Canadians conflicted about economy and financial situation heading into the 2011 holiday season
Yet retailers can expect single-digit growth and continuing transformation of Canadian retail landscape
Toronto, November 8, 2011 – Canadians will still go out and shop this holiday season, but their sentiment toward the economy and their employment prospects have softened from where they stood this time last year. Entering the 2011 holiday shopping season, only 29% of Canadians expect the economy to improve in the coming year, while 33% think it will decline. A year ago, 49% of Canadians had a positive outlook while only 15% had a negative outlook on the economy.
“The uncertain global economy and the resulting volatility of the stock market, the Canadian dollar, and fuel prices have taken their toll on Canadians’ confidence,” said Jean-Philippe Vorsanger, Retail Consulting Lead with Deloitte Canada. “Survey respondents told us that their highest priority is to pay off debt, although debt to income ratios continue to rise across the country and are now much higher than those of Americans who have focused on paying down their debt in the past couple of years.” Vorsanger said that Canada’s consumer confidence index has dropped to 75 from 89 last year, although he noted that Canadians remain more positive compared to Americans whose confidence is around 45.
Our Survey results show that Canadians will go out and shop this holiday season, albeit cautiously. Fully 50% of Canadians plan on sticking to a budget this holiday season, with a median reported budget of $477. Canadian households earning under $30,000 reported a median budget of $264 while households with income over $150,000 reported a median budget of $816. “As a result, retailers should anticipate low, single-digit growth over the holiday shopping season,” Vorsanger said.
The future of electronic commerce
Roughly the same proportion of Canadians, (45%) says they plan on doing some of their holiday shopping online this year as did last year, although that number climbs to 60% for the 18 to 29 set.
“The number of Canadians who plan to buy online has been stable in the last couple of years, but this is poised to change,” said Peter Barr, Partner, and National Consumer Business Leader. He pointed out that pressure on store-based retailers from internet pure plays, retailers who have successfully leveraged the internet to capture sales through multichannel convenience and U.S. retailers who increasingly ship to Canada are forcing other Canadian retailers to step up their e-commerce offering.
“Already, several Canadian retailers have revisited their e-commerce strategies and are investing in new ecommerce platforms.”
According to Vorsanger, younger Canadians are leading the charge toward adopting mobile shopping applications, with one-third planning on using mobile applications for shopping this holiday season.
“We expect the Canadian retail scene to continue to evolve significantly in the next few years. We see more U.S. retailers entering the market, expanding e-commerce offerings by Canadian retailers and more importantly the number of new retail CEOs that have been appointed in the last few months is a sure sign that Canadian retailers are ready for fresh perspectives and big changes,” Vorsanger noted.
The new survey shows that the upcoming holiday season should benefit electronics retailers as one-third of Canadians are planning on purchasing a technology gift up from just about a quarter last year. Flat screen TVs took the top spot as the most commonly cited technology gift, followed by digital cameras, smartphones, e-readers and tablets. As many tablet manufacturers significantly reduce prices in an attempt to gain market share against Apple’s iPad, the category is expected to be an important sales engine for electronics retailers.
Traditional gift categories such as clothing and home furnishings and accessories should also do well as consumers take advantage of the season to catch up on purchases they have been delaying earlier this year.
Experience gifts such as spa packages and golf lessons which do traditionally better in good times, will not be high on Canadians’ shopping lists this year.
In Greater Vancouver, consumers are feeling less optimistic about the economy. While in 2010, 80% of Vancouver residents believed the economy would stay the same or improve, about two-thirds now hold this view. Fewer people also expressed confidence about job security in 2011 with just 49% indicating they felt their job was secure or very secure compared to approximately 60% in last year.
Despite this outlook, Vancouverites are feeling that their household finances are in order, and a majority of respondents (58%) said they plan to spend the same as last year this holiday season. Interestingly, cross-border shopping is in decline in Vancouver with 50% of residents saying it is likely they’d cross the border to shop, compared to 65% last year, with clothing, gasoline and groceries being the top three cross-border purchases in 2011.
As well, Vancouverites are becoming increasingly tech-savvy, with the use of mobile apps for shopping doubling in Greater Vancouver, reaching a 30% level, higher than the national average of 20%. Vancouver residents are also slightly ahead of the national average in terms of shopping online (50% will do at least some online shopping), and, are more likely to make use of daily deal websites (30% versus 22% for the rest of Canada). Tablets and eReaders will also be a popular gift in Vancouver this year.
Edmonton, Calgary and Winnipeg
The outlook in the Prairie provinces is more positive than elsewhere in the country heading into the holiday season. Albertans, Manitobans and Saskatchewanians have lower unemployment (5%) compared to the Canadian average (7%), and a strong majority of employed residents from Edmonton, Calgary and Winnipeg (88%) rated their jobs as secure, compared to a national average of 78%.
Close to three-quarters thought the economy would improve or remain the same; nationally, two-thirds of Canadians feel the same.
As a result, this holiday season, more residents in the region plan to spend the same or more compared to last year.
Greater Montreal Area
In Montreal, the economic outlook is worse than last year. Fewer Montrealers in 2011 have a positive view of the economy than last year (60% versus 89%), and the number of respondents feeling secure about their jobs remains unchanged since last year (50%). Additionally, Montrealers view their household situation less favourably this year: 33% see their economic situation as having deteriorated, while last year only 25% felt the same way.
More than half of Montreal residents plan to spend about the same amount as last year this holiday season. Two-thirds would spend a bonus or extra income on paying back debt or would save it, compared to almost three-quarters of respondents in the rest of the country who would do the same; 19% of Montrealers would spend extra income on a vacation compared to a little over 12% in other Canadian regions.
Cross-border shopping is declining: While about 30% of Montrealers said they were likely to cross the border for shopping last year, only half that number are likely to shop in the U.S. in 2011.
Montrealers are less likely to shop in outlet malls, with a quarter saying they are likely to do so in 2011 compared to 46% in the rest of the country.
Montrealers were considered early adopters of mobile applications for holiday shopping last year but the rest of the country has quickly caught up with them: fully 20% of Canadians and Montrealers plan to use mobile applications for shopping.
While Atlantic Canadians say they will spend more than the average Canadian this year during the holiday season, second only to respondents in the Greater Calgary Area, many have mixed feelings about the Canadian economy. The new survey shows that 42% of Atlantic Canadians feel that the economy will remain the same over the next year while close to a quarter feel it will improve modestly and a comparable number expects the economy to decline slightly.
In the region, consumer confidence remains the highest in Newfoundland and Labrador thanks to the strength of the resource sector.
Two-thirds of Atlantic Canadians are feeling secure in their jobs, and the future looks promising for urban markets such Moncton, Halifax and St. John’s where retail and construction have performed steadily and major contracts for mega projects could drive more optimism.
The survey shows that over 70% of respondents feel their household income will remain the same or improve this year. As in the rest of the country, Atlantic Canadians plan to be cautious in their spending with the majority planning to spend the same amount as last year and slightly more than one-third planning to spend less.
Nine out of ten employed respondents in Atlantic Canadians are significantly less attracted to shopping south of the border than last year: More than half of the respondents do not plan to purchase goods from the U.S. in 2011.
About the survey
This survey was commissioned by Deloitte and was conducted online by an independent research company between September 21 and 27, 2011. The survey polled a national sample of 2,258 consumers.
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 57 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.