Planned purchases of big-ticket retail items have plunged in the past month and close to one third of consumers responding to a survey say their financial outlook over the next six months is negative.
“It’s clear that specialty retailers, car dealerships, and real estate businesses will see significant challenges in the months ahead and even if the economy starts to reopen they will need to provide significant incentives to get Canadians to open their wallets for big ticket items that are often discretionary purchases,” said Jeff Doucette, General Manager of Field Agent Canada, which produced the survey looking at the impact of the economic crisis brought on by COVID-19.
The financial outlook of Canadians for the next six months is: five percent very positive; 20 percent positive; 44 percent neutral; 25 percent negative; and six percent very negative.
“It’s pretty safe to say that every business in Canada is adapting to meet the concerns and demands of COVID-19 and the resulting social distancing measures,” said Doucette.
The survey had some interesting results when it came to purchase intentions over the next six months. The decrease from March to April was significant in almost every retail category.
The intent to purchase a house or condo dropped from 12 percent to seven percent; for a vehicle it fell from 17 percent to nine percent; large appliances dropped from 15 percent to 10 percent; small home appliances decreased from 21 percent to 13 percent; and televisions were down from 15 percent to seven percent.
What stuck out from the results for Doucette was the depth of the change and the consistency.
“We picked 25 or so different categories and they were all very negative. In the 50 percent range (of falling intentions) if you had to take the average of all those categories,” said Doucette. “It just seems like such a huge cog of our economy or a bunch of huge cogs of our economy are really stopped and to fight their way out of that is going to take a lot of effort to get consumers’ confidence back so they feel they can purchase these big ticket items. It’s kind of scary.”
Part of the challenge for big ticket items currently is that a lot of those stores are not essential service stores, so they’re closed or it’s much more difficult to order from those retailers or order those types of products.
“Amazon is backed up in deliveries of non-essential items. Part of it is just access to these products and when people are going to be able to actually go to a store and kick the tires and lift the lid on a washer or dryer. That’s the principal barrier,” said Doucette.
“And the other piece is how long does this last and how much of a hole does it burn in people’s pocketbooks. And how bad the employment situation is. All those things are tied together. But the first things to go when you need to pay for groceries are going to be the new TV that you were dreaming of. Instead of being six months down the road maybe it’s a year or two down the road now because of the new financial reality.”
Many of the consumer habits being formed now around the areas of frugality, wise spending, and discount shopping may just continue on post COVID-19.
“I think there’s going to be a lot of leftovers from this time whether that’s frugality and just sort of trying to understand when we’re spending something if we really need to buy out. I think in today’s culture we want new headphones, we go to Best Buy and we go get them. And there’s no barrier. There’s no barrier to spending $200 on a pair of expensive headphones. You can go do it and it can be very much impulse driven if you have the money in your pocket,” said Doucette.
“Now it’s much more of a process to get them and there’s so many different points where you can say ‘nah, I don’t think I really need those’. I think that will happen.
“The other piece that I think that will probably happen, if we’re all buckled down for another couple of months in our houses, eventually it’s going to be ‘I’ve got to buy an Xbox just to keep the kids entertained. What else can we do? We’re running out of straws’. There will probably be the sort of enhance your home environment spending that starts to happen because people are spending so much time inside their home or on their property.”