July/August 2020 – Facing the Music

With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.

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"Our whole business is run by people all under 40. We're a new genera- tion," McNamee says. "We don't have the attitude that retail is going to hell in a hand- basket," adds the former bassist. "Online, the rest of it, that's our world we grew up in." He'd doubled revenue at Rufus, grow- ing from 22 to 55 employees and adding a small online component. The results of his new approach were evident as McNamee, who resembles the late Philip Seymour Hoffman in his more raffish roles, walked around the Drive shop in the first week of March, just before the world took a sudden sharp turn into dysto- pian science fiction. His staff and contract teachers were busy: one talking to a guy at the counter about his beloved Les Paul guitar, another playing drums in the back, a third teaching a lesson in one of the two small soundproof studios. That ended as the COVID-19 tidal wave crashed onto B.C. The store, along with thousands of others, closed, and McNamee had to figure out what to do next. As every- one shut down with no idea of what the future held, early reports trickled out that half of businesses in the province weren't sure they would reopen on the other side. In a May survey by the Canadian Federation of Independent Business, almost a third of retailers felt that way. Survival would depend, in part, on how quickly they could transform their business models. That's something B.C. seemed well poised to do, with its high proportion of entrepreneurs used to making it on their own. WHAT COULD GO WRONG? B.C. was ticking along at about $7.3 billion a month in retail sales, seasonally adjusted, in the few months before the pandemic hit, doing relatively better than the rest of Can- ada. Analysts had sounded quiet notes of alarm starting last fall that retail was turn- ing sluggish everywhere in the country, reaching lows not seen since the 2008-09 recession. But B.C. sales had increased by 1.2 percent year-over-year, 1.9 percent in Vancouver—the highest numbers outside of Yukon. Economists, politicians and bureaucrats track those retail numbers fervidly. Purchases of leggings, camping equipment, banjos, ceramic teapots, lawn- mowers and sofa beds might seem like simply a metric of bourgeois behaviour to some. But consumer spending, which makes up 58 per- cent of gross domestic product in Canada, is a prime indicator of a country's economic health. And retail trade, which employed 2.2 million Canadians and accounted for 5.2 percent of GDP last year, according to Statistics Canada, is a big part of that spend. Commercial real estate brokers painted optimistic pictures in their reports. "Although retail is facing global headwinds and experienc- ing declining sales, the Vancou- ver market holds a steady pace, buoyed by highly productive shop- ping centres and retail-oriented corridors," chirped CBRE Group in November 2019. Vancouver's retail success sto- ries continued to look successful. Aritzia, the Vancouver-based, now international, clothing chain that has focused on design, a living- room feel to its shops, and a deli- cate balance of affordability and quality, announced a 10-percent revenue increase in its January quarterly report. Leases at the highest end, in Vancouver's luxury retail prin- cipality centred at Alberni and Burrard streets, were pegged at $260 to $300 a square foot. True, the vacancy rate at regional malls in B.C. had edged up and was likely to stay there for a while, as elsewhere in Canada, thanks to the proliferation of failures among mall-friendly chains like Forever 21, Home Outfitters, Payless Shoe- Source and Pier 1 Imports. But unlike Twitter, those who work in the business of organizing commercial leases and sales are generally unmoved by the story of this or that historic business closing, an event that elsewhere sets off a weeklong "Vancouver is broken" meme. For brokers, it's strictly about vacancies and square-footage rates. Those looked good for B.C. A few empty storefronts on South Granville? "It's just going through a bit of a transition. It will come back," David Knight, a Vancouver-based vice-president at real estate services firm Colliers Inter- national specializing in urban retail, said pre-pandemic. Vancouver in general looked great, Knight maintained in interviews and fore- casts at events like last fall's Retail West con- vention. "There's insatiable demand from 38 BCBUSINESS JULY/AUGUST 2020

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