Advertisement
Advertisement

Consumer Spending Downturn Expected for Retailers in Canada for Holiday 2022 [Deloitte Report]

Retail industry news delivered directly to you. Subscribe to Retail-Insider.

Deloitte Canada’s Holiday Retail Outlook reveals consumer spending nationwide will substantially drop this holiday season to levels below 2020.  

According to the report, Inflationary pressures along with economic uncertainty are disproportionately impacting Canadians across different income levels and spending cuts will impact restaurants, travel, groceries, and will span across several sectors as consumer sentiment continues to wane. 

The report shows Canadians are tightening the purse strings and are pessimistic about the year ahead, with about half expecting the economy to get worse over the coming years.  We have seen consumer sentiment oscillate through the past four years with things starting to look more optimistic in 2021. However, consumer holiday spending outlook is down again, said the Deloitte report. 

Bath & Body Works at CF Toronto Eaton Centre (Image: Dustin Fuhs)

Marty Weintraub, Partner, National Retail Leader at Deloitte Canada, described the report as coming at “an interesting point in time” to be looking at what consumers are going to be spending for the holiday season.

Marty Weintraub

“What we see this year, and by the way it’s not a huge surprise because of what’s going on around us both economically, geo-politically, we’re just in a little bit of an extreme situation. We thought 2020 was sort of quite extreme being our first holiday season heading in but . . . we have some additional extremities coming up,” said Weintraub.

“Spend going down may not surprise folks but the magnitude of the spend coming down is quite high . . . People are extremely anxious about what could happen. We’ve (the general public) been using the R word (recession) off and on and with all of that uncertainty we’re just seeing that buttoning down, earlier than ever shopping – 26 per cent of Canadians will finish by Black Friday.”

The report found:

  • Almost half (48 per cent) of Canadians expect the economy to be worse in 2023, and four in 10 (41 per cent) have seen their household finances worsen this year;
  • Overall holiday spending will fall 17 per cent this year, to $1,520, with the biggest cuts in non-gift electronics (-55 per cent), travel (-30 per cent), and non-gift clothing (-27 per cent);
  • Canadians will shop early and hunt for deals to stretch their holiday budget: One in three (37 per cent) will shop earlier this year, with 46 per cent believing it will help them get better deals. They’ll shift to other brands if their preferred one is too expensive (72 per cent), buy from retailers that sell at the lowest possible prices (70 per cent), and seek out sale items (69 per cent);
  • Rising prices and supply issues may impact consumer trust and brand loyalty: (76 per cent) of survey respondents expect prices to rise this holiday season and, worryingly, 68 per cent question if retailers may be raising prices more than needed, a concern that has been creating tensions across industries. Additionally, supply chain challenges have trained consumers to find substitutes, with 61 per cent indicating they’ll try new brands if what they want is out of stock;
  • Consumers want to buy goods that express their values—but some are skeptical: Four in 10 (44 per cent) consumers are willing to pay up to 10 per cent more for sustainable/ethical products or services. Others won’t pay more because of affordability issues (47 per cent), challenges in identifying genuinely sustainable/ethical products (41 per cent), or the belief that their purchase choices won’t have a meaningful impact (28 per cent);
  • 51 per cent of customers say they will favour shopping in-store this holiday season (up slightly from 49 per cent last year), and those who will are planning to visit more stores: 5.9 on average, up from 5.3 last year but shy of pre-pandemic levels (6.4 in 2019). And more are planning to host formal meals this year than last (41 per cent versus 35 per cent).
Hudson’s Bay Queen Street Holiday 2022 (Image: Dustin Fuhs)
CF Toronto Eaton Centre on Black Friday 2021 (Image: Dustin Fuhs)

 Weintraub said 71 per cent of Canadians are likely to shop at Amazon this year versus 62 per cent last year. He said 43 per cent will start their holiday shopping in November versus 35 per cent last year. Everyone is starting earlier and will be done earlier this holiday shopping season.

“Recent holiday seasons have seen Canadian consumers cycle between cautious optimism and concern. This year, they’ve been exposed to a seemingly endless cycle of negative news, including economic uncertainty, high inflation, rising interest rates, geopolitical upheaval, general “pandemic hangover,” new or resurgent diseases, and more. It will be hard for Canadians to find reasons for optimism when there is so much Ambiguity,” said the report.

“Across income brackets, consumers have seen their buying power shrink. They’ll be looking for ways to stretch their dollar this holiday season. For some, that may mean choosing new products; for others, it might mean spending more time looking for the best deals. While some will strive to make purchases that reflect their sustainability and/or ethical values, others question whether they can afford to do so or whether they feel equipped to identify products that are genuinely sustainable and/or ethical.”

Best Buy Black Friday 2021 (Image: Dustin Fuhs)

The report said a growing number of Canadian consumers are signing up for Amazon Prime: 47 per cent say they’re now Amazon Prime members, up from 40 per cent in 2021 and 37 per cent in 2020. However: 59 per cent of shoppers expect their Amazon holiday spend to remain the same this year.

“After a couple of years of having to keep their distance from other people, Canadian consumers want to connect—with friends, families, and even fellow shoppers. Half of survey respondents (51 per cent) say they prefer to shop in-store this season, up slightly (49 per cent) from last year, to interact with products, take advantage of better prices and promotions, and avoid shipping costs. They’re planning to visit more stores, too: 5.9 on average, up from 5.3 in 2021, but still shy of pre-pandemic levels (6.4 in 2019). They also plan to spend more than half (56 per cent) of their holiday budget in a physical store, compared to 41 per cent online,” added the report.

“Canadians from coast to coast to coast have been through a lot these past few years and although they’re resilient, they’re understandably fatigued. Even as fears about COVID-19 fade, consumers are living in a highly charged state of anxiety, with recessionary concerns, inflationary pressures, and rising interest rates top of mind. These economic and financial concerns are likely leading Canadians to focus on their personal finances and short-term needs, which is reflected in the planned reduction in holiday spending.

“Retailers will need to do more than sharpen prices to win the hearts of consumers this holiday season. If communicated in a genuine and authentic manner, they can offer moments of respite by demonstrating empathy and an understanding of what their customers are feeling. The holiday period can be stressful in the best of times, and consumers will be making tough spending decisions as they work to take care of their families’ needs.”

Article Author

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training.

More From The Author

Foot Traffic Up at Malls in Canada as Consumers Return to...

A representative at Colliers says that, remarkably, foot traffic is up 30% on one mall over 2019 -- and with the holidays approaching, more consumers are going to stores to ensure they get what they want.

Shops at One York in Downtown Toronto Adding New Retailers and...

The retail podium in Toronto's South Core is seeing significant changes including a food hall, grocery store and Second City among other updates.

RECENT RETAIL INSIDER VIDEOS

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Latest Stories

Follow us

4,265FansLike
6,734FollowersFollow
10,843FollowersFollow

all-time Popular