Canadian consumers head into the 2024 holiday season still feeling the impacts of inflation and higher
interest rates, and continue to be concerned about their personal financial situation and the broader
economic outlook, according to Deloitte Canada’s 2024 Holiday Retail Outlook.
“Encouragingly for retailers, holiday spending is expected to rebound by 10% from last year to an average of $1,478. However, this level of planned spend remains well below recent historic levels,” said the report.
“Consumers’ focus on value and this year’s late Black Friday will see retailers battling it out over a significantly shorter holiday shopping season. We expect competition for consumer spend to be
particularly intense this year. With some shoppers planning to wait until Black Friday week to kick off
their shopping, retailers should be prepared to pull out all the stops to encourage consumers to shop
early, shop often—and shop with them.”
Marty Weintraub, Partner/National Retail Leader with Deloitte, said while spending is expected to be higher this year than last year, it’s still far below the peak of 2019.
“So we have not fully recovered to that point and in fact because Canadians are still somewhat in a state of confusion around how they believe the economy is going to unfold going forward, there’s a pretty even split about whether it’s going to get better or worse and as a result . . . about four per cent (of the increased spending) is going to go in the form of gifts and gift cards. Where the money is going to be going moreso is towards travel and charitable giving and some of the areas that are not necessarily going to fall into retailers’ tills,” he said.
“There’s a general compression that’s going to happen. Black Friday is probably going to be more important this year than in prior years because of the deal taking behaviour. About 67 per cent of consumer budgets are going to be spent on or after Black Friday which is a compressed fewer than five days shorter than last year. It’s going to be a super competitive war of the websites. Spend’s up but it’s not going to go to retailers’ tills and Black Friday and beyond is going to a battle zone for the dollar.”
Key insights for 2024:
- Spend forecasted to increase 10% but remains below recent levels: Gift spend is up 4% (a
modest amount above inflation); travel and charitable donations are up considerably (+20%,
+35%) but remain below historic levels. Continued concerns about rising prices and economic
uncertainty appears to be challenging spend in more discretionary categories such as non-gift
apparel (-9%). - Retailers have less than four weeks to capture 67% of consumers’ holiday budget: Black Friday,
the critical shopping milestone, falls a full five days later this year – giving retailers a more
condensed three and a half weeks to capture their share of consumers’ wallets. - Marketplaces and Social Commerce may be driving an upturn in eCommerce growth: 43% of
the holiday budget will be spent online (43%, up from 41% last year and 36% in 2019). More
than half (51%) of Canadians are Prime members, 1 in 3 have shopped on emerging platforms
such as Temu, Shein, Alibaba in the past three months, and 1 in 5 would be interested in
shopping on Instagram. - Data breaches challenge consumer trust in retailers: One in four have been impacted by a
retailer data breach – driving some to either stop shopping (21%) or shop less often (40%) at the
impacted retailer. - Many are skeptical about GenAI, but younger consumers may be early adopters: 6 in 10 are
concerned about the technology, and few are excited (19%) or trust it (15%). 1 in 3 have used a
GenAI tool in the past three months–higher for those 18-34 (53%) than those 55+ (16%).
Deloitte’s annual holiday retail outlook explores the shopping behaviours, attitudes, and preferences of
consumers for the upcoming holiday season. This year marks the sixth publication since the holiday
retail outlook was first published in 2019. The findings are based on a survey of more than 1,000
Canadian consumers across age groups, financial situations, and geographic regions. All dollar figures
quoted are in Canadian currency.
Here’s Deloitte’s full report:
Economic outlook from Deloitte’s chief economist, Dawn Desjardins
Canada’s economy got off to a relatively firm start in 2024, with real GDP increasing at close to a 2% pace. However, the headline numbers contradict a softer performance, with consumer spending slowing dramatically in the second quarter and the labour market showing signs of cooling. On a per capita basis, the economy contracted for the fifth consecutive quarter. Fortunately, the progress on inflation allowed the Bank of Canada to lower the policy rate by 75 basis points over the summer months. Our expectation is that the inflation rate will continue to decline and reach the 2% target in early 2025; as a result, we expect an additional 50 basis points in policy rate cuts to end the year at 3.75% and reach 2.75% by mid-2025.
In the near-term, however, the economy is expected to grow at a more moderate pace, with softer
labour market conditions weighing on consumer confidence. Even with interest rates expected to
continue to decline, many homeowners who took on mortgages at extremely low rates during the
pandemic will face higher debt servicing costs when they renew. For Retailers, this continued pressure
on wallets will limit the consumer’s ability to spend on discretionary items this holiday season.
We are optimistic about Canada’s economic prospects for 2025. Lower inflation and interest rates will
ease the burden of the highly indebted household sector sufficiently to support a pickup in spending—
especially if labour market conditions turn around as we expect. After two years of subpar growth, we
look for the economy to hit its stride in 2025.
Financial constraints may challenge discretionary spend
Canadians’ holiday spending is forecast to rise 10% this season to $1,478, reversing last year’s decline— though still below levels of recent years ($1,520 in 2022, $1,706 in 2019). Spend on holiday gifts and gift cards are expected to rise 4% – a modest amount above inflation. The categories with the largest increases, travel, and charitable donations, are up 20% and 35% respectively–but also remain below historic levels.
The anticipated rise in holiday spending is not necessarily driven by renewed consumer optimism. Canadians are as concerned about housing costs and rent increases (55%), paying for holiday gifts (35%), and credit card debt (31%) as they were last year, though fewer are likely to say they’re in a worse financial position (36%, compared to 41%). Canadians’ recession concerns persist (63%, slightly down from 67%), and views are fairly evenly split on whether the economy will improve (33%) or worsen (36%) in 2025.
As they strive to make the most of their holiday dollars, consumers unsurprisingly plan to buy gifts from Amazon (71%) and mass merchants (61%)—and a growing number (14%) are starting to look at what emerging online retailers such as Temu, Shein, and Alibaba have to offer. They’re less likely to visit department stores (29%, from 36% last year) or home improvement retailers (12%, from 21%) this season. One in five (21%, compared to 23% last year) consumers plan to shop at specialty apparel retailers this season—but 17% of those shoppers plan to spend less when they do. Given this, spend in non-gift apparel is expected to see the largest decrease across all categories (-9% compared to 2023).
Overall, the driving factor behind the rise in holiday spending this year appears to be inflation. Two out of three Canadians (65%) expect higher prices this season—and 70% still feel retailers are raising prices unfairly. More than half (59%) of those who expect to spend more this year say it’s because things cost more, while 58% of those who plan to spend less cite inflation concerns as the reason.
Black Friday looms large as retailers face a short, intense battle for consumer dollars this year
Black Friday falls on November 29 this year—a full five days later than last year. That means retailers have just three and a half highly competitive weeks to capture their fair share of consumers’ spending in the run-up to the holidays.
Consumers will still be searching for the best deals this season. Eight out of 10 plan to shop around for the best deals, and seven out of 10 plan to shop at retailers offering the lowest prices, search for items on sale, and change brands if their preferred choice is too expensive. This search for value will drive some consumers to postpone their holiday shopping until Black Friday draws closer. Forty-two percent of consumers believe Black Friday offers the best deals of the season—which is likely why 17% plan to start their holiday shopping the week of Black Friday and 48% plan to shop on Black Friday itself. Overall, consumers plan to spend about 22% of their holiday budget on Black Friday – higher for younger consumers at 30%. Of the $350— average planned Black Friday spend, more than half of ($200) will be spent online.
Retailers should shape their marketing strategies to meet ever-growing consumer need for value throughout the holiday season. By fine-tuning their marketing and promotional strategy, retailers can encourage shoppers to make purchases ahead of and during Black Friday. For example, retailers can leverage existing loyalty and customer data to understand consumer preferences and create compelling, personalized offers. Retailers can also work to identify ways to encourage consumers to make purchases earlier in the season beyond traditional discounting (i.e., free/faster shipping if purchased before a select date). Lastly, retailers will need to ensure they have the right products in-stock and can meet delivery expectations during the busy Black Friday season.
Digital shopping remains strong as consumers explore marketplaces and social commerce
While more than half (55%) of consumers prefer to do most of their holiday shopping in-store, digital shopping plays a key role in their shopping plans. Consumers expect to spend an increasing share of their holiday budget online (43%, up from 41% last year and 36% in 2019), with most shopping online due to value or convenience. Retailers will be interested to note that younger consumers and those earning over $150,000 plan to spend half of their holiday budget online.
Though many consumers will visit physical stores for holiday inspiration (48%, down from 53%), even more will turn to Google (73%) and Amazon (65%). Fifteen percent will search for ideas on newer platforms Temu, Shein, and Alibaba, while 8% (up from 5% last year) will ask ChatGPT for ideas and suggestions. These emerging sources of gift inspiration provide consumers with faster, more personalized, and more competitively priced product recommendations than ever before. Traditional retailers will be further challenged by non-traditional players that invest substantially in their marketing efforts to support customer acquisition.
Amazon Prime is more popular than ever: 51% of consumers say they’re Amazon Prime members—the
highest proportion we’ve ever recorded. Membership is more common among those earning $50,000–
$150,000 (56%) or above (52%); younger consumers aged 18-34 are more likely to be Prime members
(58%) than those aged 55 and up (45%). Prime membership isn’t necessarily translating into more
spending, however: 59% of consumers expect their planned Amazon spend will remain about the same
this year.
Canadian consumers may love Amazon, but they’re also checking out emerging digital shopping
alternatives too. One in three consumers say they’ve shopped on platforms such as Temu, Shein, and
Alibaba in the past three months, mostly for clothing (63%). Younger consumers aged 18-34 (39%) are
more likely to have done so than those aged 55 and up (23%), and the platforms appeal equally to
consumers across all income brackets. We expect this trend to grow quickly as consumers continue to
search for value, and these platforms offer a wide variety of unique products at extremely competitive
prices.
More than half of Canadians (61% – up from 55% last year) are willing to pay a premium for sustainable products and are interested in buying sustainable gifts (59%). However, 6 in 10 find it hard to shop sustainably when their personal finances are challenged, and 4 in 10 don’t believe sustainable products offer good value for money. Consumers may believe there is a trade-off between choosing retailers and products that align with their values while meeting their price expectations. This suggests that there is opportunity for retailers to educate consumers of the efficacy of their products – especially as there are high-quality, sustainable products that can actually help save consumers’ money in the long run. Marketing executives should emphasize sustainable products’ value proposition across channels and customer communications (e.g., website and digital applications, loyalty programs etc.).
Consumers also show interest in shopping directly through social media channels such as Instagram (22%) and TikTok (12%). The 18-34 cohort is far more interested in shopping on Instagram (40%) than their 55-plus counterparts (9%). Retailers will want to pay close attention to these new shopping alternatives and explore opportunities to test these new channels as sources of untapped growth with younger shoppers in relevant categories.
Retailer data breaches are challenging Canadians’ trust in retailers
Four out of 10 consumers (39%) say they’ve been affected by a data breach of some sort—and one in four (24%) say they’ve been impacted by a retailer data breach in particular. These incidents are having a real impact on many consumers’ behaviours: 21% of consumers affected by a breach say they stopped shopping at that retailer, and another 40% say they shop there less often. One in five (18%) changed their payment method, while just 21% didn’t change their shopping behaviour at all.
Retailer data breaches—we’ve seen a number of them in the past year alone—may also be making consumers wary of sharing their information: in fact, 39% would prefer not to share any data at all with retailers. Two out of three consumers are worried about their data being compromised in a breach (67%) or misused (66%). Consumers are also concerned about a lack of transparency about how retailers are using their data (50%), skeptical about how their data will be used to influence their shopping decisions (36%), and leery of their data being deployed to deliver uncomfortably targeted ads (32%).
Despite these concerns, almost half (49%) of consumers say they would share information in exchange for promotions, deals or discounts. While consumers are particular about what type of information they share – they’re fairly comfortable sharing gender or racial information, but much less comfortable sharing financial or social media information – some admit the potential for a deal would make them more willing to share.
Retailers must continuously evaluate their cybersecurity strategies and defenses as the risk of security breaches continues to rise. As retailers seek new avenues for growth in a recovering economy, it’s essential that they also prioritize investments in cybersecurity to protect both their digital assets and ensure they maintain the trust of their customers.
In addition to digital security risks, retailers are also experiencing significantly higher levels of shrink compared to previous years. The reasons for shrink are many and often complicated, but for many retailers today the majority of loss is related to internal and external theft. To combat the rise in shrink, many retailers are implementing technology (e.g., Visual AI/high-resolution camera systems, RFID tags), leveraging next gen analytics to better understand and predict where shrink may occur, and “returning to the basics” through disciplined inventory management practices. However, retailers must carefully consider and balance the impact these practices have on the overall customer experience.
Many are skeptical about GenAI, but young consumers appear to be early adopters
Will Generative AI revolutionize retail and the consumer experience this holiday season? The answer
seems to be a definitive “maybe.” While 51% of Canadian consumers believe they understand what
GenAI is, very few are excited by the technology (19%)—and even fewer trust it (15%). Most (59%) are
concerned about GenAI technology.
One in three (33%) consumers say they’ve used a GenAI tool in the past three months, mainly for
information/knowledge purposes (46%) or help with writing (43%)—perhaps experimenting with
ChatGPT or Microsoft Co-Pilot. For those who say they haven’t used GenAI, the main reasons are
security and privacy concerns (43%), or simply not knowing what they’d use the technology for (35%).
Younger consumers aged 18-34 are far more likely to have used GenAI in the past three months (53%)
than those aged 55 and up (16%), though they too are concerned about the technology (53%). Younger
consumers are more likely to be excited by GenAI’s possibilities (30%), and they’re also more likely to
believe retailers should adopt the technology to improve the consumer experience (30%, compared to
18% overall).
Canadian consumers are skeptical about GenAI. This suggests retailers should consider prioritizing GenAI towards internal operations as a means to learn prior to exploring higher-risk, customer-facing applications. When they do deploy GenAI externally, retailers should consider use cases that may appeal to younger customer segments as these groups are more likely to be early adopters. Lastly, and most importantly, they must be transparent about how they’re using the technology and how data will be used or shared. The usual terms and conditions page won’t suffice.
Value will continue to be top-of-mind this holiday season and beyond
As the holiday season draws closer, Canadian consumers are concerned about inflation, their personal financial situation, and wider economic matters. They’ll be looking for the best value they can find this year both in-store or online, and many will wait for Black Friday deals before starting their shopping in earnest. Retailers will face a shorter, more intensive competitive battle for consumer wallet share this season. It will be critical to focus marketing and promotional efforts across channels to encourage consumers to get an early start on their shopping. At the same time, retailers need to be mindful about recent data breaches that may contribute to consumer skepticism about sharing information online and using new technology such as GenerativeAI.
It will also be important for retailers to pay attention to longer-term consumer trends. New digital shopping destinations such as Temu, Shein, and Alibaba are gaining traction, and social commerce (e.g., Instagram, TikTok) is emerging as new retail channel. Consumers will have an abundance of choice as they navigate an increasingly crowded retail landscape. In an environment where constrained discretionary spend is likely to persist, we expect consumers to continue to gravitate to the retailers and platforms that meet their expectations for value. Retailers that do so and are mindful of the longer-term trends shaping consumer behaviour will be best positioned to succeed during this holiday season and those to come.
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