The continuing increase in Canada’s inflation rate is driving more consumers to the discount store market to ease the pain of rising prices across the board in the country.
Paul Wood, President & CEO of Giant Tiger Stores Limited, said the discount sector has experienced growth overall over recent years as retail and customers shifted away from the middle of the market either to discount or luxury.
“Given the current disruptions in the economy and the geopolitical turmoil that exists, there remains a solid case for the discount retail as we move forward, and I do not see any immediate end in sight to these challenging conditions,” he said.
“At Giant Tiger we continue to focus on operating in a frugal manner to ensure we can keep our everyday low prices as low as possible for our customers and pass along great value online at gianttiger.com or in our over 260 stores across Canada through our assortment of on-trend fashion and home products, seasonal merchandise, and our full assortment of grocery.
“As inflation and dramatically rising costs of fuel occupy some of the news reports, naturally the expectation is that more Canadians turn to discount for opportunities to save on their everyday needs. At Giant Tiger we seek to provide outstanding value at the lowest price and offer a fun and easy shopping experience for our customers to shop smart and save smart every day.
“Wages have not risen at the rapid rate of inflation Canadians are experiencing and as this trend persists, we expect more will choose to experience discount retail to get more for their money. Gas alone at current rates takes a big bite out of everyone’s bi-weekly paycheck. When people working at home begin to venture back out to work as COVID restrictions end, the pinch will become even more prominent.”
Bruce Winder, author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail, said the discount sector had seen strong growth through the pandemic and will continue with this trajectory due to several factors affecting shoppers at this time and into the future.
“First, when I think about discount, I include retailers such as Walmart, Costco, Amazon, No Frills, Food Basics, FreshCo, Dollarama, Dollar Tree and any other store selling value price points,” he said.
“For context, when I think about all price points in retail, I think about the range from value at the bottom, rising to good, better, best and luxury toward the high end. One could also include super-luxury for elite consumers – a growing segment.”
He said factors impacting the growth of discounters include rise of inflation, specifically in food, gas, housing, and other everyday living categories, the rise of interest rates, increased consumer debt, slow wage growth, particularly in low paying jobs, job uncertainty and other issues. These economic and social headwinds have forced consumers to shop at value-based stores to make their dollars stretch further to make ends meet.
“We are seeing mix changes within the industry from mid-priced point retailers to value retailers and even within value retailers we are seeing an increase in private label sales as consumers choose store brands over national brands at higher price points,” said Winder.
“Within mid-priced retail we will also see lower end products (good price point) increase in sales as a percentage of the sales mix. More will be bought on promotion as well and we could see stockpiling of essentials during sale weeks.
“Thrifting will increase as consumers look to used product retailers (ie. Value Village) and websites such as Kijiji and Facebook Marketplace to manage budgets. Retail will continue to polarize based on society’s divide between the haves and have nots which has only become more pronounced during the pandemic and the new abnormal we find ourselves in now and through the balance of the 20’s.”
Winder said these trends will continue as many of those headwinds are not temporary.
“We will probably see several new retailers and service providers emerge who will cater to this growing part of retail,” he added.
George Minakakis, Principal of advisory firm Inception Retail Group Inc., and author of The New Bricks & Mortar Future Proofing Retail, said inflation is shrinking more of every Canadian’s present day budget.
“It is human nature to focus on reducing costs and saving. In fact, a poll we are running currently is showing just that. Discount and variety type stores from grocery to mass merchandise have been growing for years. During the pandemic many announced plans to add stores,” he said. “There is a three-folded strategy behind growth here. More locations create convenience. It increases the operators buying power to keep costs down and at the same time it is a recognition that more consumers are becoming cost conscious. The demand is there. We already know that 50-55 per cent of Canadians live paycheque to paycheque. These stores are serving a need and give a hand to consumers who need to stretch their budget.
“The current economy has created human risks and the need to provide and feed the bodies and minds of a family. This is needed to sustain positive mental health. Especially as costs in general from grocery, gasoline to restaurants are rising. Clearly, this creates more competition for larger grocers and mass merchant retailers. They will also begin to respond with offers in this inflationary economy. Inflation will fuel more demand for the discount business model. It is to the benefit of consumers who need to pay for medicine, haircuts, eye exams, and take care of household emergencies.
“Discount retailers are a permanent common and timely channel of choice for consumers. For that reason we should not be surprised to hear that larger retailers will try to get their hands on this sector of retail with acquisitions.”
Michael Kehoe, broker of Fairfield Commercial Real Estate in Calgary, said there is a pronounced flight to value in the Canadian market as consumers look to save money in these inflationary, turbulent times.
“Retailers across the value-oriented spectrum are capitalizing on this by expanding their store networks and merchandise offerings. Grocery discounters and dollar stores are some of the clear winners as the retail landscape shifts to cater to more price-conscious shoppers. In consumer real estate circles retail chains like Dollarama are referred to as, ‘the store that ate Canada’ with around 1,400 locations and counting,” he said.