This paper examines firm turnover and productivity growth in the Canadian retail trade sector. Firm turnover occurs as the competitive process shifts market share from exiting firms and existing frims that contracted to entering firms and existing frims that expanded. There is considerably more firm turnover in the retail sector than in the manufacturing sector and more of it comes from entry and exit. Moreover, contrary to the manufacturing sector where only part of overall productivity growth comes from firm turnover and the re-allocation of resources from the less to the more productive growth comes from firm turnover and the re-allocation of resources from the less to the more productive, all of the aggregate productivity growth comes from this source in the retail sector.