SUBMISSION ON THE REVIEW OF TORONTO MUNICIPAL CODE CHAPTER 510 HOLIDAY SHOPPING BY-LAW – ISSUED JANUARY 23, 2017
On behalf of the Ontario Convenience Stores Association and the 3,000 convenience stores that reside in the Greater Toronto Area (GTA), I am pleased to have the opportunity to formally submit the industry’s position on Toronto Municipal Code Chapter 510, Holiday Shopping By-Law. The OCSA appreciates the City’s intention to review the by-law, and to consult with industry and labour prior to making any changes. As the views presented in this document are those of a significant segment of the City’s small business sector, it is our expectation that these will be considered prior to the publication of the final report expected in Spring 2017.
The below provides an overview of the convenience store sector in Ontario, as well as a list of challenges that we are currently under from a revenue, regulatory, and competitive perspective. The case presented here is one that suggests that the City of Toronto should uphold the existing by-law on holiday shopping, thereby granting the ability of our members to remain the exclusive option for citizens in need of grocery and confectionery goods on statutory holidays in the GTA.
About Small Business Community Retailers
Although the convenience store sector is made up of small businesses, we amount to big business for the province and, by extension, the City of Toronto. There are approximately 9,000 convenience stores in Ontario today, with approximately 4,500 in the GTA. Our sector interacts with 2.7 million patrons each and every day. Our stores collect $3.8 billion in tax revenue for the Province every year and in 2014 we accounted for $2.6 billion in lottery revenue for the Ontario Lottery and Gaming Corporation (OLG). We are an $18.4 billion industry in Ontario and support over 65,000 jobs.
From a social responsibility perspective, the convenience channel is the most effective in Ontario and Toronto in terms of age verification. Our stores are highly aware that they are counted on by the Toronto public to safely and responsibly dispense one of the most controversial legal products currently in our market, tobacco. Not only are these stores subject to some of the most costly and punitive fines in North America, they are owned by families and New Canadians whose social-conscious inherently prevents them from being anything less than diligent when handling tobacco and checking for age.
It should not be surprising that evidence recently collected via a provincial Freedom of Information request (FOI), demonstrates that convenience stores operate at an exceptionally high level with respect to age-verification. Ontario Public Health’s own numbers show that out of the 20,000 – 22,000 inspections they perform on our members per year, infractions occur in less than 5% of cases. In other words, our stores consistently pass at a 95% rate. We of course would like that to be 100%, but it is a good number to build from and it probably challenges some of the public’s perceptions about our channel.
Convenience stores are an important part of Toronto’s economic and social fabric. We provide important tax revenue to the city, we provide business ownership opportunities for New Canadians, and we fulfill a need for both convenience and community building in neighbourhoods across the municipality.
Despite the impressive socio-economic contribution our stores make to Toronto’s diverse neighbourhoods, our industry is struggling. For the first time since the OCSA came into existence there are less than 9,000 stores in the province. We are losing on average 200 stores per year.
There are a number of factors for this. Margins are extremely small and shrinking under pressure from suppliers.
Our stores continue to struggle under a restrictive regulatory regime. On this point, it should be noted that a Toronto-based convenience store is currently subject to 183 regulations (52 federal, 89 Ontario, and 42 municipal). This imposes both direct and non-direct costs on our low margin businesses.
On regulation, we understand the City is currently proposing to increase permits and fees for sidewalk displays. The proposed fee structure would require our small-margin stores to pay a one-time application fee of $700, and then a yearly permit feet of $1,000 – $3,000. These costs in addition to a suite of regulations our members are already subject to, further undermines the viability of our stores.
Competition with our channel is increasing. Specialty “vape shops,” drug stores, the underground market for tobacco and other channels continue to divert our traditional customers.
Finally, our destination category products – those that help drive traffic in our stores – are declining in popularity. No longer can the convenience sector count on magazines, lottery, and cigarettes to sustain profitability of the operation. In addition, the ability to retail beer and wine products was recently granted to large grocery stores and chains, leaving our small businesses out. As Ontario is one of the only jurisdictions in North America without the ability to retail beverage alcohol products, a destination category product remains elusive in the current climate.
Opinion on Holiday Shopping
It is the opinion of the OCSA and its members that the City of Toronto should not amend the Holiday Shopping By-Law.
The Ontario Retail Business Holidays Act restricts most retailers from opening on nine (9) designated statutory holidays. Among those stores exempted from the Act are stores with a footprint of under 2,400 sq. ft., pharmacies under 7,500 square feet, and stores located in designated tourist areas. Many, if not most, pharmacies in Ontario now sell groceries which means that if they are 7,500 square feet or bigger, they too must close on these designated statutory holidays. We continue to notice, however, that many of these stores are remaining open and are in defiance of this Act.
The way the Toronto by-law is written, convenience stores and other small chain and independently run stores benefit from their small market profile. It is one of the few regulations that serve to actually advantage small business in the City, and is one we intend to continue to fight for.
In forcing larger grocery and drug stores to close on the identified holiday, convenience stores are given a brief competition-free environment in which to operate. These holidays (New Year’s Day, Family Day, Good Friday, Easter Sunday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, and Christmas Day), not only provide a refreshing bump in direct sales for our struggling sector, but it allows them to reinforce their value proposition of “community and convenience” to patrons in their neighbourhoods. Often, on these dates our stores are not only able to introduce new customers to their stores, but refresh the loyalty of their “regulars” thereby helping them maintain strengthened sales throughout the year. In other words, these dates serve as much as a sales opportunity as a marketing one.
The troubling trend of open defiance of these laws by grocery and drug stores with respect to Holiday Shopping should be combated with additional resources for enforcement in the short term. Understanding that police budgets are restricted, we nevertheless have appealed to most regional police departments to take the matter seriously. We have also met with the office of the provincial Attorney General on this matter a number of times. In some cases, we have succeeded in drawing additional attention to this issue and, for the most part, our members are satisfied with the treatment of the current holiday shopping rules.
We ask that the City of Toronto consider small business community retailers before making any decisions to amend the current Holiday Shopping by-law. We feel that by sustaining a Holiday Shopping retail environment that allows our stores to reinforce what makes them a net contributor to both the economic well-being of the City, and to the unique cultural and social quality of the neighbourhoods they operate in, our members will be provided an opportunity to succeed in an otherwise difficult market. Amending the by-law would be another hit to a sector that has had to endure a number of recent government decisions that have threatened their viability and a decision to respect our interests would be an appreciated action by the City and its government.
Dave Bryans – CEO
Ontario Convenience Stores Association (OCSA)