March 18, 2016 | Paul Thompson
Part 2: Bringing Data Back - The Implications for Canadian Retail
Steve Wartecker’s recent blog about bringing back the mandatory long form census in Canada was bang on. Canada has long been a source of inspiration to other countries when it comes to gathering robust data from which policy decisions are based. But the need for understanding the distribution of small ethnic minorities and low and high income groups is not only important to government policy, but is of utmost importance to retailers as well.
What Shifting Canadian Demographics Mean for Retailers
Retail is becoming more polarized, as the gap between the rich and poor has grown over the last 20 years. When the government decided to scrap the mandatory long-form census in 2011 in favor of a voluntary National Household Survey (NHS), it skewed the data, as the middle class was overrepresented in the results. This is a significant because the middle class had in fact shrunk. In Canada, like in the US, the extreme ends of the income earners are growing faster than the middle class.
The under representation of low and high income groups and ethnic communities reflected in the NHS data, negatively impacts retailers’ ability to assess the efficacy of their real estate decisions. This comes at a time when localization continues to be one of the most important trends in retailing. Successful chains need to profile their customers in order to tailor marketing, merchandise, and staff to reflect the needs of local markets. This is particularly challenging when demographics have changed dramatically, and retailers are relying on data that is 9 years old to make capital investments and marketing spend decisions.
There is signficinat evidence for this shift in retail, with lower income groups and the squeezed middle class adopting more value-based retailing options, including dollar stores, discount stores and private label merchandise. If you look at where growth is happening, you’ll quickly see that traditional retail stores are being outpaced by discounters and dollar store growth.
It is also important to incorporate the time horizon into any analysis. I have worked with many retailers who were in the heart of the hottest retail node at one point in time, and then over twenty years later, this retail node has changed. As an example, Surrey and Richmond in British Columbia and Little Italy and Little Portugal in Toronto have changed dramatically over the decades.
It is only with reliable long-form census data that we can reliably track changes in ethnicity, as one group moves to the suburbs while another moves in to fill the void. With the reinstatement of the Mandatory LF Census, retailers will once again be able to track change over time to uncover migration trajectories and correlate neighborhood level data when building store performance models and optimizing their real estate portfolio.
Retailers, and solutions providers to retailers like Tango, need excellent and highly detailed neighbourhood supply-side data to make informed decisions around real estate capital allocation and merchandise/marketing spend. As businesses are realizing that monetizing data assets is a way to create additional value for shareholders, it is a good thing that the Canadian government is reinstating the long-form census and treating that data as a valuable asset that it is.
We at Tango will continue to support best practices in data analysis to ensure your real estate decisions are always well supported and data driven.