Retail sales drive about 2/3 GDP for many countries. Any impact to retail sector can impact GDP growth for a country. We are heading into more and more automation, especially in areas like eCommerce or augmented reality or streaming or kiosks or smaller shops/stores

1. STUDY: WHAT IS THE
FUTURE BRICK AND
MORTAR RETAILERS –
DECEMBER 2017
By: Paul Young CPA, CGA
Date: December 26, 2017

2. PAUL YOUNG - BIO
• CPA, CGA
• Financial Solutions
• SME – Business Process Changes
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Financial Solutions
• SME – Supply Chain Management
• Academia – Advance Accounting, Public
Finance and Advanced Management Systems
Contact information:
Paul_Young_CGA@Hotmail.com

3. OVERVIEW
▪ Retail sales drive about 2/3 GDP for many countries. Any impact to retail
sector can impact GDP growth for a country.
▪ We are heading into more and more automation, especially in areas like
eCommerce or augmented reality or streaming or kiosks or smaller
shops/stores

5. ECOMMERCE - GROWTH
Source - http://www.emarketservices.com/start/News/International/news/What-are-the-
trends-that-will-dominate-eCommerce-in-2017__7517.html?xz=0&cc=1&sd=1&ci=7517
The figures for the growth of the eCommerce channel are very high. It currently represents around 10% of
global business and is rising every year. In this scenario, companies have begun to digitize their services in
order to satisfy the new demand; some have already started out on this channel, some are far along the
process, some are halfway, and others have not yet started but plan to do so soon. In this scenario, Packlink
has made a series of predictions about what will happen in the eCommerce field in this new year, and the
direction companies will be heading.
2017 will be marked by issues such as the presence of bots in chats (programs that answer customers'
queries), payments via cellphones and wearable devices (wristbands, chips), artificial intelligence to initiate
the customers' purchasing experience and smart data to make predictions (data analysis, with companies such
as the Spanish firm Carto seeing spectacular growth), and companies must be prepared to incorporate all new
developments. Of course there will be innovations in the logistical sphere, seeking to satisfy the prevailing
consumer demand for instant service; companies such as Amazon are already trialling deliveries with drones
and offering record delivery speeds of sometimes under 15 minutes.

6. GLOBAL TREND – ONLINE SALES

7. DEPARTMENT STORES / ECOMMERCE
▪ http://wolfstreet.com/2017/04/24/brick-and-mortar-retail-bankruptcies-2017/

8. BRICK AND MORTAR - RETAILERS IN TROUBLE 2017
Source - http://www.cbsnews.com/media/the-10-retailers-most-likely-to-
fail-in-2017/
1. Sears Hometown and Outlet Stores
2. Tailor Brands
3. Fenix Parts
4. Perfumania
5. Destination XL
6. Bebe Stores
7. The Bon-Ton Stores
8. Appliance Recycling Centers of America
9. DGSE Companies
10.Sears

9. SYSTEMIC ISSUES / LARGE RETAIL STORES
▪ As so many times, Private Equity firms are in the thick of it.
▪ Mall traffic is sagging. Department store sales have been in decline since 2001.
Most retailers are loaded up with debt. Many have been losing money. Now
they’re running out of options. Store closings numbered in the thousands last
year. This year they promise to get much worse. “Zombie malls” have become
reality, their vast parking lots rented to car dealers to store their excess vehicle
inventory.
▪ But ecommerce sales are booming, including online sales by some brick-and-
mortar retailers, such as Walmart and Macy’s:
▪ Over-indebted retailers are notoriously difficult to restructure and many end up
being liquidated. Unsecured creditors, such as suppliers and junior bond holders,
are often left out in the cold. Even secured creditors can end up holding the bag.
Source - http://wolfstreet.com/2017/04/24/brick-and-mortar-retail-bankruptcies-2017/

10. HOW TO SMARTEN UP YOUR RETAIL SUPPLY
CHAIN
Source - https://www.intelligenthq.com/resources/how-to-smarten-up-your-retail-supply-chain/
• Track and Manage Inventory in Real Time – Smarten Up Your Retail Supply Chain
• Synchronize Your Marketing and Supply Chain – Smarten Up Your Retail Supply Chain
• Be Open to Improvement
• Prepare for Disruptions
• Hire the Right People

11. TOP 10 RISKS / RETAIL SECTOR
▪ http://www.ey.com/gl/en/industries/consumer-products/turn-risk-and-opportunities-into-results--retail-sector---the-top-10-risks
1. Low growth consumer markets
2. Regulation and Compliance
3. Inability to control costs/rising input prices
4. Inability to benefit from e-commerce
5. Wrong price image
6. Supply chain disruptions
7. Inability to penetrate emerging markets
8. Failure to respond to shifting consumer behavior
9. Sourcing
10.Volatility in commercial real estate markets

12. MERGERS AND ACQUISITIONS
▪ Walmart - https://www.themiddlemarket.com/news/wal-mart-
expands-e-commerce-business-with-bonobos-acquisition
▪ Amazon and Whole Foods -
http://www.cnbc.com/2017/06/20/amazon-could-buy-more-grocers-
apparel-makers-citi.html
▪ Mergers Talks - http://investorplace.com/2017/07/8-mergers-and-
acquisitions-dethrone-amazon/view-all/#.WWSMXoTytnI

13. BLOG / CANADA RETAILING
▪ http://www.cbc.ca/news/business/retail-2017-year-end-outlook-
1.4458112?utm_content=buffer43f79&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
▪ “The article is missing the following areas:
▪ FYI – The article talks about eCommerce, but not other areas. CBC is consistent that is leave many factors out of their articles. The article is very misleading in terms of
the issues facing retailers in Canada.
▪ Household debt continues to rise which means more and more people will be impacted by slightest changes to interest rates -
http://business.financialpost.com/news/economy/canadas-debt-problem-gets-helping-hand-from-economic-boom-1
▪ Augment and Virtual Reality and Retailing - http://fortune.com/2017/09/21/augmented-reality-3-industries/
▪ Canada has seen an expansion with retail and commercial sites. The pot is only so big in Canada. The major retailers have issues with leases/debt/square footage – Source -
http://clark.com/shopping-retail/major-retailers-closing-2017/ (This is USA, but Canada has also seen closures like Sobeys, Loblaws, Sears, etc.)
▪ Canada still trails USA in terms of adoption when it comes to eCommerce - https://www.slideshare.net/paulyoungcga/online-reselling-north-american-brick-and-mortar-vs-
ecommerce or https://globalnews.ca/news/3929131/canada-online-sales-ecommerce/ or https://www.bcg.com/en-ca/publications/2017/retail-technology-digital-
canadian-retailers-meet-demand-e-commerce-takes-off.aspx
▪ Canada is moving to higher business costs (hikes to minimum wage, carbon taxation, property taxes, hydro, etc.) - https://thetyee.ca/News/2017/12/07/employers-clash-
timeline-minimum-wage/
▪ Retail price gaps between USA and Canada - http://www.america-retail.com/canada/canada-canadian-grocers-narrowing-gap-with-big-u-s-chains-costco-walmart/
▪ Bottom line
▪ Retail sales impact 2/3 of the economy in Canada. If people have less money to spent either through higher taxes or slow wage growth then retail sales in Canada will feel
the impact.

14. WHAT IS THE FUTURE OF RETAIL?
Source - http://footwearnews.com/2017/business/retail/retail-stores-closing-real-estate-342556/
“Retailers know [that brick-and- mortar] is still very relevant but are
rethinking the number of stores, [their location], their purpose, how to
reimagine them and how to integrate all the technologies that are
driving new shopping patterns,” said Gene Spiegelman, vice chairman
of North America retail services at Cushman & Wakefield Inc.
But the biggest hurdle in creating a thriving marriage between real
estate, retail and technology is that each component moves at its own
pace.

15. SOLUTIONS
▪ https://www.slideshare.net/paulyoungcga/supply-chain-management-
issues-and-solutions-june-2017
▪ https://www.slideshare.net/paulyoungcga/study-digital-approach-to-
supply-chain-the-new-consumer-model
▪ https://www.slideshare.net/paulyoungcga/reporting-challenges-for-
office-of-finance-accounting-finance-tax-risk-management-internal-
audit-november-2016