The Death of Brick & Mortar Stores and the Rise of E-Commerce

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On Monday, Forever21 announced that they will shut down all business operations in Canada and re-structure their remaining assets in the US and abroad by declaring bankruptcy. They have filed to shut down their 44 stores in Canada with liquidation effective immediately and a full withdrawal by the end of December 2019. Forever21 is just the latest in a slew of companies to announce either withdrawal from the Canadian market or all-around dissolution of assets. Other recent closures include GAP, Payless ShoeSource and department store giant Sears.

This causes us to question the state of the Canadian economy as a whole – but also calls into question the changes that are happening for consumers themselves. Statistics Canada releases the figures for all retail-earnings each quarter, tracking them against previous years and creating future predictions for the upcoming quarter.

Retail statistics from Statistics Canada are divided into three categories; food and drug, store merchandise, and automotive and related – and are further sub-divided by class. These sub-categories, however, have become projections based on previous sales due to the fact that Statistics Canada is now suppressing the breakdown due to confidentiality reasons. They also track the sales from E-Commerce parties; however, these figures are limited to only Canadian operations – any e-commerce orders from foreign parties are not included in their published features.

For the last 12-month trend, Location-based Retailers from all three categories made 610.8 billion dollars, with a dismally low growth-rate of only 1.5%. Comparatively, the statistics for local e-commerce represent only 3.2% of Canadian retail purchases but show a positive 24% growth rate for the last twelve months.

Brick and mortar stores are also included in the e-commerce category for all their online operations, but it is generally an unprecedented trend in the business world and many businesses are facing difficulties in managing the transition. Even in the last ten years, entire lines of businesses have become obsolete, and it doesn’t seem to change anytime soon. Video and music stores were the first line of retail operations to be decimated by the introduction of online business. Now, we see the same effects happening to department stores and general mall-based businesses.

But why is this happening? Because people are changing the way that they want to spend their money. There is an urgency to the way consumers shop, and therefore the general shop-around in various department stores and malls are less of a priority and more of a hindrance. People seem to be driven by direct-marketing for one line of product where they can get in and get out. This change of attitude is what will be the downfall of these institutions.

For More Information on Statistics Canada NAICS: http://www23.statcan.gc.ca/imdb/p3VD.pl?Function=getVD&TVD=118464&CVD=118465&CPV=44-45&CST=01012012&CLV=1&MLV=5

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