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Canadian e-commerce sales were estimated at about CA$15.1 billion for 2009 and $21.5 billion for 2012, and are projected at about $30.9 billion by 2015.12 As in the United States, e-commerce sales in Canada have been growing three to four times faster than total retail sales. The 2015 estimated e-commerce sales in Canada is equivalent to approximately 62 million sf (roughly CA$500 per sf) of bricks-and-mortar selling-space sales substitution that is being met online.

Retail Planning Needs to Recognize the Effect of E-commerce What does it mean? E-commerce will play an

increasingly more important part in the distribution of retail goods. It will not replace existing “fortress malls”13 but will likely increasingly impact “B” and “C” class centers. It will also play a more significant part in the planning for future retail space. There will be new retail developments, but the net decline in total physical space will be felt in older retail areas, creating opportunities for redevelopment. Although wide variations may exist between urban and

rural areas, the typical Canadian service ratio of retail and related service space—about 40 sf per capita—can be used for illustrative purposes. A study by Ryerson University estimated that in

Toronto, in 2010, “virtual” space, representing physical retail space made redundant by the Internet, totaled approximately 4.6 million sf, or roughly one sf per capita.14 E-commerce currently accounts for 1.5 to 2.0 sf per capita of the established retail service ratio. Based on the much more rapid growth in e-commerce compared to traditional retail, this is projected to grow to 4.0 to 5.0 sf per capita within the next decade. The following example illustrates the potential impact

of e-commerce on bricks-and-mortar space. Assume a market of 1 million people which is increasing its population at 1% per year. At the normal service ratio of

40.0 sf per capita, the initial total demand would be 40.0 million sf, growing by 4.0 million sf in 10 years (100,000 people increase multiplied by 40 sf per capita) for a total of 44.0 million sf. If the service ratio declines by only 2 sf per capita

during these 10 years, then the total retail space required at the end of the period is only 41.8 million sf, rather than 44.0 million. (1.1 million people times 38 sf per capita). This means that instead of requiring a net additional 4.0 million sf of new space over this 10-year interval, only 1.8 million sf is warranted. This is less than 50% of the total amount of retail space that would have been required under the standard formula of 40 sf per capita ratio. If the retail service ratio declines by more than 2 sf per capita over the next 10 years—say, by a highly probable 4 sf per capita—then the net new space demand equals zero. The future reduction in retail space demand will create

significant new vacancies in existing centers. Much of this vacant shopping center space can be absorbed through the addition of services benefiting by free parking, such as medical/dental, health and fitness, educational, government and institutional facilities. More eating and drinking establishments, small offices serving local needs, financial institutions, libraries, art galleries/museums and other exhibits are also potential uses. Numerous shopping centers will be evolving into multi-functional business centers. Nevertheless, many, if not most, of the service tenants will be paying lower rents than traditional retailers. This will impact financial performance. For individual developers of prime sites and owners of

fortress centers, e-commerce may be no more than a small annoyance at this time. No doubt, newly developing urban areas and subdivisions will require new retail space, as will retailers new to the market. However, the impact on total retail space demand created by e-commerce can no longer be ignored. Moreover, government agencies that plan for retail space 20 or 30 years into the future must take this factor into consideration.

12 Statistics Canada, “The Daily: E-commerce: Shopping on the Internet,” September 27, 2010, retrieved June 4, 2013. 13 These are large centers in superior locations, in trade areas with barriers considered impervious to entry. See Jones Lang LaSalle, “The

Changing Face of Regional Malls” (Special Supplement to Retail Traffic), June 2006, p. 2, retrieved June 3, 2013. 14 Maurice Yeates with Paul Du and Tansel Erguden, “Charting the GTA,” Research Report 2011-06. Toronto: Centre for the Study of Commercial Activity, Ryerson University, 2011.

Hermann J. Kircher is President of Kircher Research Associates Ltd., a firm specializing in highest and best

land-use analyses and market research for retail developments, in North America and internationally, for more than 40 years. He is a 2013 ICSC Researcher Award winner. He can be contacted at For additional information, please visit


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