The death of the retail industry may have been greatly exaggerated – but that doesn't mean the industry isn't currently going through major disruptive and fundamental changes. For this special series, Yahoo Finance Canada will look at how the retail scene is developing, what companies are doing to adapt, and what could come next. Click the image above to see our full coverage of what the future holds for the Canadian and global retail scene.
While it may be nearly impossible to buy a Canadian-made washing machine, what consumers likely don’t know is that most of the motors found in North American machines can be traced back to a single manufacturer in Canada, Dennis Darby, CEO of Canadian Manufacturers and Exporters, told Yahoo Finance Canada.
That is the reality of Canada’s manufacturing sector post-1994, when the North American Free Trade Agreement transformed the sector from one that used to make finished products for the domestic market to one that now makes parts, pieces and processes ingredients and chemicals as part of North America’s integrated supply chain.
This partly explains why it’s often hard to find made-in-Canada labels on regular consumer items, despite the enormity of the manufacturing sector. To put it in perspective, last year the country’s 90,000 manufacturers generated $686 billion— the sector’s highest dollar value ever— representing about 10.5 per cent of Canada’s GDP, said Darby, whose industry association has 2,500 members.
While Canada may be best known as a producer of high-value components, that doesn’t mean made-in-Canada products no longer exist, just that the companies that make them generally thrive in specialized markets where consumers are willing to pay a premium.
“Canada Goose was an old-small company and they found a niche, a product that worked and a way to produce it in Canada that was profitable and that’s good for them. Its biggest plant now is in Manitoba; you’ve got to be close to the goose down,” Darby said.
Tapping into niche markets
Green-conscious start-ups, like the Vancouver-based company ChopValue, are also doing their part to raise consumer awareness about shopping local and supporting sustainable goods and manufacturing.
Over the last three years, the company has collected more than 18 million used chopsticks and turned them into trendy interior design pieces, diverting this waste from landfills. It now has “micro-factories” in Vancouver, Victoria, Montreal and Los Angeles, employing 22 people and generating nearly $1 million in revenue last financial year. The chopsticks are cleaned, processed and repurposed at each local factory and are made into tiles for tables, shelves, coasters and yoga blocks that range in price from $15 to $295.
By keeping all facets of production on-site, ChopValue is able to track and minimize its carbon footprint, something it’s documented in detail in its publicly available Impact Report.
“The moment we are outsourcing a step that we can’t control, we are impacted by prices from third-parties … by shipping costs, taxes or trade agreements. All of these things we are cutting down on, so we can operate independent of political situations or any other impact that would put our business at risk,” the company’s founder and CEO Felix Böck told Yahoo Finance Canada.
Böck is now planning to take his business model global through franchising— his goal is to see 75 to 100 new locations opened in the next three years. He’s hoping that his blueprint for manufacturing locally and sustainably will inspire other companies to rethink how they operate.
“If you lead by example and show how it’s done and how it works, and you’re the one taking the risk, that can make others think about what resources may be around them that they have access to that may add value before they dispose of them,” said Böck, who is also working on his PhD in structural bamboo products at the University of British Columbia.
While he wants each ChopValue to keep manufacturing local— “it’s just a rudimentary and basic thing that we stand for”— it’s not without its challenges, especially when it comes to finding the right talent.
“There are many young people who aren’t used to working with their hands anymore. If you post a job description about a social media manager, you probably get 300 applications, but if you want to hire a carpenter or a cabinetmaker, it’s a completely different set of expectations, especially hiring in the city,” he said.
A skilled labour shortage, high taxes, strict regulations and navigating three levels of government are just some of the challenges businesses face in Canada, Darby said.
“What it seems to be, anecdotally, is dollar-wise Canadian companies are investing more outside of Canada than global companies are investing in Canada, and that’s a trend that we haven’t seen for a long time, so that’s alarming,” Darby said.
There’s also been a lot of uncertainty lately because the U.S. still hasn’t ratified the changes to NAFTA, making businesses unsure of where to invest, he said.
While these are some of the most significant pressure points for small businesses, Darby thinks Canada’s long history of innovation, quick adoption of technology and trade deals with Europe and the Pacific Rim still make it a good place to do business.
“If we can produce high-value things that incorporate a lot of technology and have a high consumer demand, that’s where we do well,” he said. “When Canada grows up it wants to be like Germany.”