced 76.7 million square feet of bricks and mortar stores.” For those of us who work better with visuals than numbers, that represents roughly all of the shopping centre inventories in Vancouver, Halifax, Ottawa and Victoria combined.

From an employment law perspective, the reasons for this shift are not particularly important. What matters is that the change in consumer habits may have significant consequences for employees across the country:

Elimination of Jobs

One of the things that makes ecommerce so appealing for businesses is that it is so streamlined and efficient, avoiding many of the fixed-costs borne by traditional retailers such as rent, inventory and staffing. Ebusinesses simply don’t need as many employees.

And even where a business maintains its physical operations, it will likely need to cut costs – and therefore jobs – to keep pace with its virtual competitors. The teenager who bagged and carried your groceries, the security guard monitoring the mall parking lot, the attendant who took your ticket before you drove away – they may all be looking for work next year. Of the 1.96 million people employed in the retail industry,  the vast majority – 1.7 million – work in shopping centres. That’s a lot jobs at risk.

Decrease in Employment Benefits

Another concern for employees is a potential decrease in favorable benefits and employee protections.

Because ebusinesses do not need to carry inventory, they can sell a wider variety of products. Consider Amazon who, quite literally, appears to sell everything. If these mega-businesses begin to create monopolies, competition will decrease, leaving employees worse off.

Fewer job options means that the employer-employee power imbalance will further increase in employers’ favour. Today, many employers offer a wide range of employee benefits beyond the basic health and dental coverage as a way to attract talent. A cynic would say that a reduction in competition will remove the impetus for companies to treat employees well.

It may provide some measure of comfort to know that these problems may be avoidable, or at least solvable. Job loss in traditional sectors may be mitigated by creative solutions aimed at job creation. In a worst-case scenario, Universal Basic Income has been floated by some as a potential solution. Legislative solutions may also provide a means of protecting employees where market forces fall short – so long as regulators are alive to these issues.

On a positive note – the market for free gifts doesn’t appear to be waning, so it looks like Santa’s job is safe for now.

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