Grocery retail and grocery – anchored REITs have proved their resilience throughout the Covid-19 pandemic. Grocery sales have remained strong and in – store sales continue to grow despite the pandemic fueled heightened demand for E-commerce. The defensive nature of the grocery retail and grocery – anchored REIT industry provides the fundamentals to forecast a generally stable outlook in the upcoming years.

Especially in times in turmoil and uncertainty, essential businesses remain a safe investment to avoid the volatility of the overall markets. The defensiveness of the industry is can be attributed to a few unique aspects. For starters, the industry makes up a significant portion of the overall retail industry as shown in figure 1, the market share combined with the essential nature makes the industry defensive against market volatility. food and beverage sales comprise 28% of the overall retail sales, second to only motor vehicle and parts dealers at 35%, and above general merchandise at 16%; the degree to which grocery and motor vehicle parts and dealers exceed the market share of the other industries within the retail sector, reinforces the sustained competitive advantage and stability experienced by these industries. The defensiveness of the grocery industry in spite of the economic climate provides the tools to forecast a generally stable outlook into the upcoming years.

Figure 1

Effects of COVID-19

As a result of Covid-19, many retail industries have realized lower than expected sales, this isn’t necessarily the case for grocery retail and grocery – anchored REITs. The Covid-19 pandemic has resulted in many businesses within a wide array of industries to realize lower than expected sales; for grocery retail, this trend isn’t as prevalent. Figure 2 demonstrates the effects Covid-19 had on percentage of sales change for the overall retail sector compared to grocery sales during the period from February 2020 – October 2020. In the early months of the pandemic, high volatility was experienced across the entire market, retail is no exception. During the initial lockdown initiated by the federal government, many businesses were forced to temporarily close, therefore overall retail suffered a significant decrease in sales of -25% compared to grocery stores which spiked inversely to retail with close to a 30% increase in sales. Towards year end, grocery sales returned back to their normal level and maintained relatively stable. The defensiveness of the industry is summed up by their stability throughout the pandemic, and this can be expected to continue into the future when facing additional threats, such as the threat of E-commerce.

Figure 2

Upward Trend in E-Commerce

The Canadian retail industry is always evolving, this has been a trend for years, but in 2020, this evolution towards E-commerce has been accelerated greatly. Figure 3 illustrates the effects of the pandemic and how it has influenced a surge in E-commerce demand. COVID-19 has brought about more than five years of growth for E-commerce in a matter of months. As shown in Figure 4, we can observe the effects of Covid-19 on in-store foot traffic compared to E-commerce traffic. There has been a significant decrease in foot traffic in the overall retail industry, particularly the sporting and hobby industry, the clothing retail industry, and the home furnishing industry, all posting significant reductions to in-store shopping and an increase to their E-commerce sales by an average of 143%. Grocery retail on the other hand has thrived in these conditions.

The food and beverage industry while realizing 103% gain in ecommerce sales, was the only retail industry to increase in-store sales by 3%, allowing for their brick-and-mortar sector to remain relatively stable allowing grocery – anchored REITs to receive operational revenue. The effects of Covid-19 for grocery stores and has been mitigated by the overall necessity of the industry, allowing for grocery-anchored REITs to post relatively stable occupancy rates as opposed to the hospitality industry or any of the above-mentioned industries. Grocery and grocery-anchored retail has always maintained a consistent in-store shopping rate, and if this trend continues – as I’m sure it will – food and beverage will remain defensive to the growing trend of E-commerce. That being said, it is still imperative for grocers to understand that E-commerce is here to stay and will likely continue to grow, which is why omni-channel capabilities are important in the modern market. Throughout the pandemic, Grocers with existing omni-channel capabilities were best equipped to weather the significant and rapid shift in consumer needs. That being said, most grocery E-commerce sales will continue to be fulfilled through grocery stores due to their in-place infrastructure and proximity to the consumer; these characteristics make grocery stores an irreplaceable part of the food distribution supply chain.

Figure 3
Figure 4


The entire year of 2020 was one for the books, with the market experiencing the greatest crash and rebound in modern history, the pandemic essentially shutting the world down, the plethora of other historical events, but after all is said and done, grocery retail and grocery – anchored REITs have proved their resilience by maintaining strong sales and occupancy rates. As for the overall retail industry, the future looks promising, as unemployment and consumer spending has a negative correlation of .4 (Q1’13 – Q4’17), there is an inverse relationship to consumer spending habits and unemployment.

As restrictions continue to be lifted, we’re likely to see the unemployment rate continue to decrease, resulting in heightened consumer spending. Illustrated in Figure 5, the Canadian GDP key indicator towards the performance of retail. As shown in Figure 6, the Organization for Economic Co-operation and Development is anticipating a gradual recovery of the Canadian GDP in line with the other G7 countries coming out of 2020; this positive outlook for the Canadian GDP is an indication retail sales will recover and remain strong into the future. This is beneficial for grocery sales as well because as GDP grows, consumer spending will increase, thus providing more disposable income for households to spend on groceries. As for E-commerce, I expect online sales to either remain stable or notch downwards as consumers become more comfortable going to the grocery store in the upcoming years, however the trend of E-commerce isn’t going anywhere, and will likely continue to grow as we look towards the extended forecast. Moving forward, it is imperative for grocers to continue investing in their omni-channel capabilities, so they are prepared to fulfill consumer demand, whether it be in-store or online.

Figure 5
Figure 6