Deloitte

Deloitte

November 16, 2010 08:00 ET

Canadians Cautious With Their Holiday Spending in Response to Slow Recovery

- Deloitte survey reveals 2010 holiday shopping trends

TORONTO, ONTARIO--(Marketwire - Nov. 16, 2010) - According to new survey results released today by Deloitte, a majority of Canadians are weathering the economic recession, with 56 per cent of survey respondents saying they are feeling somewhat or very secure about their jobs, and close to three-quarters reporting that their financial position is the same or better than last year. In addition, a majority of Canadians (85 per cent) expect the economy to remain the same or improve in 2011. "Given the global economic recession, this is encouraging news," said Brent Houlden, Deloitte Canada's Retail Practice Leader. 

Unfortunately for retailers, Canadians intend to remain cautious in their spending this holiday season. Fifty-two percent of Canadians plan to spend the same amount this holiday season as they did last year, 44 per cent plan to spend less, and only four per cent plan to increase their spending – which amounts to little or no change in consumers' spending from the last two years. Moreover, according to Houlden, current levels of consumer confidence are relatively lower than in the first half of 2010 and back-to-school sales were disappointing. "This trend combined with this year's survey results suggests retailers should only expect modest gains relative to last year's holiday season, but nothing more," Houlden said. "That said, don't expect major discounts either, because inventory levels have been well managed by retailers," he pointed out.

The results of this year's holiday survey show that it is deleveraging that's taking spending away from retailers. When asked what they would do with a bonus or extra income, three-quarters of survey respondents said they would pay down debt or save. "The desire to pay down debt or save makes sense given that debt levels in Canada have risen during the recession," Houlden noted. "In contrast, Americans' debt levels have declined, and now Canadians and Americans are in debt in almost equal levels."

Key trends that will mark this holiday shopping season:

Retailers will need to drive traffic to their stores this year

To attract Canadians in their stores, retailers will innovate with events that drive traffic and better showcase their offerings. Many retailers are starting to use social media and online promotions to drive traffic, rather than more traditional media and discounting. But consumers will be keeping an eye on price: 56 per cent of survey respondents expect that all or nearly all of their gifts will be purchased on sale. "Consumers will focus on price, using new online technology to check prices once they are in the store," said Houlden. "This trend should push retailers to have a very defined strategy to justify prices."

Consumers shouldn't wait for big sale events

Inventory levels are being well managed by most retailers who have switched to focusing on sell through versus stocking up the shelves. Given that inventory levels are thin, hot items will probably sell out quickly.

Competition to intensify among retailers

Canadian retailers will also face stiffer competition as foreign retailers move into Canada, with more announcing plans to do the same in the near future.

In addition, with the Canadian dollar now at parity with the U.S greenback, there will be an incentive for Canadians to consider shopping across the border. The Deloitte survey found that 38 per cent of respondents were likely to visit the U.S. for their holiday shopping. However, Houlden noted that even though the Canadian dollar is stronger today than last year, Canadians are not flocking in much greater numbers to the U.S. than in previous years because of border hassles, higher gas prices and a greater variety of retail offerings in Canada.

Use of social media and Internet reaches a tipping point among Canadian shoppers

Seventy per cent of Canadians will use blogs, other social media forums, store websites and other online shopping sites to review prices, research gifts ideas, find discounts, and research reviews and recommendations. According to Houlden, using the Internet and social media for shopping activities has reached a tipping point as Canadians change the way they shop.

In commenting on technology use by Canadian consumers as part of their shopping experience, Houlden indicated that the use of mobile apps isn't expected to reach critical mass until next year's holiday season; he pointed out that Montrealers appear to be early adopters with 19 per cent embracing the technology against 14 per cent nationally. "We should expect the number of users to steadily increase over the next few years as more apps become available and mobile payment becomes an option." 

Regional differences in spending

Regional differences will likely play a role in how retailers do this coming holiday season. Job security, a key factor in spending decisions, varies significantly from coast to coast. For example, 70 per cent of respondents in Atlantic Canada feel somewhat or very secure about their jobs, compared to 57 per cent in Toronto, Montreal and Vancouver.

About the Deloitte survey

The survey was commissioned by Deloitte and conducted across Canada by an independent research company between September 22 and October 6, 2010. The survey polled a sample of 2,000 individuals and has a margin of error for the entire sample of plus or minus five percentage points.

About Deloitte

Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,700 people in 58 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

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