Re­tail re­de­fined by dig­i­tal rev­o­lu­tion

The Georgia Straight - - News - By

TChar­lie Smith

he last clas­si­cal-record store in Van­cou­ver, Sikora’s, still has a fair num­ber of reg­u­lar cus­tomers. As one of the own­ers, Ed Savenye, sur­veys his 3,000-square-foot palace of vinyl discs and CDS in the 400 block of West Hast­ings Street, he can see a cou­ple of them look­ing through the con­tain­ers of LPS. When one asks for help, Savenye leaps into ac­tion.

But Savenye, who be­came a part­ner in the store with long-time em­ployee Roger Sco­bie in 2001, read­ily ac­knowl­edged dur­ing an in-store in­ter­view with the Ge­or­gia Straight that there are fewer of these cus­tomers than in its predig­i­tal hey­day.

At the heart of his con­cern on this day is Ama­zon, a Seat­tle-based e-com­merce gi­ant that gen­er­ated US$177.9 bil­lion in rev­enue last year. That’s up from US$61 bil­lion five years ago. This year, the be­he­moth founded by for­mer Wall Street ex­ec­u­tive Jeff Be­zos, now the rich­est CEO in the world, is on track to top US$200 bil­lion in sales. Ama­zon’s suc­cess has had a dev­as­tat­ing im­pact on book­sell­ers and record-store own­ers.

“For the sake of time and just a cou­ple of bucks, a lot of our cus­tomer base just sim­ply walked away,” Savenye said wist­fully.

As a re­sult of de­clin­ing sales, Sikora’s will close at the end of Fe­bru­ary af­ter 40 years in busi­ness. It’s one of a mul­ti­tude of lo­cal busi­nesses that have been felled by rapid trans­for­ma­tions in re­tail. Shortly be­fore Christ­mas, the Comic­shop at 3518 West 4th Av­enue an­nounced that it will be shut­ting down af­ter 44 years in busi­ness. Last year, HMV Canada called it quits. In­gledew’s, a cen­tu­ry­old Van­cou­ver shoe busi­ness, also folded in 2017. Af­ter 82 years in busi­ness, two Um­brella Shops were shut­tered. Ni­cole Bridger closed her epony­mous Gas­town cloth­ing store, shift­ing to on­line or­ders and pop-up shops. Savenye wor­ries that the list of lo­cal re­tail­ing fa­tal­i­ties will grow, un­der­min­ing com­mu­nity con­nec­tions and sev­er­ing long-stand­ing friend­ships be­tween shop­keep­ers and their cus­tomers.

It’s not just Ama­zon that’s gob­bling up lo­cal shop­ping dol­lars. There are many other for­eign-owned dig­i­tal plat­forms, in­clud­ing Way­fair, Etsy, and Alibaba, that are hav­ing an im­pact on dif­fer­ent re­tail sec­tors. Savenye pre­dicted that within a cou­ple of decades, many sub­ur­ban malls will have to close—or be con­verted into “ful­fill­ment cen­tres”. That’s Ama­zon-speak for its mas­sive dis­tri­bu­tion fa­cil­i­ties, which will be in­creas­ingly re­liant on ro­bots and ar­ti­fi­cial in­tel­li­gence in the years to come.

“You’re look­ing at a bunch of min­i­mum-wage mon­keys run­ning around in an Ama­zon ware­house pack­ing card­board boxes—that is the fu­ture of re­tail,” Savenye said. “It isn’t pretty.”

He didn’t blame his land­lord for the loom­ing clo­sure of Sikora’s—in fact, he had noth­ing but praise for the build­ing owner’s ef­forts to help the store sur­vive. In­stead, Savenye fo­cused on the “five Ds” that have eroded his busi­ness: down­siz­ing, dig­i­ti­za­tion, dis­tri­bu­tion, de­ser­tion, and demise.

People liv­ing in smaller apart­ments—in­clud­ing empty-nesters who have down­sized by sell­ing their houses—don’t have enough space to house large record col­lec­tions. The second D, dig­i­ti­za­tion, has en­abled for­mer cus­tomers to down­load mu­sic from on­line sites and lis­ten to stream­ing ser­vices. This has trans­formed the third D, dis­tri­bu­tion, as whole­salers fo­cus more on these ar­eas rather than mov­ing phys­i­cal prod­ucts to stores. That, in turn, has led cus­tomers to desert Sikora’s in favour of on­line ser­vices. Fi­nally, there’s the demise of his older cus­tomer base. He noted that if some­one started vis­it­ing Sikora’s at the age of 48 back in 1979, this per­son would be in their late 80s to­day.

“Do they even need to buy any more clas­si­cal mu­sic?” Saveyne asked. “And let’s be blunt: are they still with us? Or have they passed away?”

He ex­pects the rise of Ama­zon will lead to hol­lowed-out shop­ping dis­tricts in down­town Van­cou­ver and along ma­jor shop­ping strips like Main, Com­mer­cial, South Granville, and Lons­dale. This stands in sharp con­trast to the vi­sion ar­tic­u­lated by Alexan­dre Gagnon, vice pres­i­dent of Ama­zon Canada and Mex­ico, at a Van­cou­ver news con­fer­ence in April.

Gagnon, a soft­ware en­gi­neer and self-de­scribed “home­grown Bri­tish Columbian”, was there along­side Prime Min­is­ter Justin Trudeau to an­nounce that the com­pany will oc­cupy the for­mer Canada Post of­fice build­ing at 349 West Ge­or­gia Street. Gagnon pointed out that Ama­zon al­ready em­ploys 6,000 work­ers in Canada. He claimed that its new Van­cou­ver ex­pan­sion will add an­other 3,000 high-tech po­si­tions.

“As a Cana­dian, I am very proud to see Ama­zon cre­at­ing these jobs here,” Gagnon said. “These jobs pro­vide an op­por­tu­nity for tal­ented engi­neers to work on a global scale on in­no­va­tive projects right here in Bri­tish Columbia.”

Ama­zon em­ploys more than 560,000 people world­wide, ac­cord­ing to last year’s an­nual re­port. Some work at its ful­fill­ment cen­tres in New West­min­ster and Delta.

SO WHAT gives? Is Ama­zon stim­u­lat­ing the Van­cou­ver econ­omy or un­der­min­ing it? It de­pends on the per­son’s per­spec­tive. Politi­cians like Trudeau, Pre­mier John Hor­gan, and for­mer Van­cou­ver mayor Gre­gor Robert­son seem to love Ama­zon. The pro­pri­etors of fam­ily-owned brickand-mor­tar re­tail­ers have a ten­dency to loathe it. They also de­spise “show­room­ing”: the term for when a per­son vis­its a shop, takes prod­uct shots with a cell­phone, and re­turns home to order these goods on­line.

In the words of Brad Stone, au­thor of The Ev­ery­thing Store: Jeff Be­zos and the Age of Ama­zon, the cor­po­ra­tion may be the “most be­guil­ing com­pany that ever ex­isted”.

Van­cou­ver re­tail con­sul­tant David Ian Gray told the Straight by phone that e-com­merce plat­forms should be viewed through dif­fer­ent lenses. He started with em­ploy­ment. Ac­cord­ing to B.C. Stats, there were 290,400 people em­ployed in re­tail in 2017. An­other 83,600 worked in whole­sale last year.

“That side of re­tail doesn’t get dis­cussed as much,” he said. “But, you know, when Sears Canada goes un­der, there is a big ef­fect on com­mu­ni­ties, at least in the short run.”

He pointed out that shop­pers of­ten claim they value those lo­cal jobs and want to buy from Cana­dian stores. At the same time, Gray sug­gested, “they’re go­ing crazy over Black Fri­day deals and com­plain­ing when re­tail is not on sale as much as they like.”

He ex­plained that this de­sire for the low­est price is in­creas­ing pres­sure on re­tail­ers to em­brace ar­ti­fi­cial in­tel­li­gence and au­to­ma­tion to drive down labour costs. And that will, in­evitably re­duce front­line em­ploy­ment in this sec­tor, which can un­der­mine this seg­ment of the pop­u­la­tion’s buy­ing power. That could have the un­in­tended ef­fect of un­der­min­ing over­all sales.

“Phys­i­cal re­tail is not dead,” Gray in­sisted. “There’s no apoc­a­lypse, but there’s an in­cred­i­ble trans­for­ma­tion hap­pen­ing—very fast.”

Gray’s com­pany, DIG360, and mar­ket re­searcher Leger re­cently re­leased a sur­vey of Black Fri­day sales to Cana­di­ans in 2017. Among those who bought items, 58 per­cent made their pur­chases in Cana­dian stores, and 55 per­cent bought on­line from Cana­dian web­sites. The sur­vey re­vealed that 17 per­cent bought from U.S. web­sites and an­other 10 per­cent vis­ited U.S. stores.

In­ter­est­ingly, more Cana­di­ans bought goods on Box­ing Day than on Black Fri­day—22 per­cent to 17 per­cent—ac­cord­ing to the sur­vey.

Gray said that be­tween seven and 11 per­cent of all re­tail pur­chases in Canada (ex­clud­ing au­to­mo­tive) are oc­cur­ring on­line, depending on the source. To him, this in­di­cates that the role of stores is chang­ing and re­tail now has to be more of a “tech­nol­ogy play”, even as people con­tinue flock­ing to shop­ping dis­tricts.

“Al­most ev­ery re­tailer needs a core com­pe­tency in tech­nol­ogy,” Gray de­clared. “So while there could be staff lost at the front end of re­tail, from the store side of it—and the stores are get­ting smaller, with some more au­to­mated pro­cesses—there are other jobs open­ing up in re­tail in terms of tech­nol­ogy and data.

“That doesn’t mean some­one at the front­lines sud­denly gets a job as a data an­a­lyst, be­cause it’s a dif­fer­ent skill set,” he con­tin­ued. “There’s

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from page 12 a tran­si­tion pe­riod.”

This trend is ev­i­dent in the ap­pear­ance of self-check­out ma­chines in Lon­don Drugs, Shop­pers Drug Mart, gro­cery stores, and other re­tail­ers. While Ama­zon is seen as an on­line re­tailer, Gray noted that it has also opened more than 650 heav­ily au­to­mated brick-and-mor­tar stores in the United States. To him, it’s a sign that “the fu­ture is go­ing to be a hy­brid” be­tween in-store and on­line. COM­MER­CIAL-LEAS­ING vet­eran Sher­man Scott has no­ticed the im­pact of on­line re­tail­ing in some ar­eas of Van­cou­ver but not oth­ers. The as­so­ciate vice pres­i­dent of Col­liers In­ter­na­tional told the Straight by phone that his com­pany has had no trou­ble at­tract­ing restaurants to lease space on West 2nd Av­enue in South­east False Creek. Some are be­ing turned away be­cause there are enough eater­ies. But it’s more chal­leng­ing at­tract­ing con­ven­tional re­tail stores.

“So we’re fo­cus­ing on ser­vice-type re­tail­ers at the mo­ment,” Scott told the Straight by phone.

He thinks that on­line re­tail­ing has likely contributed to va­can­cies in re­cent years in the 1100 block of Rob­son Street. The Gap is one ma­jor store that aban­doned this area. How­ever, he also stated that re­tail is thriv­ing in Gas­town and pointed to a sig­nifi- cant in­crease in lux­ury-ori­ented re­tail shops on nearby Al­berni Street.

Ac­cord­ing to Scott, the ex­pan­sion and up­grad­ing of Pa­cific Cen­tre, in­clud­ing the ad­di­tion of a Nord­strom store, has al­tered the dy­nam­ics down­town, at­tract­ing more shop­pers into Cadil­lac Fairview’s mall. “They changed up the ten­an­cies,” he said. “They’ve done a re­ally good job.”

He sug­gested that this is not only hav­ing an ef­fect on Rob­son Street but is also mak­ing things more chal­leng­ing for re­tail­ers in the South Granville area. Some lo­ca­tions have been va­cant for an ex­tended pe­riod of time.

“Also in the last few years, we’ve just seen a mas­sive in­crease in prop­erty taxes,” Scott said. “And that’s had an im­pact, be­cause all that gets passed on to the ten­ants. I’ve seen some cases where prop­erty taxes are close to what the land­lord is get­ting.”

Part of the rea­son is the city’s pol­icy of tax­ing on what could po­ten­tially be built on a site un­der ex­ist­ing zon­ing rather than what ac­tu­ally ex­ists. It’s one of sev­eral is­sues with which Sharon Townsend, the ex­ec­u­tive di­rec­tor of the South Granville Busi­ness Im­prove­ment As­so­ci­a­tion, and her mem­bers must grap­ple. She told the Straight by phone that the city gov­ern­ment needs to stop look­ing at lo­cal re­tail­ers as a cash cow.

“There’s no real road map, and… the play­ing field is chang­ing so fast,” Townsend said. “And con­sumers are ex­tremely fickle.”

The owner of Diane’s Lin­gerie on Granville, Sharon Hayles, ac­knowl­edged that on­line shop­ping is taking a toll on some busi­nesses. Her com­pany has re­sponded by cre­at­ing its own e-bou­tique—and she said that the Euro­pean brands in her store are not avail­able on Ama­zon.

“Be­cause of the per­son­al­ized ser­vice that we do, from a bra-fit­ting per­spec­tive, we don’t prob­a­bly no­tice this as much as some of the other re­tail­ers,” Hayles said.

The Straight spoke to two mil­len­nial con­sumers with sharply dif­fer­ent ap­proaches to shop­ping. Ali Na­jaf, a re­cent grad from the SFU Beedie School of Busi­ness, said by phone that he’s signed up to Ama­zon Prime, which guar­an­tees de­liv­ery in two days. The cor­po­ra­tion pro­vides free six-month mem­ber­ships to col­lege and univer­sity stu­dents, which ap­pealed to many of his for­mer class­mates. It also of­fered un­lim­ited photo stor­age in the cloud.

An­other mil­len­nial, Spice

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