THIS STORY APPEARS IN THE NOV. 14 ISSUE OF MARKETING. TO GET THE ISSUE, SUBSCRIBE NOW.
If Colliers’ crystal ball is correct, Canadian retailers are in for a blue Christmas, as consumers keep a tighter hold on their purse strings this holiday season to pay down mounting debt.
Colliers International’s 2011 Fall Retail Forecast says December’s retail sales (excluding automotive) are expected to reach $32.7 billion, a modest 3.9% increase compared to last year’s $31.5 billion spent by Canadian households.
Total retail sales for 2011 are expected to slightly surpass $297 billion—a small 1% increase from $294.3 billion the year before.
However, with inflation at approximately 3%, this nets out as a slight drop in annual sales, explains Drew Keddy, vice-president of Canada and national retail leader with Colliers International.
“Given everything that’s going on in the world right now, it’s not surprising to see the expectation for the rest of the year is not as positive as it was last year,” he says, citing the fear of another global recession and a strong loonie as reasons for consumer belt-tightening.
Canadians’ confidence in the economy is also on the decline for a fourth consecutive month, due in part to a shaky stock market and a cascade of bad economic news from around the globe.
According to marketing research firm TNS Canada, consumer confidence has dropped from a June high of 100.3 to 95.2 in October. And the TNS “Present Situation Index” that measures how Canadians feel about the economy “right now,” dropped from 96.4 in September, to 95.2.
“Canadians certainly don’t see the end of these problems any time soon, and the fear now is that the downward slide in confidence will cause Canadians to tighten their holiday spending plans, which will serve to bring the world’s problems home to the Canadian economy,” said Norman Baillie-David, vice-president of TNS Canada, in a statement.
As confidence continues to fall, the number of retail sales and promotions will likely rise, says Ed Strapagiel, executive vice-president at KubasPrimedia. Retailers likely purchased their 2011 Christmas stock in the spring, when optimism was higher and the “last thing a retailer wants is to get stuck with seasonal merchandise going into the next year,” he says.
But retailers shouldn’t expect shoppers to flock to pre-season sales just yet, says Strapagiel, because “more sales and specials only encourage consumers to wait for more sales and specials.”
Retailers in the U.S., where consumer confidence is at its lowest level since the 2009 recession, are responding with seasonal promotions to deter consumers from shopping around or waiting for last-minute price drops.
Walmart for example, launched its Christmas Price Guarantee. If customers buy an eligible product at Walmart anytime between Nov. 1 and Dec. 25, and find that same product advertised for less at another store, the retailer will give them a gift card for the difference.
In a similar move, Toys “R” Us is giving their loyalty club members 10% back in “R” Us Dollars on purchases made until Christmas Eve. The program first ran in 2008. But the toy retailer is sweetening the deal this year. Customers who spend more than $200 during the aforementioned shopping period will earn a 2012 Super Savers Pass good for an additional $100 in savings, including coupons sent via email each month next year.
