Canadian retailers are preparing for a crucial holiday season, with a projected 2% increase in sales over last year. According to Caila Schwartz, Director of Consumer Insights and Strategy for Retail & Consumer Goods at Salesforce, Canadian online retail sales are expected to reach approximately $14.7 billion (USD) between November and December. This growth reflects broader trends seen in major markets, including the U.S., where a similar 2% increase is anticipated.
The forecast, however, comes with a caveat: inflation is driving Canadian shoppers to be more selective and value-driven. Consumers are trading down to less expensive alternatives and waiting for key sales periods, such as Cyber Week, to make significant purchases. In an interview, Schwartz outlined the key trends that will shape the 2024 holiday season, including the rise of Chinese marketplaces, the increasing importance of AI-powered personalization, and the role of loyalty programs in driving consumer decisions.
Key Trends for Holiday Shopping: Value and Chinese Marketplaces
Canadian consumers are entering the holiday season with a strong focus on value. “We’re seeing a very strong gravitation toward value,” Schwartz explained. “Consumers are looking for the biggest bang for their dollar, which is influencing where they shop and how they spend.”
This shift toward value is reflected in changing shopping behaviours, with 78% of Canadians reporting that they are trading down—opting for cheaper alternatives to their usual purchases. This focus on value is likely to define the holiday season, with many consumers holding off on large purchases until Cyber Week in hopes of securing the best deals. Schwartz noted that 69% of Canadian shoppers are planning to wait for this highly promotional period before making major purchases.
In addition to value-focused shopping, Chinese e-commerce platforms such as Temu and Shein are gaining traction among Canadian consumers. Salesforce’s research shows that 59% of Canadians have purchased from these platforms in the past six months, and 41% are expected to make at least one purchase from these sites during the holiday season. “These platforms are growing quickly, especially in Western markets,” Schwartz said. The rise of these marketplaces represents a significant challenge for domestic retailers, who must compete with the low prices and broad product offerings of their global competitors.
AI-Powered Personalization to Shape Retail Landscape
Artificial intelligence is poised to play a critical role in shaping the holiday shopping experience. Schwartz highlighted that AI-powered personalization is expected to influence 16% of all online orders in North America during the 2024 holiday season. This includes personalized product recommendations and dynamic pricing, both of which are becoming increasingly common in online retail. “Consumers are leaning into AI,” Schwartz explained. “They’re curious about how AI can enhance their shopping experience, and they’re already starting to see the benefits.”
AI’s ability to offer tailored shopping experiences is particularly valuable in a crowded marketplace, where retailers are vying for consumer attention. Schwartz emphasized that AI can help businesses deliver the right message at the right time, which is critical during key sales periods like Cyber Week.
While larger retailers are leading the way in AI adoption, smaller businesses are also finding ways to leverage AI to compete more effectively.
For retailers that have brick-and-mortar locations, Schwartz pointed out that buy online, pick up in store (BOPIS) will be especially important this holiday season. “We tend to see that after ground shipping cutoffs, retailers offering BOPIS grow five to seven times faster than those that don’t,” she said. This feature is expected to be crucial as the holiday season progresses, particularly in the final days leading up to Christmas.
Loyalty Programs to Drive Consumer Behaviour
Loyalty programs are becoming an increasingly important tool for retailers, particularly as inflation continues to shape consumer behaviour. Salesforce’s research indicates that 66% of Canadian consumers are consolidating their purchases around retailers that offer loyalty programs. Schwartz explained that loyalty programs allow consumers to maximize value, which is especially appealing in today’s economic climate.
“Loyalty programs offer a significant competitive advantage,” Schwartz noted. “They allow retailers to collect first-party data, which can then be used to deliver personalized shopping experiences powered by AI.”
Cyber Week to Be a Critical Moment for Retailers
Cyber Week is shaping up to be the most important period of the holiday shopping season, with many consumers waiting for deep discounts before making significant purchases. Schwartz expects Cyber Week to be highly promotional, with retailers offering aggressive discounts to capture consumer attention. However, the condensed holiday timeline—there’s one less week between Cyber Week and Christmas this year—adds an additional layer of complexity.
“Retailers that offer BOPIS will have a distinct advantage,” Schwartz emphasized. “We’re expecting nearly 50% of online orders placed in the last two days before Christmas to be for buy online, pick up in store.” The combination of value-conscious consumers and a shorter holiday period means that retailers will need to be agile and responsive to consumer needs.
Amazon Prime Day’s Limited Impact and the Importance of AI for Smaller Retailers
Amazon Prime Day, which took place earlier this month, had a relatively muted impact on Canadian retail, with only 1% growth in online sales over the two-day event. This was a stark contrast to Prime Day in July, which saw much stronger growth. According to Schwartz, many Canadian retailers likely held back on promotions in October, saving their efforts for Cyber Week. However, the “halo effect” of Prime Day, where non-Amazon retailers benefit from increased traffic, was still present.
For smaller retailers, the challenge of competing with larger players like Amazon is significant, but Schwartz believes AI offers a path forward. “AI can help smaller retailers compete more effectively by allowing them to deliver personalized experiences at scale,” she said. By using AI to analyze customer data and provide tailored recommendations, smaller businesses can build stronger relationships with their customers and better meet their needs.
Looking ahead, Schwartz emphasized that the holiday season will be a critical time for Canadian retailers. “It’s going to be an incredibly competitive season, and retailers that listen to their consumers and deliver personalized experiences will be the ones that succeed,” she concluded.
