Amazon takes a bite out of Northern merchandisers

The world’s largest digital retailer is grabbing market share from Nunavut’s traditional sales leaders, who say there could be consequences if the trend continues.

Although the long-established North West Company and Arctic Co-operatives Ltd. are enjoying greater returns during the Covid pandemic, they are feeling the pinch from the planeloads of parcels that Nunavummiut are ordering through Amazon.

“Every one of those Amazon boxes hinders the ability of the local retailers to survive,” said Duane Wilson, vice-president of stakeholder relations for Arctic Co-operatives.

Ellen Curtis, manager of internal communication with the North West Company, acknowledged that “Amazon places stress on the ongoing investments by community-based retailers like ourselves.”

Amazon, meanwhile, is striving to improve its shipping service to Nunavut’s capital, having announced a partnership with Canadian North in December and opening a pick-up hub for parcels in Iqaluit. The company is aiming to fulfill orders in as few as three days.

Could other Nunavut communities expect such service in the future?

Amazon spokesperson Dave Bauer says, “As far as expansion is concerned, we’ve been servicing Iqaluit for many years. We’re always evaluating areas to expand delivery options, but currently our focus remains on Iqaluit.”

Mayor Kenny Bell said 200,000 Amazon parcels arrived in Iqaluit in 2019. Bauer said that figure is incorrect, but he declined to provide an alternative number.

Whether Amazon enjoys a discounted rate or fixed price through Canada Post also remains a mystery.

“We do not disclose details of contractual agreements with our customers,” stated Canada Post spokesperson Nicole Lecompte.

Christina Tricomi, media relations with Crown-Indigenous Relations and Northern Affairs Canada, confirmed that Amazon is not registered with Nutrition North Canada, a federal government program that lowers shipping rates on grocery orders and other essential household items.

“We understand that for the most part, Amazon’s northern sales currently focus on non-perishable food and non-food items,” said Tricomi.

The products that are in greatest demand in the North is something else Bauer declined to disclose.

Challenges and benefits

Wilson and Curtis say their companies face higher costs by having stores on the ground in the North.

The Co-op has 32 locations in Nunavut and the NWT and those communities have a combined population that wouldn’t support a single Canadian Tire store in the south, according to Wilson.

He said he completely understands why consumers in Nunavut are enticed to buy items at lower prices from Amazon but as that continues to happen, stores in the North may move towards only selling items that Amazon doesn’t, and the cost of those items, such as lettuce, will rise, he reasoned.

Curtis contended that in-person shopping offers advantages that Amazon cannot.

“Many customers prefer to see a product before they buy it and most prefer to have their item(s) immediately,” she stated. “There are staff on hand to answer questions, process returns, etc. We also have the ability to warehouse product, so if transportation is impacted by weather, for example, we have safety stock for the community and this was extremely critical throughout the pandemic.”

In regards to employment, the North West Company supports 925 jobs in Nunavut and the business has spent more than $75 million in building and renovating its facilities in the territory over the past five years, she said.

In addition, there are grants and donations toward local causes. The North West Company was one of the partners behind a $3.6-million grocery voucher and hamper campaign for vulnerable residents across the North during the Covid pandemic, Curtis noted. Sports teams and other groups often approach the company in advance of fundraisers.

“We are proud of the support we provide to community organizations and for community events; year-to-date, store-level spending toward community donations has increased by 73 per cent. Big or small, these contributions are made possible because of our in-community relationships with our customers,” said Curtis.

Wilson pondered what Amazon would be willing to do to assist local causes.

“What would the donation scene look like in Iqaluit if every business decided to say, ‘We’ll happily donate X up to a maximum of this, matching what Amazon gives you?’” he asked.

Covid boost to the bottom line

The North’s retailers have seen sales climb during the pandemic, largely due to far fewer shopping trips in the south for Northerners and federal aid programs putting more money in some consumers’ pockets.

Curtis said the North West Company earns about four cents of profit from every dollar of sales. The remainder, she added, goes towards transportation, rent, utilities, maintenance, services and wages – which were increased for staff during the pandemic.

She also pointed out that the 2018 Government of Nunavut Price Survey showed that the average food basket in the 21 communities served by her company was $170.25 compared to $189.52 in communities without a Northern or NorthMart.

Wilson asserted that there’s “no motivation for a community Co-op to take advantage of a situation as it pertains to pricing because its owners are the same people using the services. It’s not an anonymous shareholder somewhere – it’s their neighbours, it’s their family, it’s their friends.”

Arctic Co-operatives Limited has diversified its businesses in the North – branching out into hotels, cable television services and fuel distribution – to offset down years in the retail business, Wilson added.

‘Sensitive subject’

Chris West, executive director of the Baffin Regional Chamber of Commerce, can see the appeal of Amazon but also the drawbacks it poses.

“It is a sensitive subject as far as shopping local is concerned as we should always encourage people to support the businesses that support them throughout the year,” he said. “Many of our local businesses give back to the communities they serve. While understanding that price difference is a major concern when you talk about Amazon on most items, we would have to focus on items that may not be available in many communities where we have members.”

Fact file
North West Company and Arctic Co-operatives earnings and donations

• The North West Company is the operator of 118 Northern food and general merchandise stores, seven larger NorthMart stores and numerous Quickstop convenience stores in Northern Canada. The company also runs a variety of other businesses elsewhere in Canada and Alaska.
• Third quarter 2020 combined sales amounted to $553 million, while gross profit rose by 9.3 per cent.
• In the second quarter, the company reported overall sales of $648.5 million and net earnings of $62.6 million. The dividend paid to shareholders was raised by three cents per share to 36 cents.
• Publicly traded on the Toronto Stock Exchange, shares in the North West Company that were valued at $3.17 on Feb. 1, 1995 are worth nearly $32 today.
• The retailer stated that its donation levels had increased by $2.6 million in response to the Covid-19 pandemic as of the end of the second quarter.
• In June, the company announced $1 million in support of the health and well-being of youth in Northern Canada through an in-house charity known as the Healthy Horizons Foundation.
• Arctic Co-operatives Ltd. comprises 32 community-owned Co-op stores across Nunavut and the NWT.
• The company’s most recently published sales on its website dates back to 2018 when the figure stood at $230 million.
• Patronage paid back to member Co-ops in 2018 totalled $10.8 million.

Sources: North West Company and Arctic Co-operatives