Wholesale & Retail Trade

 

Whether you are buying food, clothing, or other necessities, putting gas in the car, picking up supplies for a do-it-yourself project, getting a new pair of glasses, or simply browsing in a mall, you're using the services of establishments in the wholesale & retail trade industry. This industry is the largest employer in BC, providing just over 15% of all the jobs in 2008 and generating 12% of the province's total GDP.

What's included in wholesale & retail trade?

Wholesalers and retailers are in the business of re-selling goods that have been purchased from suppliers. They bring goods produced in the province, or imported from other regions and countries, to the marketplace where they can be purchased by consumers.

Wholesalers usually supply goods for resale or industrial use

Wholesalers can be thought of as "middle men" who supply goods to industrial or business customers, such as retailers, restaurants, manufacturers, or construction companies. They sell single units of big ticket items like farm machinery, heavy equipment and vehicles. They also sell bulk quantities of building supplies, food & beverages, seed, fertilizer, and many other types of products.

These goods may be used as inputs into production. For example, a building contractor would usually purchase materials such as cement, plywood, nails, two-by-fours, sinks, pipes, bathroom fixtures, paint, glass, wallpaper, and so on from a wholesale supplier.

Wholesalers typically operate from a warehouse or office space that is not necessarily designed to attract walk-in customers. These outlets are often located in industrial areas of cities, where it is convenient for their customers to pick up and load supplies, or from which goods can be distributed and delivered directly to their clients.

BC wholesalers of building materials and food, beverages & tobacco product accounted for 45% of total sales in 2008

Wholesalers of building materials (24%) and food, beverages & tobacco (21%) dominate the industry, accounting for nearly half of total sales in 2008. Another 19% of sales were made by machinery & electronic equipment (including computers) wholesalers. These shares have been quite stable, changing only marginally during the last decade or so.

Retailers generally deal directly with final consumers of goods

The main characteristic of retailers is that they sell goods primarily to consumers or households. Supermarkets, gas bars, drug stores, furniture outlets, "mom and pop shops", hardware stores, car lots, mobile home dealers, and garden centres are only some of the many types of retail businesses. This industry also includes "big box" retailers such as office supply and computer stores, and retailers of building materials, plumbing, and electrical supplies.

Retail outlets are usually designed to have display areas where customers can see merchandise available for sale. They cater to walk-in traffic, so they're often located in city centres or suburban areas.

Some retailers sell directly to customers…

Not all retailers have store-fronts. The industry also includes establishments that sell via infomercials, vending machines, door-to-door sales, by in-home demonstrations, or by mail order. Some retailers only sell products online.

…and some stores are not included in the retail industry

Some establishments that sell goods to customers are not included in this industry. For example, a produce stand at a farm would be considered part of the farming operation. A bakery that produces and sells baked goods onsite is included in the food manufacturing industry. Photofinishing shops that are primarily in the business of developing pictures rather than retailing products are part of the personal & laundry services industry, and maintenance & repair shops have their own industry group.

On the other hand, meat & seafood markets or optical outlets, which are primarily involved in selling finished products to customers, are part of the retail industry. Cutting meat, preparing fish or grinding lenses is just one aspect of the service they provide.

Retailers of automotive products, including new & used car dealers, RV dealers, and gas stations, typically account for about a third of total sales in this industry. Supermarkets, food, liquor, and beer & wine stores usually take in about one-quarter of total retail revenues. Department stores and other retailers of general merchandise accounted for 11% of total sales in 2008. These shares have remained quite stable since 1990.

Automotive product retailers accounted for nearly a third of total retail sales in 2008

An industry in transition

The wholesale & retail trade industry has seen many changes in recent years¹. These have been driven by technological and market developments.

Retailing has always been characterized by a mix of small, privately owned and operated establishments, and chain stores² that have multiple outlets. Chain stores include local chains, as well as regional, national and international operations.

More than half of all retail purchases in BC are made at chain stores. They account for 84% of total sales by department stores and general merchandisers, and about three-quarters of sales by home electronics retailers, supermarkets, and clothing. Other types of retailing where chain stores have at least 50% of the market include home centres, gas stations, and furniture stores.

Chain store purchases are accounting for a growing share of retail spending in BC³

In the mid-1980s, most of the chain stores in Canada were domestically owned. There were only 10 US-based chains operating in Canada. By 2003, there were 185 US chain stores with Canadian outlets, and 11 of the top 20 retailers in the country were American.

Some of the most significant retailing innovations have originated in the US

What effect has the growing influence of US retail companies had on the industry in Canada? Historically, many of the major innovations in retailing have come from the US.

For example, supermarkets were an American innovation-the first self-service grocery store, called Piggly Wiggly's, opened in Louisiana in 1916. The concept of the "self-serving store" was so revolutionary that the owner was granted a patent.

Prior to this development, customers at grocery stores had to ask a clerk to measure out dry goods in the required quantities. Pre-packaged goods, fresh fruit, vegetables, meat and dairy products were not available at the grocery store. You had to visit the butcher, or the greengrocer, or the dairy to buy these items.

US retail giants have brought changes to retailing in Canada

More recently, a number of important retailing innovations have originated in the US. These include marketing concepts such as everyday low pricing, big box retailing, warehouse club stores, and specialty store chains, which only stock certain types of goods such as sporting equipment and clothing, computer products, or craft and office supplies.

Big box retailers, factory outlets and warehouse clubs

Big box retailers place an emphasis on self-service, bulk buying, or do-it-yourself assembly. Stores are typically warehouse-style. Because they spend less on decorations or fixtures such as carpets, and may have fewer floor workers than other types of retail outlets, big box retailers can often sell goods-ranging from clothing and food to furniture and appliances-at very competitive prices.

By eliminating the middle man, factory outlets are able to offer their products to consumers at reduced prices. Warehouse clubs offer products in bulk, and at discount prices, to customers who pay a fee to join.

New technologies to manage inventories

Technological innovations have changed the way the industry does business. For example, bar codes, which are used to electronically scan and price merchandise, are also used to implement just-in-time inventory control (a process that allows retailers to keep less stock on hand, since they can order goods from their suppliers "just in time" before they need them).

Radio frequency ID tags, which allow stores to locate merchandise using radio signals, are used as inventory control mechanisms and to simplify the stocking process. Goods marked with these tags can be located even if they are still in packing crates. Technologically advanced distribution centres, and the practice of cross-docking (where merchandise in warehouses is kept ready for shipment rather than being unpacked and put on shelves) are also innovations that arrived in Canada with the US retailing giants.

The "Wal-Mart" effect

The entry of Wal-Mart into the Canadian marketplace in 1994 had a profound effect on retailers of all sizes. Some small independent stores were not able to compete, and have gone out of business. Others have found new ways to market their products, attracting customers who prefer to shop at locations that can offer more personalized service or stock products that aren't available from the big retailers.

Canadian chain stores have changed their marketing strategies in order to compete with stores like Wal-Mart. Many of them used to offer goods at sale prices from time to time, while charging higher prices in between. Now, they've adopted everyday low pricing, or are competing by marketing house brands or using customer loyalty plans.

The "Wal-Mart effect" hasn't just driven prices down. It has resulted in a lot of changes in the industry supply chain. Big corporations often deal directly with manufacturers, bypassing wholesalers altogether. Because these corporations have a lot of buying power, they're able to influence the way producers make, package and ship their products. Some of these changes (such as the introduction of radio frequency ID tags) can benefit both small and large retailers.

Retailing has become more efficient, but more uniform than it used to be

All of these factors have made retailing more efficient, contributing to productivity gains in the industry. But there has also been a cost, since some of the diverse and unique features offered by small independent retailers have been lost.

So how does all this affect consumers? They are able to purchase brand-name goods at lower prices. They can find virtually the same stores, offering the same products, in shopping malls all over North America. However, the types of goods offered for sale, and the retailers stocking them, have become more uniform. Independent retailers offering unique products are not as common as they used to be.

Internet shopping is popular…

The Internet has become an increasingly popular source for shoppers looking for books, clothing, flowers, housewares, and even construction supplies. Many retailers and wholesalers offer products for sale online as well as in their stores, and Internet-savvy customers frequently check out these websites before they go shopping, even if they intend to make their purchases in person.

Large book retailers have whole divisions devoted entirely to Internet commerce. Booklovers can purchase rare or out-of-print books online from a network of second-hand book dealers located all over the world.

What do Canadians⁴ buy online?

The most common Internet purchase is travel arrangements Forty-five percent of Canadian Internet shoppers made travel arrangements online in 2007⁵, and one in three purchased tickets for entertainment on the Internet. Among items traditionally sold by retailers, the most popular Internet purchases include books, magazines & newspapers (37% of shoppers) and clothing, jewellery & accessories (30%). Music (22%), computer software (20%) and consumer electronics (20%) were also popular Internet purchases. Less commonly purchased items include flowers (16%), toys & games (15%), and a variety of other items such as housewares, sporting goods and health & beauty products, to name just a few.

…but most purchases are still made at retail outlets

Internet shopping is still a relatively small niche market. In 2007, BC households that purchased goods or services online (including airline tickets and other services not available from retail outlets) made an average of nine online purchases and spent $1,280 on products sold over the Internet. By comparison, total retail sales were $32,376 per household in that year.

Changing consumer habits affect retail trends

People are becoming increasingly busy, and have less time to prepare meals. Food retailers have responded to this by providing fresh salads, sandwiches, packaged casseroles, hot food, and other items that are ready to serve in their deli departments. Twenty years ago, most supermarket delis primarily sold sliced meats and cheeses.

It's not uncommon for supermarkets to have in-store pharmacies, flower shops, and even bank branches on-site. They may also sell clothing, books and other dry goods, and rent out cleaning equipment and videos. As a result, customers can benefit from "one-stop" shopping when they go to pick up their groceries.

The "one-stop shopping" idea is catching on. Some general merchandisers are including grocery departments in their stores. Other types of stores are carrying products that they previously did not stock. For example, some pharmacies now sell a wide range of fresh and packaged food products, as well as clothing, housewares, electronics, and small appliances in addition to their traditional wares.

Why does all this matter?

The wholesale & retail trade industry has changed a great deal in the last two decades. Some of the changes have fundamentally altered the way the business works and what types of jobs are available in this industry. Supermarket chains hire chefs, cooks, and dishwashers to prepare and package take-home meals.

Stores that use just-in-time inventory processes may need more truck drivers but fewer shelf stockers. Book dealers who sell their products online don't need front-line sales clerks, but they do need mailroom and warehouse workers and computer operators to run their business. These are just a few examples of how the changes in the industry have affected employment characteristics.

Measuring output in wholesale & retail trade

By the time goods reach a wholesaler or retailer, they have usually gone through many stages of production. Raw materials harvested or extracted by a primary industry are sold to a manufacturer who produces and ships finished goods to a wholesale or retail establishment. Wholesalers and retailers do not materially alter the goods they sell-they simply make them available to their customers.

For wholesalers and retailers, the value of production is not the same as total sales. Selling prices include the cost of goods sold plus a margin, which is a measure of the value of the services provided by a wholesale or retail establishment.

Margins cover expenses such as operating storage or retailing facilities, fuel & trucking services, supplies, rent and wages as well as a return to the owner. In some cases, the margin represents a relatively small percentage of the final selling price. For example, most of the selling price of a car goes to the manufacturer rather than the dealer.

Margin rates are highest in retailing

Margin rates (the ratio of margins to total sales) vary significantly among industries. In retailing, they average about 29%. Clothing retailers usually have the highest margin rates (typically about 50%), while retailers of motor vehicles and gasoline tend to have lower margin rates (usually less than 20%).

Higher margin rates do not necessarily mean higher profits. They simply reflect differences in the cost of providing services. One reason why retail margins are relatively high at clothing stores is that retailers must devote some of their floor space to displays and changing rooms, and many keep staff on hand to give personalized assistance to customers. Sometimes items are damaged when customers try them on, and they may require repairs. This adds to the cost of providing clothing retail services.

In a supermarket or self-serve gas station, customers fill up their own gas tanks or load their grocery carts, and are less likely to need one-on-one interactions with staff before they pay for their items. Margins in these types of establishments are usually lower than in more service-intensive retailing businesses.

In wholesaling, margin rates are lower

Margins in the wholesaling industry average about 20% of operating revenues. As is the case in retailing, there is a lot of variation in wholesale margins, which range from less than 10% for wholesalers of pharmaceutical products to more than 30% for those wholesaling motor vehicle parts, office and professional equipment, and apparel.

Margin rates reflect differences in the types of services provided by retailers and wholesalers

Retail trade employs nearly 12% of the province's workforce

About 5% of the province's GDP originates in wholesale trade, while the industry‘s share of total employment is just under 4%. In contrast, the retail industry's share of GDP (7%) is quite a bit lower than its share of employment (nearly 12%).

Given the customer-oriented nature of retailing activities, it is not surprising that retail trade is a much bigger employer than the wholesale trade industry. In fact, there were three retail workers for every worker in the wholesale industry in 2008.

Retailing is a labour-intensive activity. It takes a lot of effort to run a store. Workers have to order goods, stock shelves, assist customers, take inventories and record purchases. Stores need to be cleaned and window displays have to be updated. There are many other tasks related to attracting and serving customers. Wholesale establishments are usually meant to be functional rather than inviting, so they normally don't require as many front-end staff to operate.

Retail trade accounts for a much larger share of total employment than GDP

Another reason for the large gap between GDP and employment shares in the retail industry is that nearly a third of the people who work in the retail industry are employed part-time, so the job count in retail trade is higher. The average for all industries is one in five and in wholesale trade, only one in 10 workers has a part-time job.

What's happened since 1990?

Employment growth has lagged behind the rest of the economy, but the industry's share of GDP is increasing

Job growth in wholesale & retail trade has not kept pace with the rest of the economy, and as a result, its share of total employment has declined slightly since 1990. In 2008, about 15% of the province's workers were employed in wholesale or retail sales. That's down from 17% in 1990.

Wholesale & retail trade's share of GDP has been rising over time, increasing from about 9% in 1990 to nearly 12% in 2008, indicating that the industry's value added has been growing faster than the all-industry average.

Faster-than-average GDP growth, combined with slower-than-average increases in employment, means that labour productivity is rising in this industry. Both wholesale & retail trade have experienced relatively strong productivity growth during the last decade, well above the provincial average. These productivity improvements may be linked to some of the technological and process changes that have been introduced in recent years.

What are the most common occupations?

Fifty-three percent of the jobs in this industry are in sales and service occupations. In wholesale trade, these workers are primarily technical sales specialists, and sales representatives. In retail trade, they're mainly salespeople, cashiers, supervisors, or grocery clerks and shelf stockers.

Jobs in business, finance and administration (18%) include office clerks, secretaries and shippers and receivers. Business, finance & administrative jobs are somewhat more prevalent in wholesaling than in retail trade. They mainly involve shipping, receiving and accounting.

Management (15%) is the next most common occupation. In wholesale trade, management positions primarily include sales and marketing positions, while managers in retailing are more likely to be running a retail outlet.

Sales and services are dominant occupations

Trades, transportation & equipment operators (10%) are mainly materials handlers, truck and delivery drivers, and equipment operators. They make up a larger share of the workforce in wholesaling (about a quarter of the workforce) than they do in retail trade. The relative importance of transportation & material handling occupations reflects the nature of wholesaling, which involves delivering goods to retailers for resale, but may also include delivering bulky items such as building and other supplies to companies that use them as inputs in production.

How many people work in wholesale & retail trade, and how much do they earn?

Wholesale & retail trade was the province's biggest employer in 2008, with a total of 354,800 people working in the industry. Three-quarters (266,800) of the workers were in retail trade, while one in four (88,000) worked in wholesale establishments.

Hourly earnings in wholesale & retail trade are lower than in other industries

The average worker in the industry earned $16.76 an hour and spent 35 hours on the job each week. Average wages were significantly lower in retail trade ($15.21) than in the wholesaling industry ($21.89). A typical worker in BC earned $21.46 per hour and spent 36 hours on the job in 2008.

What are the characteristics of the workforce?

Twenty-six percent of workers in this industry had part-time jobs, spending less than 30 hours on the job each week. Part-time work is more common in retail trade (31%) than in the wholesale (10%) industry.

Seventeen percent of workers have union coverage, less than half the provincial average (31%).

Employment in wholesale & retail trade is very seasonal, peaking in December

December sales account for a significant share of total revenues for many retailers. For some, such as clothing and home electronics retailers, as much as 15% of their total sales are usually made in December. Department stores, pharmacies, and personal care stores also see higher sales during the pre-Christmas rush. These retailers often bring in extra staff to help during the busy holiday shopping season.

For some retailers, there is also more activity during the tourist season in the summer, or just before school starts when parents and students stock up on supplies and new clothing for school. Garden stores are busiest during the spring and summer months.

Despite the seasonal changes in employment, temporary workers make up just 8% of annual employment in the industry. Workers hired to help out during the pre-Christmas rush are usually only employed for a short period, so even though they may account for a significant share of the total workforce while they are working, the effect is muted when annual averages are used.

About 50% of the workforce is male, slightly less than their share (53%) of total employment. In wholesale trade, seven in 10 workers are male, but the share is much lower (43%) in retail trade.

Unemployment rates in this industry are relatively low

The incidence of unemployment in the industry is relatively low, averaging 5.1% between 1990 and 2008. This was well below the 7.8% rate for all industries during this period. The average jobless rate in wholesale trade (4.5%) was lower than in the retail industry (5.3%).

Self-employment is less common in wholesale & retail trade (12%) than in the economy as a whole (19%). Nearly one-fifth (18%) of the workers in wholesale trade are self-employed, but in retail trade, only 10% are self-employed.

The wholesale & retail trade industry includes everything from "mom and pop" corner stores to large department stores or wholesale distribution centres.

Small stores are often operated by self-employed businesspeople, who often hire part-time or full-time staff to help run their store. This means that even in a small store, there may be several employees as well as the self-employed owner.

This, together with the prevalence of part-time work in retailing (which boosts the total job count), may help explain why self-employment accounts for a relatively small percentage of the total number of jobs in this industry.

Wholesale & retail establishments are often small businesses.
Eighty percent have fewer than 100 employees

Although self-employment is less common than in the economy as a whole, most establishments have relatively few workers. Forty-four percent of employees in wholesale & retail trade work at establishments with fewer than 20 people.

Where are the jobs located?

Wholesale distribution centres are often located in highly populated areas, although smaller wholesale establishments can be found in most urban areas. Retailing activity occurs in every part of the province, and the regional distribution of workers in this industry closely mirrors the regional distribution of the provincial workforce.

Jobs in wholesale & retail trade are distributed among regions in much the same way as the population

What's the outlook to 2017?

The industry's share of GDP is forecast to increase marginally to just over 12% by 2017, while the number of jobs is expected to grow only slightly faster than the all-industry average.

GDP is forecast to grow a little faster than the provincial average