After a brief summer bounceback, Ottawa’s hard-hit retail sector shed nearly 5,000 net jobs last month – a drop that some industry observers suggest could be the canary in the coalmine for a business in the midst of a seismic shift.
Even as malls and other shops reopened over the summer and capacity restrictions in stores were eased, the number of retail employees in the nation’s capital has steadily fallen over the past couple of months.
According to Statistics Canada, the three-month rolling average number of Ottawans who held retail and wholesale jobs stood at 62,400 last month, down from 67,200 in August and 71,000 in July. That’s a loss of 8,600 jobs in a few of months.
Industry followers who spoke with OBJ Tuesday listed a number of potential explanations for the sector’s struggles.
Ian Lee, an associate professor at Carleton University’s Sprott School of Business, said the troubling trajectory is just the beginning of what he expects will be a long-term trend as more retailers scale back their brick-and-mortar operations and devote more resources to e-commerce.
“Online sales have just gone through the roof,” Lee said Monday of the shift in consumer spending patterns during the pandemic. “If you’re buying online, you’re not buying it from the store, and if you’re not buying it from the store, you need less (employees).”
Lee said the retail sector is going through a “strategic rationalization,” with smaller malls and mainstreet retailers that can’t compete with e-commerce giants such as Amazon likely to be the biggest losers.
“Some malls will close because at the end of the day, some of those sales will no longer be there,” he said.
Lee also noted that rising labour costs are prompting more big retail chains to replace cashiers with self-checkouts, adding the move to greater automation in the sector “is coming, and it’s coming quickly.”
University of Ottawa economics professor David Gray calls the culling of retail jobs a “lag effect” of nearly 18 months of measures aimed at containing COVID-19 that have upended the industry and left many shop owners with unpaid bills such as back rent and other expenses.
Cash-strapped businesses have to cut spending somewhere, he explained, and labour is an obvious target.
“Even though the customers have come back for the most part and are spending again, I think the costs that (retailers) incurred during the many months of shutdowns and now coming to roost,” he said.
Meanwhile, the head of one of the city’s largest business organizations says many mainstreet retailers that struggled to find staff when the sector reopened turned to high school and university students to fill the void during the summer.
“They were a pretty big and important part of the workforce,” said Michelle Groulx, the executive director of the Ottawa Coalition of Business Improvement Areas.
But now that classes are back in session, the student labour pool is shallower, she noted. At the same time, government assistance programs mean many potential workers have less incentive to return to the workforce and a shortage of foreign workers has cut off another key source of labour for store owners, Groulx added.
“There’s a desperation to hire people across the board,” she said.
Still, September’s bleak retail employment numbers left at least one local analyst scratching his head.
Barry Nabatian, the director of market research at Shore-Tanner & Associates, said stores across the city have been “booming” lately as consumers who were sidelined for much of the past 18 months embark on spending sprees.
“When sales are up, employment must be up,” he said. “It’s totally the opposite of what I would have expected. I’m very surprised. I would have believed 5,000 more (jobs).”
Nabatian speculated that the drop in the three-month rolling average was a residual effect of a lingering industry downturn that extended into July.
“It is illogical to think that in August and September, there were job losses in retail and hospitality in Ottawa,” he said.