The recent changes in geopolitics, trade policies and retaliatory measures on cross-border goods are creating risks and new opportunities for Canadian retailers. As customer expectations shift, retail leaders are turning to new sourcing models, building resilient supply chains and employing AI in demand planning in new ways.
The current rise in tariffs is having an unprecedented impact on virtually all industries, with retailers on the frontline of the impacts. Canadian consumers are choosing to source local and Canadian, prompting retailers to rapidly search for new sources for the goods they offer. As an example, in February 2025, Canada’s largest retailer reported double-digit increases in the demand by customers for Canadian products. Additionally, keeping costs low and avoiding price increases means retailers are re-evaluating their supply base to find the lowest cost options. This is a necessary step not just for goods for reselling to customers, but also for goods and services that will have an impact on internal operating costs and margins.
What is the economic impact on the retail sector?
An increase in tariffs and retaliatory tariffs is expected to have a significant economic impact on businesses and consumers in the form of price increases. This inflation will lead to an overall increase in the cost of living. Financial markets have been declining globally, causing consumer spending to slow as uncertainty stalls purchases of medium to large ticket items. Retailers themselves are holding on strategic decisions with high costs and long-term impacts. This is occurring just as the economic rebound is beginning to take hold in Canada with recent prime rate cuts. Other economic factors, including the Canadian vs. US dollar value and the upcoming wave of mortgage renewals, have retailers closely watching for a downturn in the economy or even the potential of a recession.
Specific retail challenges and outlook
The ‘buy Canadian’ trend has retailers acting quickly to make this as simple and transparent as possible to customers. For example, a new and rapidly developed online shopping app at one grocery retailer allows customers to swap to alternate items quickly and easily. Developed in only a few days, this extremely agile and rapid software development capability provides a best-in-class customer experience and competitive advantage.
Sourcing is another challenge, with new supplier and new product onboarding cycles typically planned on a schedule. Off-cycle activities are an added burden on any retail organization. Whether planned or unplanned, onboarding usually takes multiple weeks or months to execute. Any reduction in this timeline puts at risk the reputation of the retailer, along with product quality and data accuracy. Additionally, if suitable sources are found at greater distance or with greater logistical complexity, meeting demand timing stretches the existing supply chain infrastructure, causing disruptions that often result in increased waste, product obsolescence, along with lost sales opportunity due to intermittent stock shortages. Higher transportation costs will compound the challenges faced by retail.
In anticipation of a significant economic downturn caused by tariffs, governments at the provincial and federal levels are responding in multiple ways, including unified actions and negotiations, discussions to eliminate provincial boarder barriers, and making financial resources available to businesses to help them through the impacts caused by tariffs. For example, the Quebec government tabled a budget at the end of March to include incentives targeted specifically at retail towards innovation, infrastructure and wealth creation by investing over $5 billion over several years. For retail business projects, $900 million over 3 years is available through the Fonds du développement économique to promote automation, robotization, digital transformation and the integration of artificial intelligence.
Key next steps for retailers
Sourcing resilience: This has been a trending topic for several years, but in the face of trade escalation, the need for agility is heightened. Retailers must implement demand planning with data-driven insights, AI and ML solutions to help make the unpredictable more predictable, with the goal of reducing out-of-stock events and obsolescence. Data-driven decision making can help speed up the process of finding and qualifying alternate suitable suppliers of goods and services. To achieve true supply chain transformation, complement your internal capabilities with specialized external expertise. The most successful organizations engage trusted advisors who bring both industry benchmarks and implementation experience to strategically accelerate results while enhancing knowledge within their own teams.
Implement integrated inventory systems: To enhance sourcing resilience, consider implementing or updating your tech stack with back-office capabilities including online order fulfillment, customer-friendly POS, inventory management, replenishment and more. Your technology needs to reliably capture and share country of origin data and enable intelligent product substitution. That means, capturing country of origin information at an article level and allowing linking of similar articles, giving customers the information they need to ‘swap’ and substitute their purchases with ease.
Cost optimization: This is always top of mind for savvy retailers in a competitive market. What is new today is uncertainty in an environment where tariffs create cost changes literally every day, and the customer’s reliance on the retailer amidst the turbulence for low-cost items. Commit to implementing cost optimization strategies that target high-ROI, in-year savings opportunities without compromising customer experience. The goal is the development of a phased transformation roadmap that balances immediate efficiency gains with long-term operational resilience, ensuring technology investments directly support core business objectives, including enhanced customer experience, during periods of market volatility.
CGI is an experienced retail partner
We are a trusted advisor, having been recognized as a Major Player in the IDC MarketScape: Worldwide Professional Services Providers for Retailers 2024 Vendor Assessment (doc #US51168224, September 2024), which suggests retail clients to “Consider CGI when looking to form a relationship with a company that has a strategic understanding of retail's competitive environment and digital solutions to help you steward the management of your IT systems and can manage large portions of your retail business, such as customer support centers, and getting to know your systems in detail over time.”
As an organization with Canadian roots, we serve our Canadian clients from a place of common ground. CGI’s business consultants offer supply chain, agility, project management and other advisory services to assist in your retail transformation. We can help leverage available grants and funding to support your innovation, automation and technology growth plans. If you are a past, current or potential CGI client, we want to hear from you and partner with you in exploring the opportunities presented by this new trade reality.
