Retailers shed 1,600 jobs

TORONTO—Major Canadian retailers Best Buy Canada and Sears Canada yesterday announced layoffs totalling some 1,600—a move analysts are blaming on the popularity of online shopping and the shrinking demand for supersized brick-and-mortar stores.
Sears Canada said it’s letting go 700 workers across the country in a bid to “right-size” and restructure its business.

About 360 jobs will be from its department stores while another 300 will be from its distribution centres.
The remaining will be cuts to head office and other support areas.
Meanwhile, electronics retailer Best Buy also confirmed it will close eight Future Shop and seven Best Buy big box stores across the country as part of a “transformational plan” to replace them with small concept web and mobile locations over the next two-and-half-years.
The closures will result in 900 job losses, around five percent of its workforce, according to the company’s Canadian head office in Burnaby, B.C.
Retail analyst John Winter said layoffs following the frenzied Christmas shopping season are commonplace.
“February is the cruelest month in retail because you find out how you’ve done in the holiday season,” he explained.
“It’s cyclical.”
Despite this, the layoffs and store closures also can be a signal that consumers still are not spending as much money in stores compared to pre-recession levels. And when they are making purchases, they’re increasingly doing so online.
Winter said the electronics sector has been particularly hurt by declining sales in music and large-screen television screens—two areas that used to be big money-makers.
They’re also facing tough competition from discounters and online stores, a victim of what’s known as “showrooming”—when people browse in stores and then buy the products more cheaply online from competitors such as Amazon.
Retailers also are preparing for the entry of U.S. discount chain Target, which will be making its Canadian debut in March.
Target plans to open 125-135 stores in former properties owned by homegrown retailer Zellers.
“Everybody is just about to get hit by a tornado,” noted Winter.
“[Target] is great news for consumers, but it’s bad news for existing and traditional big boxes like department stores and big boxes such as Best Buy,” he said.
Retail analyst Wendy Evans said these latest job cuts and store closures show Canadian retailers are learning they don’t need a lot of space—or employees—if a large share of their business is coming from online.
“This is a beginning of restructuring of the retail structure that’s been in the works for a while,” she remarked.
“Obviously with the increase of online selling, there is more market share . . . therefore the need for bricks-and-mortar is changing.”
Evans said storefronts will never be eliminated, but with the rising cost of retail space and lack of vacancies in Canada, many companies are looking at this area first to “fine-tune” their business models.
“I think we’ll find that the big boxes are going to develop smaller boxes to fit themselves into the urban market,” she predicted.
“We’ve been seeing that for some time.
“I think there will be a general decline over time in the size of retailers,” she added.
Evans noted it will be particularly interesting to see how Sears transforms itself in the coming months, as it competes with Target and discount retailers for consumers in the areas of home goods, appliances, and clothing.
“We have a lot of low-end competitors and you really have to be different,” she stressed.
“Everybody is nipping at their heels.”