As Canadians came out of the holiday shopping season, they continued to spend this year with the foodservice industry on fire.
Mastercard’s January SpendingPulse report, which measures in-store and online retail sales across all forms of payment, found that Canadian retail sales (excluding Automotive) increased +0.1 per cent year over year, e-commerce sales fell -11.1 per cent and In-Store sales were up +3.5 per cent.
The restaurant sector showed strength as Canadians continue to seek entertainment outside of the home, traveling to dinners out, which is reflected by an increase in Restaurants +55 per cent year over year and Fuel & Convenience +11.2 per cent.
Mastercard said this remains consistent with a broader shift in consumer spending towards experiential activities.
“Retail sales in Canada are stabilizing as consumers continue to spend on passion areas like travel, live entertainment, dining and other experiential activities,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated.
“I think what you’re seeing is a consumer that is being somewhat cautious. They’re still excited about getting out and doing experiences. They’re still buying. They’re changing what they’re buying. Even apparel had a good performance but it was likely more promotional clearing out. So it was a heavier promotional environment.
“Restaurants are killing it because people want to get out. They’ve already bought all the things for their house. So during the pandemic when they were cooped up you saw a really, really strong performance in the categories of electronics, home improvement, home furnishing. And those are now the categories that are weak. It’s saying that the consumer bought the things that they wanted during the pandemic for the stay-at-home categories. They don’t need more of those. They’ve shifted away from that. They’re buying freshness in apparel. They’re still buying that because they’re going out to restaurants and they’re going to events.”
Some findings of the report include:
- As Canadians are once again able to travel, consumer spending slowed in Home Improvements (-11.9 year over year) and Home Furniture & Furnishings (-6.5 per cent) as experiential spending is prioritized over home enhancement projects;
- As retailers prepare to launch Spring collections, many offered extended sales events and discounts to clear out remaining winter inventory driving up Apparel (+13.7 per cent) and Jewelry & Leather Goods (+13.6 per cent).
“The current uncertain economic environment continues to drive spending decisions amongst Canadians,” said Michelle Meyer, Chief Economist, North America, Mastercard. “Consumers have become more selective with discretionary purchases transitioning their focus from larger buys in sectors such as Electronics, to smaller buys driving up sales in Apparel, for instance, along with experiences.”
Sadove said the Canadian consumer is now feeling some of the pressures. Inflation is real. It’s eating up a lot of money especially for lower income people. Interest rates continue to be high.
“It’s going to be a slowing environment but it’s going to be an environment where consumers are focused on value. The players that provide value will do well and that’s whether to the apparel space or in other spaces,” said Sadove.
“You’ve had such an explosive growth in experiences with travel and the restaurant numbers are stunningly high. At some point, it’s going to have to revert back in terms of growth but remember the restaurants are just playing catch up.
“If you look at 2023 versus 2020, they’re all growing about the same. They’re at 20 some per cent versus 2020. You’ve got this reversion to the norm. I would expect a moderation across the board where you’ve seen these major swings in one direction or the other and now you are reverting back to the norm and that norm you’re starting to see in the January numbers where it’s a slowing overall retail growth.”