Printer icon Print Page

The fastest way to the holiday nice list for retailers

Michael Burt
Director
Canadian Industrial Outlook

This op-ed was originally published in the Globe and Mail on December 2, 2018.

As we roll into the peak Christmas shopping season, the behaviour of Canadian consumers moves to the front of the line. Expectations are that retailers will still have some reason for cheer this season, even if weakening consumer spending power means that the punch bowl is running low. But, for retailers to fully benefit from the holiday season, even bricks-and-mortar stores require a strong online presence.

The underlying economic conditions for Canadian consumers have decidedly cooled over the course of 2018. Year-to-date, job creation has averaged only 6,000 positions a month. This performance is well less than the pace achieved in 2017, and insufficient to move the national unemployment rate any lower than about 6 per cent. With job creation slowing, so too has the pace of wage growth. Indeed, after a strong start to the year, wages fell in the third quarter of the year.

At the same time, debt payments are accounting for an increasing share of consumers’ available income. Consumer borrowing has continued to rise at a healthy pace despite the slowdown in wage growth. When rising debt loads are combined with recent increases in interest rates, consumers are paying more to service their debt. Interest payments alone now account for 6.9 per cent of disposable consumer income, their highest share in five years.

Despite these headwinds, consumer confidence remains close to its post-recession high. So, with consumers in a good mood, we expect that retailers will have a good Christmas this year. Indeed, surveys of seasonal buying intentions suggest that consumers will spend 3 to 4 per cent more this year than they did in 2017. The Prairies are the only region of the country where consumers are notably pessimistic.

The breadth of what consumers buy at this time of year means that nearly every major retail segment will see a holiday boost. Some products – such as toys – are highly seasonal, with a third or more of their sales occurring in the weeks leading up to Christmas. Other holiday favourites include electronics, jewellery and sporting goods. However, even industry stalwarts such as food experience a holiday shopping feast – December retail food sales (primarily grocery stores) are usually 20 per cent more than the average for other months.

Another major holiday trend is where consumers are spending their money – namely online. Recent, monthly e-commerce sales in Canada continue to surge, consistently rising by more than 15 per cent year-over-year, five times the pace for total retail spending. Online sales are particularly sensitive to seasonal spending. December online sales in Canada are typically nearly double the seasonal low they reach in February.

With e-commerce still accounting for less than 5 per cent of retail sales in Canada, there is still plenty of room for further growth in online sales. However, this does not mean that bricks-and-mortar stores cannot benefit from the consumer shift to online spending. In fact, Canadians spend more online with traditional retailers than they do with those who only have a web presence.

Home delivery is the favoured option for those buying online. But more than two-thirds of consumers report that they are willing to pick up items they purchased online at a local store. Timeliness and the elimination of delivery costs are the two key reasons why people choose this option. The extra customer value that these physical locations provide may be why online retailers such as Amazon.com Inc. have been experimenting with offering secure pickup locations.

Despite weaker economic conditions, we expect retailers will have reason to celebrate the holiday season. Online retailers will have the greatest opportunity for growth, but traditional retailers with an effective online presence need not be left off the holiday nice list.


For more information contact

Corporate Communications
613-526-3280
corpcomm@conferenceboard.ca


Monthly Newsletter

Get updates about Conference Board research and events by signing up for our monthly newsletter.
 
 
 

Access Our Research

Access to The Conference Board’s reports is free of charge to professional journalists upon request.

Access Our Experts

We have a team of experienced researchers and economists who are able to comment on current events or share their expertise for news features.




Connect with Us