Retail margins thin and getting thinner
The profit margin of Alberta retailers was the lowest in the country in 2019 at 3.9 per cent
By ATB Economics 19 February 2021 1 min read
The retail sector is changing in some major ways. This is explored in detail in the latest episode of our The Future Of podcast featuring Manjit Minhas from CBC’s Dragon’s Den.
To help get a handle on where retail is heading, it might be useful to look at where things currently stand in terms of the sector’s revenues, expenses and profit margin.
In Alberta, the profit margin has fallen in recent years and was the lowest in the country in 2019 (the most recent year for which these data are available) at 3.9 per cent.* The national average was 4.6 per cent.
The total operating revenue of Alberta retailers in 2019 was $84.1 billion while total expenses came to $80.8 billion for a total profit across all retailers in the province of $3.3 billion. Total profit peaked in Alberta during the last boom at $4.2 billion in 2014.
Alberta’s retailers spent a total of $9.3 billion on labour in 2019 or about 11.4 per cent of their total expenses.
Profit margins vary across the sector. Grocery stores, for example, had a profit margin of just 0.8 per cent in 2019. It was 1.5 per cent for new car dealers, 4.3 per cent for shoes stores, 6.7 per cent for gas stations (keeping in mind that gas stations sell a wide range of products other than gasoline) and 7.5 per cent for health and personal care stores.
As the retail sector evolves, individual retailers will have to find ways to deliver both the products and the shopping experiences consumers want and do so within tight margins.
*The profit margin for the retail sector is the difference between total operating revenue and total expenses expressed in percentage terms. Total expenses include the cost of goods sold and operating expenses such as rent and labour costs. The statistics in today’s Owl do not include non-store retailers.
Answer to the previous trivia question: Not including the + countries such as Russia and Mexico, the Organization of the Petroleum Exporting Countries (OPEC) currently has 13 members.
Today’s trivia question: Which had the smaller profit margin in 2019? Alberta’s new car dealers or used car dealers?